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Alternative Energy Industrys Profit Pools
Introduction
A profit pool is the total profits earned within an industry by all players and it extends to all players in the value chain (Gadiesh and Gilbert, 1998). Therefore, for a company to have competitive edge in the alternative industry, they should use their capabilities to employ and manage elastic networks of distributed sources of products and services. The current drift is a shift from co-located development groups to globally distributed projects and program groups. More businesses in the world are conducted through collaborations between and with organizations because the next layers of creating value are becoming very complicated such that no single organization is going to figure them out alone. One should note that profits at every level of the value chain are different.
Main body
For alternative energy industry, competitive edge is achieved by production of services and products that have recognizable differentiation, of high worth to their consumers and are those created more effectively and efficiently than their competitors are. If a company seeks to be a market leader within the industry, to attain that goal it requires to create the right set of strategies to get cost and market advantage over its rivals (Preston and Rinertsen, 1998). Therefore, such companies should focus its development strategies on the generation of the right range of products and services to attain a competitive edge and the correct development model to offer the industry value like profit share, market share revenue, or market penetration, which is anticipated for every product or service. Most of the serious business setbacks experienced by directors is misalignment among organizations strategic business goals and the capability to efficiently manage, identify and offer project productivity that accomplishes the strategic objectives successfully. This determines whether there are profit pools in the industry.
As seen in Diagram 1, the movement of al in the supply chain may vary as some intermediaries in the alternative energy Industry supply chain may leapfrog one intermediary to the next. Cost benefits and higher margins are the primary factors that influence the distribution of alternative energy Industry in the value chain.
From diagram 2, the profit pool map shows the dynamic interplay of suppliers, marketing intermediaries, manufacturers, and distributors and retailers. All the players in the map are responsible for maintaining and safeguarding the quality and integrity of the alternative energy products for their profitability. Fundamentally, consumers have become very discriminating in terms of types alternative energy, particularly on effects on the environment. This has led the industry to assign quality categories for the various alternative energy sources to maintain quality.
This can be summarised in the following table
Furthermore, the industry has seen the emergence of significant trends such as the green and the growing acceptance of sustainable sources energy. These trends will surely impact the industry by shifting demand away from the traditional energy sources and encourage them to embrace new sources of energy thus increase the total profits in the industry.
In recent years, the trend of consolidation particularly in the retail segment has greatly elevated the quality and service delivery of alternative energy companies. Ultimately, some companies have chosen to move beyond just providing the best alternative varieties, but also to delight the customer with excellent customer service and fine supply ambiance. It has become clear that the alternative energy consumer has exerted enough bargaining power to compel the industry to enhance the quality control processes in every stage of its value chain (Anthony, Dearden and Vancil, 1972).
As complexity of the service or product increases, the alternative energy management value also increases as a development model in offering a competitive cost edge. The value originates from the horizontal characteristic of alternative energy that drives its concentration on cross-disciplinary cooperation within the industry (Thompson, 2008).
In recent years, the industry has been experiencing a significant degree of consolidation particularly in the production sector as some companies have also engaged in both production and distribution. Some large companies have even gone to the point of almost vertically integrating by creating linkages with producers and their communities. Therefore, these companies have moved to control their producers not only to guarantee quality and supply, but also to better manage raw material costs and improve the profits (Slywotzky and Morrison, 1997).
Conclusion
To sum all of which has been said above, the potential of the alternative energy industry is great. Nevertheless, the potential is largely unexploited due the lack of cohesion in the industry making it difficult to determine profit pools. The industry is highly fragmented; this fact has also halted the creation of an industrial value chain. Although existing industrial value chains continue to benefit from the concept of profit pool, this benefit remains limited largely due to limitations on part of the industry. In order to complete benefit the world industry it is imperative that the value supple chain of this industry be developed at the earliest keeping in mind the various prerequisites.
Reference List
Anthony, R. N., Dearden, J. and Vancil, R. F. (1972). Management control systems: text, cases and readings. Tata McGraw-Hill Publishers.
Gadiesh, O., & Gilbert, J. L. (1998). How to Map Your Industrys Profit Pool. Harvard Business Review.
Preston, S., & Rinertsen, D. (1998). Developing Products in Half the time: New Rules New Tools. Hoboken, NJ: John Wiley and sons.
Sheehy, B., Bracey, H., & Frazier, R. (1996). Winning the Race for Value Strategies to Create Competitive Advantage in the Emerging Age of Abundance. American Marketing Association.
Slywotzky, A. J., and Morrison, D. J. (1997). The Profit Zone How Strategic Business Design will lead you to Tomorrows Profits. Allen and Unwin.
Thompson, A. A. (2008). Crafting & Executive Strategy The Quest for Competitive Advantage. 16th Edition. Tata McGraw-Hill Publishers.
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