1. ValueMathics THE MAGIC PALLET

2. ©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.

3. The same applies whenever a service is delivered to the buyer

4. Then again, seller and buyer have different perceptions of “value”. “The Magic Pallet” explains the different elements of those perceptions.

5. 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 Seller’s sales/buyer’s purchase price Value

6. 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

7. ValueMagics uses concise concepts with precise descriptions to identify the elements that constitute the value proposition of a firm

8. VALUE CHAIN The chain of activities performed by a single firm, which add value for its customer TECHNOLOGY PRODUCTION LOGISTICS MARKETING SUPPORT VALUE SET 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….

9. 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 now can start loading the pallet…… MINDS = Cost people with a higher education and/or creativity. MONEY = Cost of own financial resources or financing MAN POWER = Cost of skilled, proficient or experienced workers MACHINES = Cost of machines, infrastructure and other means. MATERIALS = Landed cost of raw materials, seeds, ingredients a/o

10. ……..…..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

11. ….the seller to the buyer. For the buyer, that value proposition has two sides: his total cost of ownership…….. This is the value proposition of …… 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

12. ……………..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………. 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

13. Higher cost of means – MMMMM- will cause higher cost of ownership –CCCCC- without necessary increasing benefits -PASIS Higher value added –TPLMS- will lead to higher benefits –PASIS. Therefore, higher MMMMM need to be compensated by higher TPLMS. Competitiveness….

14. 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 ……

15. 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 more perceived benefits than the total cost of ownership for the buyer Competitive advantages Comparative advantages The business equation

16. 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

17. Behind the buyer are the end users or consumers. They also have a perception of value. But –other than the buyer- the end user’s perception of benefits and sacrifices is not strictly monetary. Less tangible issues play an –often dominant- role in the purchasing decision. Like environmental and or social considerations. And –last but not least- psychological motives to buy or not to buy. These customer values complete The Magic Pallet From B2B to B2C

18. BUSINESS CONSUMER TECHNOLOGY PRODUCTION LOGISTICS MARKETING SUPPORT MINDS MONEY MAN POWER MACHINES MATERIALS COST CHRONO CHANGE CHANCE CONFLICT PRODUCT ACCESS SPEED IMAGE SERVICE PERIL PEOPLE PLANET PROFIT PRICE PRODUCT QUALITY SPEED IMAGE SERVICE TECHNOLOGY PRODUCTION LOGISTICS MARKETING SUPPORT

19. ValueMagics applied…. Though not designed to be a mathematical model, The Magic Pallet serves to give indications of value to players in global supply chains In the SWAT analysis, we show how to use The Magic Pallet to find the most successful road to global markets. See www.valuemagics.comwww.valuemagics.com