【正文】 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 tv 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 units sold Market leader’s units sold It is preferable to use units instead of revenue since we believe accumulated units of experience drive the potential for higher relative profitability 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 49 。 Wireless Operating Plan 20% 15% 10% 5% 0% (5%) (10%) .2 .3 .5 1 2 5 10 Lucia Etel Alliance Telco Callums Billtel .1 Technologyweighted RMS* Operating Profit Margin LAGTEL (current) LAGTEL (projected) R178。 CS First Boston。 Wireless Operating Plan 20% 15% 10% 5% 0% (5%) (10%) .2 .3 .5 1 2 5 10 Lucia Etel Alliance Telco LAGTEL Callums Billtel .1 Technologyweighted RMS* Operating Profit Margin R178。 CS First Boston。 Wireless Operating Plan The team “peeled the onion” and found a stronger relationship between wireless only RMS and wireless infrastructure profitability. $2B 1995 Wireless Infrastructure Revenue 25% 20% 15% 10% 5% 0% (5%) (10%) .1 .2 .3 .5 1 2 5 10 Lucia Alliance Etel Telco LAGTEL Callums Relative Market Share (Wireless) Operating Profit Margin Billtel R178。 CS First Boston。 Killen Associates。 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 Agenda ?ROS/RMS overview ?Applications ?ROS/RMS steps ?Client examples –wireless infrastructure –drug retailing ?Challenges ?Key takeaways 30 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 Source: Natwest Securities。 the RMS for all other players is calculated in relation to the market leader. Leader’s RMS: Any other player’s RMS: Market leader’s units sold 2 player’s units sold Other player’s units sold Market leader’s units sold It is preferable to use units* instead of revenue since we believe accumulated units of experience drive the potential for higher relative profitability 20 Shared Experience (1 of 2) When potential shared experience is ignored, the predictive power of ROS/RMS is limited. In this example, market share in outboard motors does not explain profitability. W o r l d w i d e R e l a t i v e M a r k e t S h a r e o f O u t b o a r d sPretax Return o