ValueMagics - a road map from cost to value

ValueMagicsa
road
map
from
cost
to
value

a
new
road
map
to
global
markets

1.  The model The Magic Pallet
2.  The tool SWAT analysis
3.  The business Market Mode
ValueMagics

a
new
road
map
to
global
markets

1.  The model The Magic Pallet
ValueMagics

BUSINESS BUSINESS CONSUMER
COST OF
MEANS
VALUE
ADDED COSTOF
OWNERSHIP
VALUE
SPACE
BENEFITS
VALUE
ADDED
SACRIFICES
BENEFITS
1. The model…….
The Magic Pallet

©2004 TGVC
Every time a shipment sails to its final
destination, seller and buyer have done
business because the transaction
represents a value for each of them.

The same applies whenever a
service is delivered to a buyer

Then again, seller and buyer have
different perceptions of “value”.
“The Magic Pallet” is a graphical
presentation of the business
transaction.
It demystifies “value” and explains
the different elements that build
up to those perceptions.

SELLER
For the seller, value is the sales price
of his goods minus the cost of means
(fixed and variable costs);
the net profit on
the transaction
BUYER
For the buyer,
value is the worth
in monetary terms
of the perceived benefits
in return for the price he pays
plus the additional costs incurred,
called “total cost of ownership”.
This is the “value proposition” of the seller.
Value
SELLER BUYER
VALUE
ADDED
COST OF
MEANS
PERCEIVED
BENEFITS
COSTOF
OWNERSHIP

The Magic Pallet uses
concise concepts
with precise
descriptions to
identify the elements
that constitute the
value proposition
of a firm
VALUE
ADDED
COSTOFOWNERSHIP
CUSTOMERVALUES
Q
UALITY
IMAGE
DESIGN
SPEED
CHANGE
CHANCE

VALUE CHAIN
The chain of
activities performed
by a single firm,
which add value
for its customer
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
VALUE SYSTEM
The set of value chains
that come together
including suppliers,
manufacturers
processors,
distributors,
traders, etc.
CUSTOMER VALUE
The sum of perceived
benefits – in monetary
terms- in turn for the total
cost of ownership
Let us first agree on some definitions….
COSTOF
OWNERSHIP
PERCEIVED
BENEFITS
VALUE

The costs of means are
the comparative
resources of a firm or
sector.
For most, these costs
are a given
- hard to improve upon
We start loading the pallet……
MINDS = Cost of people with a higher education and/or creativity.
MONEY = Cost of money: own financial resources or financing
MAN POWER = Cost of labor: skilled, proficient or experienced workers
MACHINES = Cost of machines, infrastructure and other means.
MATERIALS = Cost of raw materials, seeds, ingredients a/o
SELLER BUYER
MINDS
MONEY
MANPOWER
MACHINES
MATERIALS

……..…..contains the value added;
the value chain of a firm or sector,
which is the source of competitive
advantages.
Not the comparative
“What do you have?”,
but
“What do you do with it?”
The second crate…….
TECHNOLOGY = Creating new, developing or adapting existing products
PRODUCTION = Transformation of inputs into a final product
LOGISTICS = All in-bound, in-house, out-bound movement of goods
MARKETING = Attracting new and retaining existing customers
SUPPORT = All pre/after sales support, personalization of processes
SELLER BUYER
MINDS
MONEY
MANPOWER
MACHINES
MATERIALSTECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT

VALUECREATION
TECHNOLOGY
SUPPORT
PRODUCCTION
LOGISTICS
MARKETING
1900
1950
1950
2000
Value, a historical perspective

Materials -fabric, button, tread, etc. $ 4,18 $ 7,54
Production –“Cut, make and trim” $ 1,40 $ 1,74
Logistics –in bound/out bound $ 0,27 $ 0,31
Taxes -quota, duties $ 0,11 $ 0,14
Sub-total $ 5,96 $ 9,73
Technology -design, fit, color, model $ ……. $ …….
Marketing –branding, promotion $ ……. $ …….
Retail price -exclusive of VAT $ 39,00 $ 89,00
ABC
The value
of production

Seller’s value equals
buyer’s total cost of
ownership……..
Next crate: cost of ownership
COST = Purchasing price on a DDP basis
CHRONO = Time involved in purchasing, control and corrective actions
CHANGE = Change and adaptation to new products, processes or suppliers
CHANCE = Number of potential suppliers, reliability, barriers, distances
CONFLICT = Disputes on incompetence, unresponsiveness, non-transparancy
SELLER BUYER
MINDS
MONEY
MANPOWER
MACHINES
MATERIALSTECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
COST
CHANGE
CHANCE
CHRONO
CONFLICT

……………..perceived
benefits from the
purchase.
These benefits can be of
technical, social,
economic or any other
nature and are related to
the product and processes
The last crate contains the……….
SELLER BUYER
MINDS
MONEY
MANPOWER
MACHINES
MATERIALS
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
COST
CHANGE
CHANCE
CHRONO
CONFLICT
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
PRODUCT = Design, shape, color, taste, feel, texture, packing
ACCESS = Compliance with product and process standards and norms
SPEED = Availability and/or delivery time, convenience of purchasing
IMAGE = Contribution to profit by reputation supplier/country or brand
SERVICE = Level of pre- and after sales service, customization of processes

Higher cost of means
(MMMMM) will cause higher
cost of ownership (CCCCC)
without necessary
increasing perceived
benefits (PASIS)
Higher value added (TPLMS) will lead
to higher benefits (PASIS) . Therefore,
higher cost of means (MMMMM) need
to be compensated by higher value
added (TPLMS).
Competitiveness….
SELLER BUYER
COST OF
MEANS
PERCEIVED
BENEFITS
COSTOF
OWNERSHIP
SELLER BUYER
VALUE
ADDED
COST OF
MEANS
PERCEIVED
BENEFITS
COSTOF
OWNERSHIP

If total cost of ownership (CCCCC) is
higher than the benefits (PASIS), the
buyer will not buy, postpone the
purchase or look for
other suppliers.
Business or no business ……
SELLER BUYER
COST OF
MEANS
VALUE
ADDED
PERCEIVED
BENEFITS
COSTOF
OWNERSHIP

The value proposition of a seller is composed by his
cost of means –comparative advantages-
plus value added –competitive advantages
That value proposition should contain
product, process and vendor’s benefits,
which are higher than the total
total cost of ownership
for the buyer
Competitive
advantages
Comparative
advantages
The business equation
SELLER BUYER
VALUE
ADDED
COST OF
MEANS
PERCEIVED
BENEFITS
COSTOF
OWNERSHIP

Value addition and profits
Capturing Value in Global Networks: Apple’s iPad and iPhone, Distribution of profits iPhone 2010, Kenneth L. Kraemer, Greg Linden,
and Jason Dedrick, University of California, Irvine, University of California, Berkeley and Syracuse University
Though not
designed to
be a
mathematical
model, The
Magic Pallet
serves to give
indications of
value to
players in
global
supply chains

ValueMathics applied….
In the SWAT analysis, we
show how to use The Magic
Pallet to find the most
successful road to global
markets.
Go to “THE TOOL” on
www.valuemagics.com
SELLER BUYER
MINDS
MONEY
MANPOWER
MACHINES
MATERIALS
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
COST
CHANGE
CHANCE
CHRONO
CONFLICT
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE

a
new
road
map
to
global
markets

2. The tool SWAT analysis
ValueMagics

2. The tool…….
SWAT analysis
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY -5 -11 -1 2 -9 13 -11
PRODUCTION 21 25 19 13 -11 21 88
LOGISTICS 19 -1 21 7 15 -15 46
MARKETING -21 3 -17 -15 5 -5 -50
SUPPORT -19 9 -19 3 -25 11 -40
TOTAL -5 25 3 10 -25 25
SWAT
analysis
VALUECHAIN
CUSTOMER VALUES

The SWAT analysis is a new
generation balanced scorecard
that uses elements of The
Magic Pallet to analyse the
potential of a firm or a sector
in a given market segment.
SELLER BUYER
MINDS
MONEY
MANPOWER
MACHINES
MATERIALS
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
COST
CHANGE
CHANCE
CHRONO
CONFLICT
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY -5 -11 -1 2 -9 13 -11
PRODUCTION 21 25 19 13 -11 21 88
LOGISTICS 19 -1 21 7 15 -15 46
MARKETING -21 3 -17 -15 5 -5 -50
SUPPORT -19 9 -19 3 -25 11 -40
TOTAL -5 25 3 10 -25 25
SWAT
analysis
VALUECHAIN
CUSTOMER VALUES
TCO 1.  Value added reflected as
“VALUE CHAIN” on vertical axe
2.  Perceived benefits and total
cost of ownership* reflected as
“CUSTOMER VALUES “ on
horizontal axe.
* TCO is the result of
MMMMM plus CCCCC
The tool

“SWAT” stands for…..
§  Sources
§  Cost of means, like technical and commercial people,
manpower, money, machines and raw materials –
“Minds, Money, Manpower, Machines, Materials”
§  Winners
§  Core competencies of the firm which create competitive
advantages in the value system
– “Technology, Production, Logistics, Marketing, Support”
§  Alliances
§  Forward or backward alliances with technology providers,
marketing companies, logistical service providers and
others
§  Trends
§  General direction of changes in customer values, like
product characteristics, process requirements, delivery
and stocking, desired image and service requirements
as well as CSR issues
– “Product, Access, Speed, Image, Service”

The SWAT analysis
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY -5 -11 -1 2 -9 13 -11
PRODUCTION 21 25 19 13 -11 21 88
LOGISTICS 19 -1 21 7 15 -15 46
MARKETING -21 3 -17 -15 5 -5 -50
SUPPORT -19 9 -19 3 -25 11 -40
TOTAL -5 25 3 10 -25 25
SWAT
analysisVALUECHAIN
CUSTOMER VALUES

TPLMS are the value activities
of a firm -the source for
competitive advantages
–its value chain.
Being the drivers for value
creation, we put them on the
vertical axe of the SWAT
analysis.
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
VALUECHAIN SWAT
analysis

On the horizontal axe, we list the PASIS
- required product, process and vendor’s
benefits of a given buyer’s segment.
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
VALUECHAIN SWAT
analysis
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
CUSTOMER VALUES

TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
VALUECHAIN SWAT
analysis
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
CUSTOMER VALUES
TCO – Total Cost of Ownership is the
column for the comparative and
competitive advantages of
the firm or sector.
We know them as MMMMM
– “Minds, Money, Man power,
Machines, Materials” and CCCCC –
“Cost, Change, Chance,
Chrono, Conflict”

PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
CUSTOMER VALUES
VALUECHAIN SWAT
analysis
The crossroads of rows and colums
give us the relevant issues in
supply and demand that are subject
the SWAT analysis

PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY
PRODUCT
DEVELOPMENT
MATERIALS
R&D PROCESS
TIME-TO-
PRODUCTION
TECHNICAL
REPUTATION
CO-DESIGN
ACTIVITIES
SUPPLIERS
FORMULATION
PRODUCTION
PRODUCTION
TECHNIQUES
PRODUCTION
PROCESSES
SPEED
WINDOWS
HOUSEKEEPING
AND OHS
PRODUCTION
FLEXIBILITY
LABOR COST
PRODUCTIVITY
LOGISTICS
QUALITY OF
LOGISTIC CHAIN
PACKAGING
STORAGE
SWIFTNESS OF
LOGISTICS
APPEARANCE
OF LSP
SPECIAL
DELIVERIES
COST OF
LOGISTICS
MARKETING
BRANDING
PACKING
LEGAL AND
SALES TERMS
RESPONSE
TIME ON RFQ
BROCHURES
WEBSITE ETC
CONVENIENCE
OF ORDERING
SALES TERMS
DISCOUNTS
SUPPORT
MAINTENANCE
INFORMATION
GUARANTEE
DATA SHEETS
COMPLAINT
HANDLING
COMPETENCE
OF PERSONNEL
PERSONAL
SERVICES
COST OF
SERVICE
TOTAL
CUSTOMER VALUES
VALUECHAIN
SWAT
analysis

Is the MD-2 variety available in the country ? Are there certified test
faciltities to guarantee the quality of the pineapple? Can ripeness be
tested to get the product at the right ripeness on the shelf ?
Is the growing and harvesting process adequate to preserve the
unique characteristics of the pineapple? Does the region have the
proper temperature range for this variety?
How are post harvest conditions? Is transport and warehousing
adequate for the chill sensitiveness of pineapples? Are transit times
suitable for the riping period of the pineapple ?
Does the company communicate the unique properties of this
variety to its prospects or custiomers ? Is there appropriate
information on the specifications in brochures or on a website ?
Does the company provide product information for consumers –on
labels or leaflets. Are there suggestions as how to serve the
pineapple or ideas for recipes ?
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
MD-2variety,ovalshape,no
spinesexeptattheleaftip,
clearyellowishcolour
inside,sweettaste,hardgreen
leaves,equalpatches
DESIGN
5
3
-5
-1
-3
PRODUCT

SWAT - methodology
1.  Gather 3-5 persons; 3=minimum, 5 = maximum
•  one/three persons from the firm; one/two from TPO,
client or supplier; one independent expert/facilitator
2.  Fill in the SWAT analysis individually without consultation
with other persons
•  5 or 3 or 1 or -1 or -3 or -5 for scroes per column
•  Use each number only once, leave blank if no correlation
3.  Add up individual scores for total group results
4.  Add up columns and rows for first assessment
5.  Circle areas of high scores green = USP/CORE COMPETENCIES
6.  Circle areas of low scores red= CHALLENGES/ALLIANCES
7.  Define knock-out criteria and desirable areas per sector/market
8.  Decide on go or no-go for exports
9.  Define corrective actions in the red areas
10.  Construct the business model around the green areas.

This is an example of an
individual SWAT sheet.
You start filling the
numbers column by
column. The question at
each crossroad is
“To what extent does the
value chain of the firm
meet the specific
customer values
of the buyer ?
In each column, numbers
can be used only once.
If you cannot find a
correlation between a
certain value activity and
a specific customer
benefit, leave the
space blank
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TECHNOLOGY -1 -1 1 -3 5
PRODUCTION 3 5 5 5 -1 3
LOGISTICS 5 1 3 -1 3 -3
MARKETING -3 -3 -1 -3 -1
SUPPORT -5 -5 3 -5 1
SWAT
analysis
CUSTOMER VALUES
VALUECHAIN

PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY -5 -11 -1 2 -9 13 -11
PRODUCTION 21 25 19 13 -11 21 88
LOGISTICS 19 -1 21 7 15 -15 46
MARKETING -21 3 -17 -15 5 -5 -50
SUPPORT -19 9 -19 3 -25 11 -40
TOTAL -5 25 3 10 -25 25
SWAT
analysis
VALUECHAIN CUSTOMER VALUES
This is an example
of a consolidated
SWAT sheet.
Individual results
are added up.
First analysis is
whether the
numbers close to
zero are the result
of consensus or
opposite opinions
in the group.
If all members have
interpreted the
respective box in
the same way, but
still have different
opinions, the
scores are left
untouched.

PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY -5 -11 -1 2 -9 13 -11
PRODUCTION 21 25 19 13 -11 21 88
LOGISTICS 19 -1 21 7 15 -15 46
MARKETING -21 3 -17 -15 5 -5 -50
SUPPORT -19 9 -19 3 -25 11 -40
TOTAL -5 25 3 10 -25 25
SWAT
analysis
Second analysis is
a quick scan of
the firm and its
potential to enter
in a certain market
segment
From the horizontal
totals, we see a
company that
excels in
production and
logistics, but with a
low level of
technology, and
serious
shortcomings in
marketing and
support
From the vertical scores, we see that the
firm does not meet the buyer’s
requirements in product attributes and
support, but scores wel in compliance with
norms and standards; it meets the buyer’s
expectations in reputation. Delivery and
availability are acceptable.

PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY -5 -11 -1 2 -9 13 -11
PRODUCTION 21 25 19 13 -11 21 88
LOGISTICS 19 -1 21 7 15 -15 46
MARKETING -21 3 -17 -15 5 -5 -50
SUPPORT -19 9 -19 3 -25 11 -40
TOTAL -5 25 3 10 -25 25
SWAT
analysis
However, the
unique asset of the
SWAT analysis is its
detailed analysis of
“focus” -
green areas-
and
“challenge”
–red areas-
of a firm.
These are the basis
for the selection of
the right product/
market
combination,
the unique selling
proposition and
corrective actions
to be taken.
SWAT - consolidated results

PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY -5 -11 -1 2 -9 13 -11
PRODUCTION 21 25 19 13 -11 21 88
LOGISTICS 19 -1 21 7 15 -15 46
MARKETING -21 3 -17 -15 5 -5 -50
SUPPORT -19 9 -19 3 -25 11 -40
TOTAL -5 25 3 10 -25 25
SWAT
analysis
The product
brand(1) does not
represent a value in
the target market,
product support (2)
is bad.
The firm’s
response time
is insufficient (3).
It needs an alliance
with a trade partner
that will take care
of the service
needs of the
market (4).
Cost of logistics
make the offer
uncompetitive (5)
1 2 3 4 5
SWAT - challenge

PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY -5 -11 -1 2 -9 13 -11
PRODUCTION 21 25 19 13 -11 21 88
LOGISTICS 19 -1 21 7 15 -15 46
MARKETING -21 3 -17 -15 5 -5 -50
SUPPORT -19 9 -19 3 -25 11 -40
TOTAL -5 25 3 10 -25 25
SWAT
analysis
This company’s
unique selling
proposition to its
target market is its
production
technique, meeting
all international
standards and
norms (1) at a
globally
competitive
price (3)
The firm is capable
to deliver JIT or
maintain stocks
where necessary (2)
A license contract
with a technology
provider will
convert this firm
into a globally
competitive private
label manufacturer
1 2 3
SWAT - focus

SWAT – in a nutshell
1.  The SWAT analysis uses elements of The Magic Pallet from
supply side -value chain- and demand side -customer values
2.  Core analysis is a firm’s capability to make a competitive
value proposition to a targeted market segment
3.  Outcome of the analysis give tangible –not subjective-
strengths and weaknesses –focus and challenge
4.  This outcome is the basis for
•  An appropriate product/market combination
•  A unique selling proposition
•  A market entry strategy
5.  Multiple SWAT’s are the most reliable input for sector
analyses and sector strategies
To see how the SWAT results are converted into the business model,
go to www.valuemagics.com “THE BUSINESS”

a
new
road
map
to
global
markets

3. The business Market Mode
ValueMagics

3. The business……..
Market Mode
TECHNOLOGY - Qualified engineers,
designers, equipment, research, product
development, design, laboratory,
+ ++ + +++ +++
PRODUCTION - Manpower, machines,
buildings, processes, internal routing
+++ +++ ++ +++ +++
LOGISTICS - Logistical infrastructure,
sourcing, materials managements, storage
capacity, transport equipment (own or
outsourced)
+ ++ ++ + ++
MARKETING - Marketing/sales management,
promotional activities, customer retention,
relation mgmt.
+ + +++ + +++
SUPPORT - Personalized service, pre- and
after sales service, maintenance, helpdesks,
product information, application engineering.
+ + +++ ++ ++
Required
amount/nature of
value addition
CONTRACT
MANUFACTURING
SUB
CONTRACTING
LICENSIE
MANUFACTURING
PRIVATELABEL
MANUFACTURING
OWNIP
BRAND

The business
•  “The business” is reflected in
the market mode. This is the
way in which a company uses
its strongest value activities
(TPLMS) to enter a market and
leave other value activities to
the trade channel.
•  These strong value activities -
competitive advantages- are
the green areas in the SWAT
+
+
++
+++
++
+++
++
+++
++
+
++
+
+
+++
+++
++
++
+++
+++
+++
+
+
relation mgmt.
+
outsourced)
+++
+
+
+
++
+++
++
+++
++
+++
++
+
++
+
+
+++
+++
++
++
+++
+++
+++
+
+
relation mgmt.
+
outsourced)
+++
+
SUBCONTRACT,
CUSTOMMNF
FOB,KPO
LICENSIE
MANUFACTURING
PRIVATELABEL,
SOURCING,IP/OC
FULLVALUE,
BRAND
JOBBING,BPO
CMTP/MAQUILA
MARKET
MODES
SUBCONTRACT,
CUSTOMMNF
FOB,KPO
LICENSIE
MANUFACTURING
PRIVATELABEL,
SOURCING,IP/OC
FULLVALUE,
BRAND
JOBBING,BPO
CMTP/MAQUILA
MARKET
MODES
•  analysis. The red areas need to be taken care of by the trade
partner or need to be improved by the exporter
•  Each market mode focuses one or two of the specific value
activities (TPLMS) and shows, which is the best way to escape the
downward price spiral and enter the high road to global markets.

PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
TCO
TOTAL
TECHNOLOGY 13 11 4 11 7 17 41
PRODUCTION 19 25 17 6 4 20 91
LOGISTICS 4 6 19 8 1 12 28
MARKETING 4 8 12 11 2 7 10
SUPPORT 5 2 13 3 17 4 18
TOTAL 37 52 23 21 31 36
CUSTOMER VALUES
VALUECHAIN
SWAT
ANALYSIS
From Tool
to Business
+
+
++
+++
++
+++
++
+++
++
+
++
+
+
+++
+++
++
++
+++
+++
+++
+
+
relation mgmt.
+
outsourced)
+++
+
+
+
++
+++
++
+++
++
+++
++
+
++
+
+
+++
+++
++
++
+++
+++
+++
+
+
relation mgmt.
+
outsourced)
+++
+
SUBCONTRACT,
CUSTOMMNF
FOB,KPO
LICENSIE
MANUFACTURING
PRIVATELABEL,
SOURCING,IP/OC
FULLVALUE,
BRAND
JOBBING,BPO
CMTP/MAQUILA
MARKET
MODES
SUBCONTRACT,
CUSTOMMNF
FOB,KPO
LICENSIE
MANUFACTURING
PRIVATELABEL,
SOURCING,IP/OC
FULLVALUE,
BRAND
JOBBING,BPO
CMTP/MAQUILA
MARKET
MODES

COST
Market Mode - who does what ?
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY
SELLER BUYER CONSUMER
CUSTOMER
VALUE

VALUE
PRODUCTION
PATENT BRAND
Market Mode – how to upgrade ?

T P L M S
FRESH
PRODUCTS
GARMENTS
APPAREL
MANUFACTURED
PRODUCTS
SERVICES ITO/
BPO/KPO
Contract
manufacturing
CTC CMTP, Maquila
JOBBING,
TOLL CONVERSION,
CKD ASSEMBLY
BUSINESS
PROCESS
OUTSOURCING
Sub-contracting OUTGROWING FOB
SUBCONTRACTING
CUSTOM MNF.
SKD, EMS
KNOWLEDGE
PROCESS
OUTSOURCING
License
manufacturing
GROWING
LICENSE
MANUFACTURING,
BOX EMS
BRAND
Private label
manufacturing
SOURCING
PRIVATE LABEL MNF.
ODM
IP/OWN
CONTENT
Own IP/brand
UNIQUE VARIETY
OWN BRAND
OWN DESIGN
OWN BRAND
OWN TECHNOLOGY
OWN BRAND
IP/OWN
CONTENT
OWN BRAND
Market Modes
We distinguish five general types of business
models/ market entry modes: each model has a
different amount and nature of value addition.

COST
1. Contract manufacturing
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY Seller concentrates
on production or
execution and
leaves technology,
design, marketing
to buyer -low value
adding. Typical
trade partners are
A-brands,
companies with
simple after sales
requirements

COST
TECHNOLOGY
PRODUCTION
1.1. CMTP/maquila
CMT CONSUMER
TECHNOLOGY
LOGISTICS
MARKETING
SUPPORT

1.2. BPO/call centre
CALL CENTRE CONSUMER
COST
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY
HSBC

COST
2. Sub-contracting
SUPPORT
MARKETING
TECHNOLOGY
PRODUCTION
LOGISTICS
TECHNOLOGY Seller produces under
specifications of
buyer,sources all
materials. Buyer
concentates on
logistics, marketing
and after sales.
Typical trade partners
are large retail chains,
T1/ OEM’s, firms with
more complex after
sales requirements.

SPRAYER LTD. “CHANEL” CONSUMER
COST
2.1. Cosmetics - sprayers
SUPPORT
MARKETING
TECHNOLOGY
LOGISTICS
TECHNOLOGY
PRODUCTION

Tier 2 –piston manufacturer
Tier 1 – engine manufacturer
OEM – truck manufacturer
2.1. Automotive – T2

ENGINEERING FIRM KEMA CONSUMER
COST
2.3. Engineering services
SUPPORT
MARKETING
TECHNOLOGY
PRODUCTION
LOGISTICS
TECHNOLOGY

SELLER LEVIS CONSUMER
COST
2.4. “FOB”
SUPPORT
MARKETING
TECHNOLOGY
PRODUCTION
LOGISTICS
TECHNOLOGY

COST
3. License manufacturing
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY
Seller has captive
(regional) markets,
but lacks the
technology or design
capacity. Sources
technology from
third parties and
concentrates on
marketing. Typical
alliances are with
enineering firms,
design studios,
laboratories

“License and buy back” :
•  Buyer provides the design, drafts, formulation of product,
often trough a design studio
•  Buyer provides sometimes a “secret component”
•  Seller takes care of production
Other modes :
•  Seller takes care of marketing, sometimes under own label,
sometimes under licensor’s brand
•  Seller takes care of outgoing logistics
•  Suitable for regional markets, beware of marketing
restrictions from licensor
3. License manufacturing – 2 options

LICENSOR
LICENSEE
LICENSEE
LICENSEE
FREE MARKETS
BLOCKED MARKETS
3. License manufacturing

COST
3.1. Food processing
SUPPORT
MARKETING
TECHNOLOGY
BOTTLER COCA COLA CONSUMER
LOGISTICS
PRODUCTION

COST
4. Private label manufacturing
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
Seller has a unique
technology or
design, production or
execution facilities,
but lacks/does not
want to get involved
in marketing after
sales. Typical trade
partners are retail
stores, B-brands,
OEM’s.

COST
4.1. Automotive – car assembly
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
MAGNA STEYR CHRYSLER CONSUMER

COST
4.2. Oil industry
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
SHELL CONSUMER

COST
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
SELLER MORNING FRESH CONSUMER
4.4. Food processing

A -BRAND
4.4. The supermarket shelf
HOUSE
BRAND
FIGHTING
BRAND

COST
4.4. Accessories – sourcing
SUPPORT
LOGISTICS
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
UMBRALLA MNF. VODAFONE CONSUMER

COST
5. Own IP/brand
SUPPORT
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
Seller has own
technology, content
or design, markets
its products or
service under own
brand through
trade channels or
on the web. Typical
trade partners are
distributors, retail,
publishers-or direct
sales

COST
5.1. Games
SUPPORT
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
APPLE CONSUMER

COST
5.2. Garments - brand
SUPPORT
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
CLEVER MODA S.A. RETAIL CONSUMER

COST
5.3. Food processing - brand
SUPPORT
MARKETING
PRODUCTION
TECHNOLOGY
LOGISTICS
BUYER CONSUMER

+ ++ + +++ +++
+++ +++ ++ +++ +++
outsourced)
+ ++ ++ + ++
relation mgmt.
+ + +++ + +++
+ + +++ ++ ++
Required amount/
nature of value
addition
CONTRACT
MANUFACTURING
SUB
CONTRACTING
LICENSIE
MANUFACTURING
PRIVATELABEL
MANUFACTURING
OWNIP
BRAND

a
new
road
map
to
global
markets

1.  The Magic Pallet – understanding value
2.  SWAT analysis – building value
3.  Market Mode – selling value
ValueMagics

ValueMagics - a road map from cost to value

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