【正文】 tional channel petitor has a greater impact on profitability than the same increase would have for a traditional drug store petitor Preliminary ROS/RMS analysis helped the Bain team develop some key insights. 40 ROS/RMS BOS Agenda ?ROS/RMS overview ?Applications ?ROS/RMS steps ?Client examples –wireless infrastructure –drug retailing ?Challenges ?Key takeaways 41 ROS/RMS BOS Challenges In some situations, ROS/RMS analysis is difficult to conduct. ?It is difficult to define the business ?Competition has significant shared experience from other businesses that is difficult to capture in the RMS measure ?Market shares must be weighted because the business is local or regional ?One or more sizable petitors are not leveraging their accumulated experience to reduce costs 42 ROS/RMS BOS Other Bain Tools Bain uses other tools to estimate potential profitability when RMS or scale is not the profit driver. Example industries Bain tool Key profit driver ?Customer loyalty ?Percent of category which is premium priced and relative market share of category ?Speed of product development and release Retention High road/Low road Timetomarket ?Auto insurance ?Credit cards ?Advertising ?Consumer goods –toothpaste –readytoeatcereals ?Technology –semiconductors ?Retail fashion –athletic gym shoes 43 ROS/RMS BOS Agenda ?ROS/RMS overview ?Applications ?ROS/RMS steps ?Client examples –wireless infrastructure –drug retailing ?Challenges ?Key takeaways 44 ROS/RMS BOS Key Takeaways (1 of 3) Overview ROS/RMS Components ?ROS/RMS is a diagnostic tool used to pare a business unit’s actual profitability to its potential profitability ?ROS/RMS suggests that a firm’s profitability should fall within a predicted range based on its relative market share ?The ROS/RMS relationship is based on the empirical evidence that high RMS is positively correlated with high profitability ?Profitability is on the yaxis and is plotted on a linear scale ?Profitability measures include ROCE, ROE, ROA or ROS. ROS is the most mon ?Relative market share is on the xaxis and is plotted on a logarithmic scale. RMS is a proxy for accumulated experience ?The normative band is the band in which panies should fall based on their RMS. It is drawn by applying plus or minus one standard deviation to the best fit line. 45 ROS/RMS BOS Key Takeaways (2 of 3) Implications of ROS/RMS Analysis ?The leader’s RMS is calculated as follows: ?Any other player’s RMS is calculated as follows: ?A firm that falls below the normative band requires operational improvements to improve profitability ?A firm that lies within the normative band can improve its profitability by improving its strategic position and gaining share Challenges ?In some situations, ROS/RMS analysis is difficult to conduct –it is difficult to define the business –petition has significant shared experience from other businesses that is difficult to capture in the RMS measure –market shares must be weighted because the business is local or regional –one or more sizable petitors are not leveraging their accumulated experience to reduce costs Market leader’s units sold 2 player’s units sold Other player’s units sold Market leader’s units sold 46 ROS/RMS BOS Key Takeaways (3 of 3) Other Tools ?When RMS or scale is not a key driver of profitability, ROS/RMS is not an appropriate tool 47 ROS/RMS BOS Takeaway Slides (1 of 2) 0%5%10%15%20%25%30% 1 2 5D u n s te rElio tC ur rierC abo tProfitability $1 50M MR ev enu eNormative band (Predicted potential profitability) Relative Market Share 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 ROS/RMS Graph ROS/RMS Relationship ROS/RMS Components ROS/RMS Steps Define the business Calculate profitability Calculate relative market shares Draw normative band Determine action implications Key Success Factors ? Determine the economic boundaries of the business ? Identify relevant petitors ? Achieve parability across petitors ? Include any shared experience ? If business is local or regional, weight market shares ? Calculate the normative band using regression analysis ? Determine if strategic or operational improvements are required What is measured: How it is measured? Scale: Profitability (yaxis) RMS (xaxis) Normative band Current profitability Accumulated experience and strategic position Range of predicted profitability – return on capital employed – return on equity – return on assets – return on sales* Relative market share (RMS) Plus and minus one standard deviation from regression line Linear Logarithmic** 48 ROS/RMS BOS Takeaway Slides (2 of 2) Action Implications Calculating RMS Calculating Profitability Other Bain Tools Examples: Suggested actions: Peabody is below the normative band。 = 33 ROS/RMS BOS LAGTEL TechnologyWeighted RMS * Weighted by manufacturer revenue by technology When RMS was adjusted for the mix of wireless technology, an even stronger relationship appeared. LAGTEL’s profitability was low considering its share, and LAGTEL was considerably be