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Profit Pools: A Fresh Look at Strategy

Profit Pools: A Fresh Look at Strategy. O rit Gadiesh, James L. Gilbert Harvard Business Review , May-June, 1998. Profit Pools: A Fresh Look at Strategy O rit Gadiesh, James L. Gilbert Harvard Business Review , May-June, 1998. Where and how is the money being made in an industry?.

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Profit Pools: A Fresh Look at Strategy

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  1. Profit Pools: A Fresh Look at Strategy Orit Gadiesh, James L. GilbertHarvard Business Review, May-June, 1998

  2. Profit Pools: A Fresh Look at StrategyOrit Gadiesh, James L. GilbertHarvard Business Review, May-June, 1998 • Where and how is the money being made in an industry?

  3. An industry Value Chain • An industry Value Chain is the collection of all business activities necessary for the end user to benefit from the product. • This includes both supply and distribution chain activities, as well as complementary products and activities.

  4. Profit Pools • Profit concentration among activities of an industry value chain is often different from revenue concentration. • Automobile financing is the most profitable element of the automobile value chain. • Concessions sales are an attractive profit pool to entertainment venues.

  5. “Choke Points” • Positions which can influence participation in an industry, and the distribution of its profits • Control of a choke point can be very profitable

  6. Implications of Profit Pools • Be sure to participate in the best profit pools of your industry • Look for and capture “choke points” when possible.

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