Advanced Search
MyIDEAS: Login

Value Creation and Profit Optimization

Contents:

Author Info

  • K. Tobias Winther

    (Agityne)

Registered author(s):

    Abstract

    The present paper develops a basic framework for evaluating and optimizing profits in a business operation. In developing a business we are often faced with an infinity of choices ranging from what products or services to sell and what customers to target to how to structure and manage the organization. To support the decision-making process a semi- quantitative dimension is here added to the traditional strategic scenario planning. It consists of a general-purpose seven-step evaluation process: (1) The starting point is a list of strategic options, as they may have been identified during conventional strategic planning. (2-3) The next steps are to identify who will influence the value creation process, and what value drivers each of them use to influence it. (4) For customers representative of different segments we can evaluate the value to the customer, the risk to the customer and the relative market power between buyer and seller. The paper explains how this can be related to the market price that each of these customers is likely to be willing to pay. (5) While the income is critical, so it the cost: the following step is to analyze the cost structure and understand how it scales with market size. (6) By combining the results from the two previous steps it is possible to find the optimal profit as a function of volume, value drivers and the other parameters. (7) In the final step the strategic implications of the various options are integrated with other knowledge to form the basis for selecting a winning business strategy. An example of a yet-to-be consumer product is used to illustrate the process.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://128.118.178.162/eps/mic/papers/0206/0206001.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by EconWPA in its series Microeconomics with number 0206001.

    as in new window
    Length: 12 pages
    Date of creation: 07 Jun 2002
    Date of revision: 08 Dec 2003
    Handle: RePEc:wpa:wuwpmi:0206001

    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on Formatted for 8.5" x 11" paper; pages: 12; figures: included
    Contact details of provider:
    Web page: http://128.118.178.162

    Related research

    Keywords: cost; customer specific cost; market power; pricing; profit optimization; profits; radical innovation; risk discount; strategic scenario planning; value chain; value creation; value drivers; value net;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0206001. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.