【正文】 ative market share Profitability (yaxis) Current profitability –return on capital employed –return on equity –return on assets –return on sales* Linear RMS (xaxis) Accumulated experience and strategic position Relative market share (RMS) Logarithmic** Normative band Range of predicted profitability Plus and minus one standard deviation from regression line 5 ROS/RMS BOS 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 is 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 Accumulated Experience RMS RMS Profitability Accumulated Experience Cost per unit 6 ROS/RMS BOS Importance of Market Share Source: PIMS (Data from 1970 to the present of 3,200 businesses 66% manufacturing, 20% consumer businesses, 14% services) U nd er 10% 10 20% 20 30% 30 40% O v er 40%%14 .0 %18 .0 %23 .0 %29 .0 %0%5%10%15%20%25%30%Pretax Return on InvestmentM ar k et Sh are Using relative market share as a predictor of profitability is supported by empirical evidence. The PIMS database demonstrates that, on average, across industries, panies with greater market share have higher profitability. 7 ROS/RMS BOS Agenda ?ROS/RMS overview ?Applications ?ROS/RMS steps ?Client examples –wireless infrastructure –drug retailing ?Challenges ?Key takeaways 8 ROS/RMS BOS 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 recently suffered significant operating losses and was experiencing severe cash flow problems An electric power equipment pany was evaluating a manufacturer of discrete semiconductors for purchase. The client was concerned about industry cyclicality and whether the target’s profit margins were unsustainably 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 target’s margins reflected its market share position and accumulated experience and were therefore sustainable。 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 strategy ?Mergers and acquisitions 0%5%10%15%20%25%30% 1 2 5 10LeeW es t v ie wPeab odyW al nutROSR M SOperational Improvement 0%3%5%8%10%13% 1 2 5 10ChesterB landf or dH en ric oROSR M SStrategic Positioning 29 ROS/RMS BOS Agenda ?ROS/RMS overview ?Applications ?ROS/RMS steps ?Client examples –wireless infrastructure –drug retailing ?Challenges ?Key takeaways 30 ROS/RMS BOS LAGTEL* Background *Disguised client case Situation: LAGTEL is a $6B tele player. Wireless infrastructure is a $2B business unit of LAGTEL, and it is the only “star” business in LAGTEL’s portfolio. All other business units are dogs. Complication: The wireless infrastructure division’s profitability is falling amid rising overcapacity in North America. Management expects that the overcapacity will continue to drive prices downward. Moreover, LAGTEL’s returns are 2% while four petitors earn in excess of 10% operating margins Question: How can LAGTEL improve its longterm profitability? Bain used ROS/RMS analysis to develop a strategy for a wireless telemunications business. 31 ROS/RMS BOS Source: Natwest Securities。 CS First Boston。 CS First Boston。 CS First Boston。 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 strategy ? Mergers and acquisitions 0%5%10%15%20%25%30% 1 2 5 10LeeW es t v ie wPeab odyW al nutROSR M SOperational Improvement 0%3%5%8%10%13% 1 2 5 10ChesterB landf or dH en ric oROSR M SStrategic Positioning ROCE (Return on capital employed) ROE (Return on equity) Disadvantages: Difficult to make parable across panies Difficult to make parable across panies Not always clear which asset measures to 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 parable measures across petitors Bain example: Drug store chains Retail department stores Beverage industry Calculation:* Net ine after taxes Average equity After tax operating profit Average assets Net ine after tax Sales ROS (Return on sales) Eliminates the effects of how assets are financed Results are sometimes unclear when some petitors mand a large price premium Net ine after taxes Capital employed Building products Leader’s RMS: Any other player’s RMS: Market leader’s units sold 2 player’s units sold Other player’s u