戰(zhàn)略分析工具分析方法-rosrms

1、 Author: Gisele GarrawayROS/RMSMarch 19981ROS/RMSBOS Agenda ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways2ROS/RMSBOS Agenda ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKe

2、y takeaways3ROS/RMSBOS ROS/RMS GraphROS/RMS is a diagnostic tool used to compare a business units actual profitability to its potential profitability.0%5%10%15%20%25%30%125DunsterEliotCurrierCabotProfitability $150MMRevenueNormative band(Predicted potential profitability)Relative Market Sha

3、re4ROS/RMSBOS 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

4、viewing of a doubling in relative market shareProfitability (y-axis)Current profitabilityreturn on capital employed return on equityreturn on assets return on sales*LinearRMS (x-axis) Accumulated experience and strategic positionRelative market share (RMS)Logarithmic*Normative band Range of predicte

5、d profitability Plus and minus one standard deviation from regression line-5ROS/RMSBOS 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 accumula

6、ted experience is positively correlated with RMSHigher accumulated experience provides an opportunity for lower costs and higher profitsRMS is a proxy for accumulated experience. RMS is positively correlated with profitabilityAccumulated ExperienceRMSRMSProfitabilityAccumulated ExperienceCost per un

7、it6ROS/RMSBOS Importance of Market ShareSource: PIMS (Data from 1970 to the present of 3,200 businesses - 66% manufacturing, 20% consumer businesses, 14% services)Under 10%10-20%20-30%30-40%Over 40%9.0%14.0%18.0%23.0%29.0%0%5%10%15%20%25%30%Pre-tax Return on InvestmentMarket Share Using relative mar

8、ket 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.7ROS/RMSBOS Agenda ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastr

9、ucturedrug retailingChallengesKey takeaways8ROS/RMSBOS ApplicationsBain has used ROS/RMS effectively for many clients. Examples of Bain work are: Computers & Office EquipmentElectric & Power EquipmentSituation:Result:A major PC manufacturer recently suffered significant operating losses and

10、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 unsustainably highBain used ROS/RMS analysis to

11、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 improvementRMS/ROS analysis revealed that the targets margins reflected its market share position and accumulated experience and were therefore

12、 sustainable; the targets high RMS helped drive EBIT margins in excess of 20%9ROS/RMSBOS Agenda ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways10ROS/RMSBOS ROS/RMS Steps There are five basic steps involved in ROS/RMS analysis: Defi

13、ne the businessCalculate profitabilityCalculate relative market sharesDraw normative bandDetermine action implicationsKey Success FactorsDetermine the economic boundaries of the businessIdentify relevant competitorsAchieve comparability across competitorsInclude any shared experienceIf business is l

14、ocal or regional, weight market sharesCalculate the normative band using regression analysisDetermine if strategic or operational improvements are required11ROS/RMSBOS ROS/RMS StepsDefine the businessCalculate profitabilityCalculate relative market sharesDraw normative bandDetermine action implicati

15、onsDetermine the economic boundaries of the businessIdentify relevant competitorsKey Success Factors12ROS/RMSBOS 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 determinants of bus

16、iness definition.HighCost sharingLowLowHighCustomer sharingOne 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)Separate businesses(beer

17、 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)13ROS/RMSBOS Correct Market Share Measure*Statistical market areas0%5%10%15%20%25%30%125Sam-Mart

18、CainsAcmeZ-MartOperating return on assetsNational RMS0%5%10%15%20%25%30%125Sam-MartCainsAcmeZ-MartOperating return on assetsWeighted Average RMS of Top 50 SMSAs*Determining whether a business is local, regional, or national is also important.Incorrectly defined businessNational discount dep

19、artment store Correctly defined business Regional discount department stores 0.310.96R-squared:When business definition is correct, there is a meaningful predictive relationship14ROS/RMSBOS Relevant Competitors - Incorrect Business Definition 0%3%5%8%10%13%125HCCKerbyDunlopGibbReturn on Sal

20、esRMS$1,250MMRevenueAn incorrect business definition may exclude relevant competitors from ROS/RMS analysis. National Textile LaunderingIt appears Gibb has three major competitors and is underperforming15ROS/RMSBOS Relevant Competitors - Correct Business Definition 0%2%4%6%8%10%12510BurnesG

21、ibbKerbyROSRMS0%2%4%6%8%10%12510Dr.KleenHCCGibbROSRMS0%3%5%8%10%13%12510GibbSouthernTextileDunlopROSRMSRegional healthcare launderingRegional industrial launderingGibb has six competitors. Gibb is in three separate businesses, all of which are regional. The correct business definit

22、ion will ensure that all relevant competitors are considered. Regional linen laundering16ROS/RMSBOS ROS/RMS Steps Define the businessCalculate profitabilityCalculate relative market sharesDraw normative bandDetermine action implicationsKey Success FactorsAchieve comparability across competitors17ROS

23、/RMSBOS Net income after taxSalesAfter tax operating profitAverage assetsNet income after taxesAverage equityNet income after taxesCapital employed*Pre-tax profitability measures are preferable because they exclude any firm-specific tax issuesROCE (Return on capital employed)ROE (Return on equity)Di

24、sadvantages: Difficult to make comparable across companiesDifficult to make comparable across companiesNot always clear which asset measures to use (Book value? Before depreciation or after?)ROA (Return on assets)Advantages:Best proxy for return on investmentsBest proxy for return on shareholders in

25、vestmentsEasy to collect comparable measures across competitorsBain example:Drug store chainsRetail department storesBeverage industryCalculation:*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 compari

26、son across relevant competitors.Eliminates the effects of how assets are financedResults are sometimes unclear when some competitors command a large price premiumBuilding productsCalculating Profitability18ROS/RMSBOS ROS/RMS Steps Define the businessCalculate profitabilityCalculate relative market s

27、haresDraw normative bandDetermine action implicationsKey Success FactorsInclude any shared experienceIf business is local or regional, weight market shares19ROS/RMSBOS Calculating Relative Market Share *Revenues or points of share can be used when units are not available.The relative market share fo

28、r 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.Leaders RMS:Any other players RMS:Market leaders units sold#2 players units soldOther players units soldMarket leaders units soldIt is preferable to use units*

29、 instead of revenue since we believe accumulated units of experience drive the potential for higher relative profitability20ROS/RMSBOS 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 d

30、oes not explain profitability. Worldwide Relative Market Share of OutboardsPretax Return on Capital6x54321.580%60%40%20%0%(20%)(40%)YamahaOMCMercuryChryslerMotorsOutboardvolume21ROS/RMSBOS Shared Experience (2 of 2)When the benefits of shared experience with lawnmowers and motorcy

31、cles is included, a positive correlation appears.Worldwide Relative Market Share of Outboards, Including Shared Experience With Motorcycles and LawnmowersPretax Return on Capital6x54321.580%60%40%20%0%(20%)(40%)YamahaOMCMercuryChryslerOutboard Motors volume 22ROS/RMSBOS ROS/RMS St

32、eps Define the businessCalculate profitabilityCalculate relative market sharesDraw normative bandDetermine action implicationsKey Success FactorsCalculate the normative normative band using regression analysis23ROS/RMSBOS Drawing the Normative Band (1 of 2) *The Bain Graphics Wizard draws the normat

33、ive band automatically when the RMS and ROS data points are given. It will not however, calculate an R2The first step 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.CompetitorUnits (MM) RMS In (RMS)CannonCastleHolmes

34、Peabody4,9603,4002,1786,2000.800.550.351.25-0.22-0.60-1.05-0.22Multiple RR squareAdjusted R squareStandard errorObservations0.7412980.5495230.3993630.399363 Intercept0.1145 X-variable 1CoefficientsStandard errorT- statP- value0.01547.450.0050.04650.0243 1.1913 0.152Regression statistics5ROS12.3%10.8

35、%4.5%10.5%Whitman 3,182 0.51-0.678.4%Regression output(from Excel)Y = mx + bROS = 0.0465 (ln RMS) + 0.1145Best Fit Line24ROS/RMSBOS Drawing the Normative Band (2 of 2) RMSOne standard deviationThe normative band is drawn by applying plus or minus one standard deviation to the best fit line.Profitabi

36、lityBest fit line (regression line)Where,n = number of observationsx = observed valuem = mean= 1n-1ni = 1(Xi - m)25ROS/RMSBOS Normative Band0%5%10%15%125HolmesW hitmanCastleCannonPeabodyROSRMS4,000UnitsThe Bain Graphics Wizard will draw a normative band automatically based on the input valu

37、es of ROS and RMS. 26ROS/RMSBOS Adjusted Normative Band0%5%10%15%0.20.5124HolmesW hitmanCastleCannonPeabodyROSRMS4,000UnitsIf 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 of the normative band.* The r

38、esulting normative band will be more narrow.*In the Wizard, go to the “Series” menu and select “remove series from normative band.”27ROS/RMSBOS ROS/RMS Steps Define the businessCalculate profitabilityCalculate relative market sharesDraw normative bandDetermine action implicationsKey Success FactorsD

39、etermine if strategic or operational improvements are required28ROS/RMSBOS 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 below the normat

40、ive band; its profitability is low given its relative market shareCost reduction strategyBlandford can improve its profitability if it increases its market share and captures experience benefitsGrowth strategyMergers and acquisitions0%5%10%15%20%25%30%12510LeeWestviewPeabodyWalnutROSRMSOper

41、ational Improvement0%3%5%8%10%13%12510ChesterBlandfordHenricoROSRMSStrategic Positioning29ROS/RMSBOS Agenda ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways30ROS/RMSBOS LAGTEL* - Background*Disguised client caseSituation:LA

42、GTEL is a $6B telecom player. Wireless infrastructure is a $2B business unit of LAGTEL, and it is the only “star” business in LAGTELs portfolio. All other business units are dogs.Complication:The wireless infrastructure divisions profitability is falling amid rising overcapacity in North America. Ma

43、nagement expects that the over-capacity will continue to drive prices downward. Moreover, LAGTELs returns are 2% while four competitors earn in excess of 10% operating marginsQuestion:How can LAGTEL improve its long-term profitability?Bain used ROS/RMS analysis to develop a strategy for a wireless t

44、elecommunications business.31ROS/RMSBOS Source: Natwest Securities; CS First Boston; Killen & Associates; Wireless Operating Plan25%20%15%10%5%0%(5%)(10%).11.5251020LAGTELCallumsE-telLuciaAlliance$2B1995 Wireless Infrastructure revenue Relative Market Share (Total Telecom) Operating Profi

45、t MarginTelcoThe profitability vs. overall scale did not demonstrate or clear normative band.LAGTEL - Background32ROS/RMSBOS LAGTEL- Wireless RMSSource: Natwest Securities; CS First Boston; Killen & Associates; Wireless Operating PlanThe team “peeled the onion” and found a stronger relationship

46、between wireless only RMS and wireless infrastructure profitability.$2B1995 Wireless Infrastructure Revenue25%20%15%10%5%0%(5%)(10%).11.52510LuciaAllianceE-telTelcoLAGTELCallumsRelative Market Share (Wireless) Operating Profit MarginBilltelR = 0.5233ROS/RMSBOS LAGTEL - Technology-Weighted RMS

47、* Weighted by manufacturer revenue by technologyWhen 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.$2B1995 Wireless Infrastructure Revenue Sourc

48、e: Natwest Securities; CS First Boston; Killen & Associates; Wireless Operating Plan20%15%10%5%0%(5%)(10%).2.3.511.52510LuciaE-telAllianceTelcoLAGTELCallumsBilltel.1Technology-weighted RMS*Operating Profit MarginR = 0.7334ROS/RMSBOS LAGTEL - Strategic Recommendation*Weighted by manufacturer reve

49、nue by technologyAfter additional competitor analysis, the team recommended a possible merger with one of the top four players to improve LAGTELs profitability.$2B1995 Wireless Infrastructure Revenue Source: Natwest Securities; CS First Boston; Killen & Associates; Wireless Operating Plan20%15%1

50、0%5%0%(5%)(10%).2.3.511.52510LuciaE-telAllianceTelcoCallumsBilltel.1Technology-weighted RMS*Operating Profit MarginLAGTEL(current)LAGTEL(projected)R = 0.7335ROS/RMSBOS LAGTEL - Regression Predicted Synergy Values Source: Bain ROS/RMS Regression Model E-telAllianceTelcoLucia$2.3B$1.9B$1.5B$1.2B$0.0$0

51、.5$1.0$1.5$2.0$2.5$3.0Billions of DollarsPotential Merger CandidateThe team used the ROS/RMS regression to predict the synergy value of possible competitor combinations. The synergy values ranged from $1.2B to $2.3B.36ROS/RMSBOS Agenda ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless

52、 infrastructuredrug retailingChallengesKey takeaways37ROS/RMSBOS Pillz* - Background*Disguised client exampleSituation: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 man

53、agement has asked Bain to assist in repositioning Pillz to become the most profitable drug retailer in North AmericaPillzs dominance is being threatened by the entry of non-traditional competitors including food retailers and mass merchantsBain used ROS/RMS analysis to understand the profitability p

54、otential of a Canadian drug store retail chain.38ROS/RMSBOS Pillz - Industry ROS/RMS The Bain team identified two 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

55、%)1%3%5%7%8%Regional ROS2.04.010.0Regional RMS$500M revenue LDPrairiesLawtons AtlanticPP ONPillzAtlanticPillz PrairiesSafewayWal-MartLDBCJC PQLoblawsPillz ONTraditional channelNon-traditional channel39ROS/RMSBOS Pillz* - SummaryPillzs profitability (ROS) is highly correlated with regional R

56、MSPillzs competitors have significant cost advantagesBecause the normative band for the non-traditional 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 woul

57、d have for a traditional drug store competitorPreliminary ROS/RMS analysis helped the Bain team develop some key insights.40ROS/RMSBOS Agenda ROS/RMS overviewApplicationsROS/RMS stepsClient exampleswireless infrastructuredrug retailingChallengesKey takeaways41ROS/RMSBOS Challenges In some situations

58、, ROS/RMS analysis is difficult to conduct.It is difficult to define the businessCompetition has significant shared experience from other businesses that is difficult to capture in the RMS measureMarket shares must be weighted because the business is local or regionalOne or more sizable competitors

59、are not leveraging their accumulated experience to reduce costs42ROS/RMSBOS Other Bain Tools Bain uses other tools to estimate potential profitability when RMS or scale is not the profit driver. Example industriesBain toolKey profit driverCustomer loyaltyPercent of category which is premium priced a

60、nd relative market shareof categorySpeed of product development and releaseRetentionHigh road/Low roadTime-to-marketAuto insuranceCredit cardsAdvertisingConsumer goodstoothpasteready-to-eat-cerealsTechnologysemi-conductorsRetail fashionathletic gym shoes43ROS/RMSBOS Agenda ROS/RMS overviewApplicationsROS/RMS stepsClient exam