Business Intelligence - PowerPoint PPT Presentation

Loading...

PPT – Business Intelligence PowerPoint presentation | free to view - id: d2e17-ZDc1Z



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Business Intelligence

Description:

... 1992, Microsoft bought Funk & Wagnalls, a second class encyclopedia, sold at dump prices. Microsoft digitalized the content of Funk & Wagnalls, produced a ... – PowerPoint PPT presentation

Number of Views:18
Avg rating:3.0/5.0
Slides: 37
Provided by: jeand1
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Business Intelligence


1
Business Intelligence
  • De prijs van informatie

2
Business Intelligence Systems
  • Cost, price and value of information

3
Production cost
Variable cost (traditional)

Fixed cost

4
Cost of information
5
Production cost
Variable cost (information)

Fixed cost

6
Cost per product (traditional)
Contribution of variable cost

Can you interpret scale effects in this figure?
Contribution of fixed cost

7
Discuss cost leadership in the following
industries
  • Car manufacturing
  • Cement (ENCI)
  • Retail
  • Restaurants
  • Banking

8
Cost per product (information)

Contribution of variable cost
Contribution of fixed cost

9
Discussion items
  • How to become a cost leader in traditional
    products?
  • How to become a cost leader in information
    products?

10
Discussion items
  • How would you set a price if you were a
    monopolist?
  • How would you set a price in in a fully
    competitive market?
  • Can you explain now why cost leadership and
    differentiation are essential strategies?

11
Discussion items
  • Discuss cost structure, price and strategies in
    the following markets
  • Regular mail
  • Express mail
  • Telecommunication (voice, voip?)
  • Air travel
  • Personal computers
  • Operating Systems
  • Note Scale effects are different in information
    products!)

12
Value of information products
Supporting activities
The margin can only exist if the amount the
customer is willing to pay for the
product/service exceeds the production cost
Infrastructure
Human resource management
Margin
Technology
Procurement
The customer is not going to pay more than the
added value of the product for his/her value
chain the customer value
Inbound logistics
Outbound Logistics
Marketing Sales
Operations
Service
Margin
Primary proces
13
The pricing inequality
  • For sustainable business, the following
    inequality must hold
  • production cost lt price lt customer value
  • Customer value is customer dependent!!! (pto)

14
What is the price of a 0.5 l of Coca Cola at the
following locations?
  • At the supermarket
  • At the gas station
  • At the railway station
  • At McDonalds
  • At Beluga
  • At Schiphol in the tax free zone restaurant
  • At Schiphol at the gate
  • On the plane at Easyjet

15
Pricing information
16
Market Entry by Bill Gates
  • Over 200 years old The Encyclopedia Britannica.
    Price of the books 1990, around 2000 euro.
  • In 1992, Microsoft bought Funk Wagnalls, a
    second class encyclopedia, sold at dump prices

17
….
  • Microsoft digitalized the content of Funk
    Wagnalls, produced a multimedia CD called
    Encarta, and put in the store for 100 euros.
  • Microsoft sold Encarta to Compaq and Dell and the
    likes for an even lower price, who put it on new
    PCs for free.

18
…..
  • The Encyclopedia Brittanica lost market share, ,
    and started to look for an electronic strategy
  • Move 1 An on line library for education,
    available for 2500 euro per year. For most
    schools, much too expensive.
  • In 1996, turn over of Encyclopedia Britannica was
    cut by 50.

19
…
  • In 1996 Encyclopedia Britannica introduced a CD
    version for around 250 euro and a on line
    membership for individuals,
  • It was too little, too late Brittanica changed
    ownership in 1996, was reorganized and the CD was
    offered for various prices in different direct
    mail campagnes.

20
2002
  • Brittanica DVD 50 USD
  • Encarta CD 31 USD, DVD 58 USD.
  • New technology changed the price (of the content
    of the) Encyclopedia Britannica in 10 years from
    2000 euro to 31 euro.

21
Back-to-School Essentials
22
(No Transcript)
23
What happened?
  • Information is hard to produce, and easy to
    reproduce
  • High fixed cost, low variable cost
  • Bill Gates changed the rule of the encyclopedia
    information game
  • Lower production cost, bigger scale

24
Porter Industry Appeal (5 Forces)
Government Legislation
Competitors
Suppliers
You
Substitutes
Customers
25
Remark on production cost of a digital
encyclopedia
  • Content is very hard and costly to compose.
    However, when the encyclopedia is composed, this
    money is gone sunk cost!
  • Variable cost changed from
  • Printing and logistics (classical scale effects)
  • CD DVD
  • On line version (unlimited scale effects)

26
Is this completely new?
  • No, Telecommunication industry knows this already
    for years
  • Same for airline industry (extra passengers dont
    incur extra cost)

27
If you cant differentiate
  • The story of the tough competitors
  • Company A sells at 10, company B sells for 9
  • A sells for 8 and B for 9….
  • A sells for 8 and B for 7….
  • Where does it stop?

It stops at the marginal cost price 0
28
Yellow pages in the USA
  • 10.000 USD for CD version in 1986, provided by
    Nynex.
  • Pro CD hired hundreds of chinese typists and
    reentered all the data into a computer.
  • Pro CD hired once again hundreds of chinese
    typists and reentered all the data into a
    computer.
  • Pro CD corrected the differences and was in
    business….

29
Gele gids cont.
  • CDs were on sale for several hundreds of dollars
  • One year later American Business Information, did
    the same, and others followed.
  • Sales price is now 20 USD per CD.
  • On the internet the informatie is freely
    available, and money is being made by
    advertisements.

30
Competitive markets
  • Marginal cost are zero, cost per unit are small,
    if the number is big.
  • Hence companies go for market share, high
    numbers, low price.
  • In the end, price is equal to the production cost
    of the cost leader, and far away from the
    customer value.

31
Monopoly markets
Sales price
30 USD
10 USD

1000 pcs
4000 pcs
32
Differentation revisited
  • Stay out of the way of cost based competition,
  • Unless you can be the ultimate cost leader
  • By differentiation, you can create a more
    monopoly like position, and price according to
    customer value, rather than in terms of cost per
    product, or even worse, marginal cost

33
Strategy (old economy advice)
  • In a market where no differentiation is possible,
    be the cost leader, or get out
  • In a market where differentiation is possible,
    seek a spot where the margin between production
    cost and differentiated customers value is
    maximized.
  • Make sure that your position is sustainable!!

34
Loss leadership
  • Cost leadership is hard to beat, once the market
    share is significant. Market share is therefore
    crucial, and in an appealing industry there is
    only one cost leader. Thus, the first to move in
    has the first mover advantage.
  • Amazon.com went first after market share, then
    after profitability. This meant attracting
    customers at a price below marginal cost. The
    bigger the loss, the more succesful the strategy
    Loss Leadership

35
Cost leadership
  • Cost leader pitfalls
  • Complatency dont set price too high and make it
    to easy, your industry will attract fortune
    seekers
  • Signal that rivals will be met with fierce
    competition, and low prices.

36
Know your added customer value
  • Personalized pricing Different customers,
    different added value, different prices
  • Kow your customer CRM, market intelligence (use
    of ICT)
  • Versioning produce different products for
    different segments of customers
  • Group Pricing make different prices for
    different segments
About PowerShow.com