贝恩战略分析方法分析方法rosrms.ppt

《贝恩战略分析方法分析方法rosrms.ppt》由会员分享，可在线阅读，更多相关《贝恩战略分析方法分析方法rosrms.ppt（50页珍藏版）》请在三一办公上搜索。

1、Author:Gisele Garraway,ROS/RMS,March 1998,2,Agenda,ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways,3,Agenda,ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways,4,ROS/

2、RMS Graph,ROS/RMS is a diagnostic tool used to compare a business units actual profitability to its potential profitability.,0%,5%,10%,15%,20%,25%,30%,0.1,0.2,0.5,1,2,5,Dunster,Eliot,Currier,Cabot,Profitability,$150MM,Revenue,Normative band(Predicted potential profitability),Relative Market Share,5,

3、ROS/RMS Components,What is measured:,How it is measured?,Scale:,There are three main components of an ROS/RMS graph:profitability,relative market share and the normative band.,*This tool is typically called ROS/RMS since ROS is the most common profitability measure used*Allows for easy viewing of a

4、doubling in relative market share,Profitability(y-axis),Current profitability,return on capital employed return on equityreturn on assets return on sales*,Linear,RMS(x-axis),Accumulated experience and strategic position,Relative market share(RMS),Logarithmic*,Normative band,Range of predicted profit

5、ability,Plus and minus one standard deviation from regression line,-,6,ROS/RMS Relationship,Companies with higher relative market share tend to have more accumulated experience.Higher accumulated experience gives the potential for lower costs and higher profitability.,Higher accumulated experience i

6、s positively correlated with RMS,Higher accumulated experience provides an opportunity for lower costs and higher profits,RMS is a proxy for accumulated experience.RMS is positively correlated with profitability,7,Importance of Market Share,Source:PIMS(Data from 1970 to the present of 3,200 business

7、es-66%manufacturing,20%consumer businesses,14%services),Using relative market share as a predictor of profitability is supported by empirical evidence.The PIMS database demonstrates that,on average,across industries,companies with greater market share have higher profitability.,8,Agenda,ROS/RMS over

8、viewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways,9,Applications,Bain has used ROS/RMS effectively for many clients.Examples of Bain work are:,Computers&Office Equipment,Electric&Power Equipment,Situation:,Result:,A major PC manufacturer recentl

9、y suffered significant operating losses and was experiencing severe cash flow problems,An electric&power equipment company was evaluating a manufacturer of discrete semiconductors for purchase.The client was concerned about industry cyclicality and whether the targets profit margins were unsustainab

10、ly high,Bain used ROS/RMS analysis to examine the PC industry and found that moving the client into the normative band through operational improvements would result in a$174MM profit before tax improvement,RMS/ROS analysis revealed that the targets margins reflected its market share position and acc

11、umulated experience and were therefore sustainable;the targets high RMS helped drive EBIT margins in excess of 20%,10,Agenda,ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways,11,ROS/RMS Steps,There are five basic steps involved in RO

12、S/RMS analysis:,Define the business,Calculate profitability,Calculate relative market shares,Draw normative band,Determine action implications,Key Success Factors,Determine the economic boundaries of the businessIdentify relevant competitors,Achieve comparability across competitors,Include any share

13、d experienceIf business is local or regional,weight market shares,Calculate the normative band using regression analysis,Determine if strategic or operational improvements are required,12,ROS/RMS Steps,Define the business,Calculate profitability,Calculate relative market shares,Draw normative band,D

14、etermine action implications,Determine the economic boundaries of the businessIdentify relevant competitors,Key Success Factors,13,Defining the Business,Effective ROS/RMS analysis depends on correctly defining the economic boundaries of a business.Cost sharing and customer sharing are the primary de

15、terminants of business definition.,High,Cost sharing,Low,Low,High,Customer sharing,One business(charge cards and credit cards),One business with potential for differentiation or niche position(Cross pens and BIC pens),Separate business with potential for cost leadership(oil and refinery by-products)

16、,Separate businesses(beer and distilled spirits),Separate businesses with potential for bundling(touring quality microphones and speakers),One business with potential for substitution(milk cartons and glass milk bottles),14,Correct Market Share Measure,*Statistical market areas,Determining whether a

17、 business is local,regional,or national is also important.,Incorrectly defined businessNational discount department store,Correctly defined business Regional discount department stores,0.31,0.96,R-squared:,When business definition is correct,there is a meaningful predictive relationship,15,Relevant

18、Competitors-Incorrect Business Definition,An incorrect business definition may exclude relevant competitors from ROS/RMS analysis.,National Textile Laundering,It appears Gibb has three major competitors and is underperforming,16,Relevant Competitors-Correct Business Definition,Regional healthcare la

19、undering,Regional industrial laundering,Gibb has six competitors.Gibb is in three separate businesses,all of which are regional.,The correct business definition will ensure that all relevant competitors are considered.,Regional linen laundering,17,ROS/RMS Steps,Define the business,Calculate profitab

20、ility,Calculate relative market shares,Draw normative band,Determine action implications,Key Success Factors,Achieve comparability across competitors,18,Net income after tax,Sales,After tax operating profit,Average assets,Net income after taxes,Average equity,Net income after taxes,Capital employed,

21、*Pre-tax profitability measures are preferable because they exclude any firm-specific tax issues,ROCE(Return on capital employed),ROE(Return on equity),Disadvantages:,Difficult to make comparable across companies,Difficult to make comparable across companies,Not always clear which asset measures to

22、use(Book value?Before depreciation or after?),ROA(Return on assets),Advantages:,Best proxy for return on investments,Best proxy for return on shareholders investments,Easy to collect comparable measures across competitors,Bain example:,Drug store chains,Retail department stores,Beverage industry,Cal

23、culation:*,ROS(Return on sales),The profitability measure used varies from case to case.The key is to use a measure that will allow for an apples-to-apples comparison across relevant competitors.,Eliminates the effects of how assets are financed,Results are sometimes unclear when some competitors co

24、mmand a large price premium,Building products,Calculating Profitability,19,ROS/RMS Steps,Define the business,Calculate profitability,Calculate relative market shares,Draw normative band,Determine action implications,Key Success Factors,Include any shared experienceIf business is local or regional,we

25、ight market shares,20,Calculating Relative Market Share,*Revenues or points of share can be used when units are not available.,The relative market share for the market leader is calculated in relation to the#2 player;the RMS for all other players is calculated in relation to the market leader.,Leade

26、rs RMS:,Any other players RMS:,It is preferable to use units*instead of revenue since we believe accumulated units of experience drive the potential for higher relative profitability,21,Shared Experience(1 of 2),When potential shared experience is ignored,the predictive power of ROS/RMS is limited.I

27、n this example,market share in outboard motors does not explain profitability.,22,Shared Experience(2 of 2),When the benefits of shared experience with lawnmowers and motorcycles is included,a positive correlation appears.,Worldwide Relative Market Share of Outboards,Including Shared Experience With

28、 Motorcycles and Lawnmowers,Pretax Return on Capital,6x,5,4,3,2,1.5,1,0.7,0.5,0.4,0.3,0.2,0.1,80%,60%,40%,20%,0%,(20%),(40%),Yamaha,OMC,Mercury,Chrysler,Outboard Motors volume,23,ROS/RMS Steps,Define the business,Calculate profitability,Calculate relative market shares,Draw normative band,Determine

29、action implications,Key Success Factors,Calculate the normative normative band using regression analysis,24,Drawing the Normative Band(1 of 2),*The Bain Graphics Wizard draws the normative band automatically when the RMS and ROS data points are given.It will not however,calculate an R2,The first ste

30、p in drawing the normative band is to run a regression on ROS and the log of RMS.We then calculate the best fit,or regression line.,Competitor,Units(MM),RMS,In(RMS),Cannon,Castle,Holmes,Peabody,4,960,3,400,2,178,6,200,0.80,0.55,0.35,1.25,-0.22,-0.60,-1.05,-0.22,Multiple R,R square,Adjusted R square,

31、Standard error,Observations,0.741298,0.549523,0.399363,0.399363,Intercept,0.1145,X-variable 1,Coefficients,Standard error,T-stat,P-value,0.0154,7.45,0.005,0.0465,0.0243,1.1913,0.152,Regression statistics,5,ROS,12.3%,10.8%,4.5%,10.5%,Whitman,3,182,0.51,-0.67,8.4%,Regression output(from Excel),Y=mx+bR

32、OS=0.0465(ln RMS)+0.1145,Best Fit Line,25,Drawing the Normative Band(2 of 2),RMS,One standard deviation,The normative band is drawn by applying plus or minus one standard deviation to the best fit line.,Profitability,Best fit line(regression line),Where,n=number of observationsx=observed valuem=mean

33、,26,Normative Band,The Bain Graphics Wizard will draw a normative band automatically based on the input values of ROS and RMS.,27,Adjusted Normative Band,If we believe that a player has mismanaged its costs and has not gotten the full benefits of its experience,we can exclude it from the calculation

34、 of the normative band.*The resulting normative band will be more narrow.,*In the Wizard,go to the“Series”menu and select“remove series from normative band.”,28,ROS/RMS Steps,Define the business,Calculate profitability,Calculate relative market shares,Draw normative band,Determine action implication

35、s,Key Success Factors,Determine if strategic or operational improvements are required,29,Action Implications,A firms position on the ROS/RMS graph helps case teams to determine whether a business should pursue strategic positioning or operational improvements.,Examples:,Suggested actions:,Peabody is

36、 below the normative band;its profitability is low given its relative market share,Cost reduction strategy,Blandford can improve its profitability if it increases its market share and captures experience benefits,Growth strategyMergers and acquisitions,Operational Improvement,Strategic Positioning,3

37、0,Agenda,ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways,31,LAGTEL*-Background,*Disguised client case,Situation:,LAGTEL is a$6B telecom player.Wireless infrastructure is a$2B business unit of LAGTEL,and it is the only“star”business

38、 in LAGTELs portfolio.All other business units are dogs.,Complication:,The wireless infrastructure divisions profitability is falling amid rising overcapacity in North America.Management expects that the over-capacity will continue to drive prices downward.Moreover,LAGTELs returns are 2%while four c

39、ompetitors earn in excess of 10%operating margins,Question:,How can LAGTEL improve its long-term profitability?,Bain used ROS/RMS analysis to develop a strategy for a wireless telecommunications business.,32,Source:Natwest Securities;CS First Boston;Killen Wireless Operating Plan,The profitability v

40、s.overall scale did not demonstrate or clear normative band.,LAGTEL-Background,33,LAGTEL-Wireless RMS,Source:Natwest Securities;CS First Boston;Killen Wireless Operating Plan,The team“peeled the onion”and found a stronger relationship between wireless only RMS and wireless infrastructure profitabili

41、ty.,$2B,1995 Wireless,Infrastructure,Revenue,25%,20%,15%,10%,5%,0%,(5%),(10%),.1,.2,.3,.5,1,1.5,2,5,10,Lucia,Alliance,E-tel,Telco,LAGTEL,Callums,Relative Market Share(Wireless),Operating Profit Margin,Billtel,R=0.52,34,LAGTEL-Technology-Weighted RMS,*Weighted by manufacturer revenue by technology,Wh

42、en RMS was adjusted for the mix of wireless technology,an even stronger relationship appeared.LAGTELs profitability was low considering its share,and LAGTEL was considerably behind four key competitors.,Source:Natwest Securities;CS First Boston;Killen Wireless Operating Plan,35,LAGTEL-Strategic Reco

43、mmendation,*Weighted by manufacturer revenue by technology,After additional competitor analysis,the team recommended a possible merger with one of the top four players to improve LAGTELs profitability.,$2B,1995 Wireless Infrastructure Revenue,Source:Natwest Securities;CS First Boston;Killen Wireless

44、 Operating Plan,20%,15%,10%,5%,0%,(5%),(10%),.2,.3,.5,1,1.5,2,5,10,Lucia,E-tel,Alliance,Telco,Callums,Billtel,.1,Technology-weighted RMS*,Operating Profit Margin,LAGTEL(current),LAGTEL(projected),R=0.73,36,LAGTEL-Regression Predicted Synergy Values,Source:Bain ROS/RMS Regression Model,The team used

45、the ROS/RMS regression to predict the synergy value of possible competitor combinations.The synergy values ranged from$1.2B to$2.3B.,37,Agenda,ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways,38,Pillz*-Background,*Disguised client e

46、xample,Situation:,Complication:,Pillz is a leading retailer of pharmaceuticals in Canada.It participates in the sale of prescriptions and over-the-counter drugs in traditional drug stores.Pillzs management has asked Bain to assist in repositioning Pillz to become the most profitable drug retailer in

47、 North America,Pillzs dominance is being threatened by the entry of non-traditional competitors including food retailers and mass merchants,Bain used ROS/RMS analysis to understand the profitability potential of a Canadian drug store retail chain.,39,Pillz-Industry ROS/RMS,The Bain team identified t

48、wo normative bands:one for food/drug combos and discount merchandisers and another for traditional drug stores.,Source:IMS,Chain Store Guide,annual reports,Pillz internal data,(5%),(3%),(1%),1%,3%,5%,7%,8%,Regional ROS,0.2,0.4,1.0,2.0,4.0,10.0,Regional RMS,$500M revenue,LD,Prairies,Lawtons Atlantic,

49、PP ON,Pillz,Atlantic,Pillz Prairies,Safeway,Wal-Mart,LD,BC,JC PQ,Loblaws,Pillz ON,Traditional channel,Non-traditional channel,40,Pillz*-Summary,Pillzs profitability(ROS)is highly correlated with regional RMSPillzs competitors have significant cost advantagesBecause the normative band for the non-tra

50、ditional channel is steeper than for the traditional channel,an increase in relative market share for a non-traditional channel competitor has a greater impact on profitability than the same increase would have for a traditional drug store competitor,Preliminary ROS/RMS analysis helped the Bain team