29三月2024戰略分析工具分析方法rosrmsAgenda

ROS/RMSoverviewApplicationsROS/RMSstepsClientexampleswirelessinfrastructuredrugretailingChallengesKeytakeawaysAgenda

ROS/RMSoverviewApplicationsROS/RMSstepsClientexampleswirelessinfrastructuredrugretailingChallengesKeytakeawaysROS/RMSGraphROS/RMSisadiagnostictoolusedtocompareabusinessunit’sactualprofitabilitytoitspotentialprofitability.0%5%10%15%20%25%30%0.10.20.5125DunsterEliotCurrierCabotProfitability$150MMRevenueNormativeband(Predictedpotentialprofitability)RelativeMarketShareROS/RMSComponents

Whatismeasured:Howitismeasured?Scale:TherearethreemaincomponentsofanROS/RMSgraph:profitability,relativemarketshareandthenormativeband.*ThistoolistypicallycalledROS/RMSsinceROSisthemostcommonprofitabilitymeasureused**AllowsforeasyviewingofadoublinginrelativemarketshareProfitability(y-axis)Currentprofitabilityreturnoncapitalemployedreturnonequityreturnonassetsreturnonsales*LinearRMS

(x-axis)AccumulatedexperienceandstrategicpositionRelativemarketshare(RMS)Logarithmic**NormativebandRangeofpredictedprofitabilityPlusandminusonestandarddeviationfromregressionline-------ROS/RMSRelationship

Companieswithhigherrelativemarketsharetendtohavemoreaccumulatedexperience.Higheraccumulatedexperiencegivesthepotentialforlowercostsandhigherprofitability.HigheraccumulatedexperienceispositivelycorrelatedwithRMSHigheraccumulatedexperienceprovidesanopportunityforlowercostsandhigherprofitsRMSisaproxyforaccumulatedexperience.RMSispositivelycorrelatedwithprofitabilityAccumulatedExperienceRMSRMSProfitabilityAccumulatedExperienceCostperunitImportanceofMarketShareSource:PIMS(Datafrom1970tothepresentof3,200businesses-66%manufacturing,20%consumerbusinesses,14%services)Usingrelativemarketshareasapredictorofprofitabilityissupportedbyempiricalevidence.ThePIMSdatabasedemonstratesthat,onaverage,acrossindustries,companieswithgreatermarketsharehavehigherprofitability.Agenda

ROS/RMSoverviewApplicationsROS/RMSstepsClientexampleswirelessinfrastructuredrugretailingChallengesKeytakeawaysApplicationsBainhasusedROS/RMSeffectivelyformanyclients.ExamplesofBainworkare:Computers&OfficeEquipmentElectric&PowerEquipmentSituation:Result:AmajorPCmanufacturerrecentlysufferedsignificantoperatinglossesandwasexperiencingseverecashflowproblemsAnelectric&powerequipmentcompanywasevaluatingamanufacturerofdiscretesemiconductorsforpurchase.Theclientwasconcernedaboutindustrycyclicalityandwhetherthetarget’sprofitmarginswereunsustainablyhighBainusedROS/RMSanalysistoexaminethePCindustryandfoundthatmovingtheclientintothenormativebandthroughoperationalimprovementswouldresultina$174MMprofitbeforetaximprovementRMS/ROSanalysisrevealedthatthetarget’smarginsreflecteditsmarketsharepositionandaccumulatedexperienceandwerethereforesustainable;thetarget’shighRMShelpeddriveEBITmarginsinexcessof20%Agenda

ROS/RMSoverviewApplicationsROS/RMSstepsClientexampleswirelessinfrastructuredrugretailingChallengesKeytakeawaysROS/RMSSteps

TherearefivebasicstepsinvolvedinROS/RMSanalysis:DefinethebusinessCalculateprofitabilityCalculaterelativemarketsharesDrawnormativebandDetermineactionimplicationsKeySuccessFactorsDeterminetheeconomicboundariesofthebusinessIdentifyrelevantcompetitorsAchievecomparabilityacrosscompetitorsIncludeanysharedexperienceIfbusinessislocalorregional,weightmarketsharesCalculatethenormativebandusingregressionanalysisDetermineifstrategicoroperationalimprovementsarerequiredROS/RMSStepsDefinethebusinessCalculateprofitabilityCalculaterelativemarketsharesDrawnormativebandDetermineactionimplicationsDeterminetheeconomicboundariesofthebusinessIdentifyrelevantcompetitorsKeySuccessFactorsDefiningtheBusiness

EffectiveROS/RMSanalysisdependsoncorrectlydefiningtheeconomicboundariesofabusiness.Costsharingandcustomersharingaretheprimarydeterminantsofbusinessdefinition.HighCostsharingLowLowHighCustomersharingOnebusiness

(chargecardsandcreditcards)Onebusinesswithpotentialfordifferentiationornicheposition

(CrosspensandBICpens)Separatebusinesswithpotentialforcostleadership(oilandrefineryby-products)Separatebusinesses(beeranddistilledspirits)Separatebusinesseswithpotentialforbundling(touringqualitymicrophonesandspeakers)Onebusinesswithpotentialforsubstitution(milkcartonsandglassmilkbottles)CorrectMarketShareMeasure*StatisticalmarketareasDeterminingwhetherabusinessislocal,regional,ornationalisalsoimportant.Incorrectlydefinedbusiness

Nationaldiscountdepartmentstore

Correctlydefinedbusiness

Regionaldiscountdepartmentstores0.310.96R-squared:Whenbusinessdefinitioniscorrect,thereisameaningfulpredictiverelationshipRelevantCompetitors-IncorrectBusinessDefinition

AnincorrectbusinessdefinitionmayexcluderelevantcompetitorsfromROS/RMSanalysis.NationalTextileLaunderingItappearsGibbhasthreemajorcompetitorsandisunderperformingRelevantCompetitors-CorrectBusinessDefinition

RegionalhealthcarelaunderingRegionalindustriallaunderingGibbhassixcompetitors.Gibbisinthreeseparatebusinesses,allofwhichareregional.Thecorrectbusinessdefinitionwillensurethatallrelevantcompetitorsareconsidered.RegionallinenlaunderingROS/RMSSteps

DefinethebusinessCalculateprofitabilityCalculaterelativemarketsharesDrawnormativebandDetermineactionimplicationsKeySuccessFactorsAchievecomparabilityacrosscompetitorsNetincomeaftertaxSalesAftertaxoperatingprofitAverageassetsNetincomeaftertaxesAverageequityNetincomeaftertaxesCapitalemployed*Pre-taxprofitabilitymeasuresarepreferablebecausetheyexcludeanyfirm-specifictaxissuesROCE

(Returnoncapitalemployed)ROE

(Returnonequity)Disadvantages:DifficulttomakecomparableacrosscompaniesDifficulttomakecomparableacrosscompaniesNotalwaysclearwhichassetmeasurestouse(Bookvalue?Beforedepreciationorafter?)ROA

(Returnonassets)Advantages:Bestproxyforreturn

oninvestmentsBestproxyforreturnonshareholders’investmentsEasytocollectcomparablemeasuresacrosscompetitorsBainexample:DrugstorechainsRetaildepartment

storesBeverageindustryCalculation:*ROS

(Returnonsales)Theprofitabilitymeasureusedvariesfromcasetocase.Thekeyistouseameasurethatwillallowforanapples-to-applescomparisonacrossrelevantcompetitors.EliminatestheeffectsofhowassetsarefinancedResultsaresometimesunclearwhensomecompetitorscommandalargepricepremiumBuildingproductsCalculatingProfitabilityROS/RMSSteps

DefinethebusinessCalculateprofitabilityCalculaterelativemarketsharesDrawnormativebandDetermineactionimplicationsKeySuccessFactorsIncludeanysharedexperienceIfbusinessislocalorregional,weightmarketsharesCalculatingRelativeMarketShare*Revenuesorpointsofsharecanbeusedwhenunitsarenotavailable.Therelativemarketshareforthemarketleaderiscalculatedinrelationtothe#2player;theRMSforallotherplayersiscalculatedinrelationtothemarketleader.Leader’sRMS:Anyotherplayer’sRMS:Marketleader’sunitssold#2player’sunitssoldOtherplayer’sunitssoldMarketleader’sunitssoldItispreferabletouseunits*insteadofrevenuesincewebelieveaccumulatedunitsofexperiencedrivethepotentialforhigherrelativeprofitabilitySharedExperience(1of2)Whenpotentialsharedexperienceisignored,thepredictivepowerofROS/RMSislimited.Inthisexample,marketshareinoutboardmotorsdoesnotexplainprofitability.SharedExperience(2of2)Whenthebenefitsofsharedexperiencewithlawnmowersandmotorcyclesisincluded,apositivecorrelationappears.WorldwideRelativeMarketShareofOutboards,IncludingSharedExperienceWithMotorcyclesandLawnmowersPretaxReturnonCapital6x54321.510.70.50.40.30.20.180%60%40%20%0%(20%)(40%)YamahaOMCMercuryChryslerOutboardMotorsvolumeROS/RMSSteps

DefinethebusinessCalculateprofitabilityCalculaterelativemarketsharesDrawnormativebandDetermineactionimplicationsKeySuccessFactorsCalculatethenormativenormativebandusingregressionanalysisDrawingtheNormativeBand(1of2)*TheBainGraphicsWizarddrawsthenormativebandautomaticallywhentheRMSandROSdatapointsaregiven.Itwillnothowever,calculateanR2ThefirststepindrawingthenormativebandistorunaregressiononROSandthelogofRMS.Wethencalculatethebestfit,orregressionline.CompetitorUnits(MM)RMSIn(RMS)CannonCastleHolmesPeabody4,9603,4002,1786,2000.800.550.351.25-0.22-0.60-1.05-0.22MultipleRRsquareAdjustedRsquareStandarderrorObservations0.7412980.5495230.3993630.399363Intercept0.1145X-variable1CoefficientsStandarderrorT-statP-value0.01547.450.0050.04650.02431.19130.152Regressionstatistics5ROS12.3%10.8%4.5%10.5%Whitman3,1820.51-0.678.4%Regressionoutput(fromExcel)Y=mx+bROS=0.0465(lnRMS)+0.1145BestFitLineDrawingtheNormativeBand(2of2)

RMSOnestandarddeviationThenormativebandisdrawnbyapplyingplusorminusonestandarddeviationtothebestfitline.ProfitabilityBestfitline(regressionline)Where, n=numberofobservations x=observedvalue m=mean=

1n-1

ni=1(Xi-m)2NormativeBandTheBainGraphicsWizardwilldrawanormativebandautomaticallybasedontheinputvaluesofROSandRMS.AdjustedNormativeBandIfwebelievethataplayerhasmismanageditscostsandhasnotgottenthefullbenefitsofitsexperience,wecanexcludeitfromthecalculationofthenormativeband.*Theresultingnormativebandwillbemorenarrow.*IntheWizard,gotothe“Series”menuandselect“removeseriesfromnormativeband.”ROS/RMSSteps

DefinethebusinessCalculateprofitabilityCalculaterelativemarketsharesDrawnormativebandDetermineactionimplicationsKeySuccessFactorsDetermineifstrategicoroperationalimprovementsarerequiredActionImplications

Afirm’spositionontheROS/RMSgraphhelpscaseteamstodeterminewhetherabusinessshouldpursuestrategicpositioningoroperationalimprovements.Examples:Suggestedactions:Peabodyisbelowthenormativeband;itsprofitabilityislowgivenitsrelativemarketshareCostreductionstrategyBlandfordcanimproveitsprofitabilityifitincreasesitsmarketshareandcapturesexperiencebenefitsGrowthstrategyMergersandacquisitionsOperationalImprovementStrategicPositioningAgenda

ROS/RMSoverviewApplicationsROS/RMSstepsClientexampleswirelessinfrastructuredrugretailingChallengesKeytakeawaysLAGTEL*-Background*DisguisedclientcaseSituation:LAGTELisa$6Btelecomplayer.Wirelessinfrastructureisa$2BbusinessunitofLAGTEL,anditistheonly“star”businessinLAGTEL’sportfolio.Allotherbusinessunitsaredogs.Complication:Thewirelessinfrastructuredivision’sprofitabilityisfallingamidrisingovercapacityinNorthAmerica.Managementexpectsthattheover-capacitywillcontinuetodrivepricesdownward.Moreover,LAGTEL’sreturnsare2%whilefourcompetitorsearninexcessof10%operatingmarginsQuestion:HowcanLAGTELimproveitslong-termprofitability?BainusedROS/RMSanalysistodevelopastrategyforawirelesstelecommunicationsbusiness.Source:NatwestSecurities;CSFirstBoston;Killen&Associates;WirelessOperatingPlan25%20%15%10%5%0%(5%)(10%).1.2.3.511.5251020LAGTELCallumsE-telLuciaAlliance$2B1995WirelessInfrastructurerevenue

RelativeMarketShare(TotalTelecom)OperatingProfitMarginTelcoTheprofitabilityvs.overallscaledidnotdemonstrateorclearnormativeband.LAGTEL-BackgroundLAGTEL-WirelessRMSSource:NatwestSecurities;CSFirstBoston;Killen&Associates;WirelessOperatingPlanTheteam“peeledtheonion”andfoundastrongerrelationshipbetweenwirelessonlyRMSandwirelessinfrastructureprofitability.$2B1995WirelessInfrastructureRevenue25%20%15%10%5%0%(5%)(10%).1.2.3.511.52510LuciaAllianceE-telTelcoLAGTELCallumsRelativeMarketShare(Wireless)OperatingProfitMarginBilltelR2=0.52LAGTEL-Technology-WeightedRMS

*WeightedbymanufacturerrevenuebytechnologyWhenRMSwasadjustedforthemixofwirelesstechnology,anevenstrongerrelationshipappeared.LAGTEL’sprofitabilitywaslowconsideringitsshare,andLAGTELwasconsiderablybehindfourkeycompetitors.$2B1995WirelessInfrastructureRevenueSource:NatwestSecurities;CSFirstBoston;Killen&Associates;WirelessOperatingPlan20%15%10%5%0%(5%)(10%).2.3.511.52510LuciaE-telAllianceTelcoLAGTELCallumsBilltel.1Technology-weightedRMS*OperatingProfitMarginR2=0.73LAGTEL-StrategicRecommendation*WeightedbymanufacturerrevenuebytechnologyAfteradditionalcompetitoranalysis,theteamrecommendedapossiblemergerwithoneofthetopfourplayerstoimproveLAGTEL’sprofitability.$2B1995WirelessInfrastructureRevenueSource:NatwestSecurities;CSFirstBoston;Killen&Associates;WirelessOperatingPlan20%15%10%5%0%(5%)(10%).2.3.511.52510LuciaE-telAllianceTelcoCallumsBilltel.1Technology-weightedRMS*OperatingProfitMarginLAGTEL(current)LAGTEL(projected)R2=0.73LAGTEL-RegressionPredictedSynergyValuesSource:BainROS/RMSRegressionModelTheteamusedtheROS/RMSregressiontopredictthesynergyvalueofpossiblecompetitorcombinations.Thesynergyvaluesrangedfrom$1.2Bto$2.3B.Agenda

ROS/RMSoverviewApplicationsROS/RMSstepsClientexampleswirelessinfrastructuredrugretailingChallengesKeytakeawaysPillz*-Background*DisguisedclientexampleSituation:Complication:PillzisaleadingretailerofpharmaceuticalsinCanada.Itparticipatesinthesaleofprescriptionsandover-the-counterdrugsintraditionaldrugstores.Pillz’smanagementhasaskedBaintoassistinrepositioningPillztobecomethemostprofitabledrugretailerinNorthAmericaPillz’sdominanceisbeingthreatenedbytheentryofnon-traditionalcompetitorsincludingfoodretailersandmassmerchantsBainusedROS/RMSanalysistounderstandtheprofitabilitypotentialofaCanadiandrugstoreretailchain.Pillz-IndustryROS/RMS

TheBainteamidentifiedtwonormativebands:oneforfood/drugcombosanddiscountmerchandisersandanotherfortraditionaldrugstores.Source:IMS,ChainStoreGuide,annualreports,Pillzinternaldata(5%)(3%)(1%)1%3%5%7%8%RegionalROS0.20.41.02.04.010.0RegionalRMS$500Mrevenue

LDPrairiesLawtonsAtlanticPPONPillzAtlanticPillzPrairiesSafewayWal-MartLDBCJCPQLoblawsPillzONTraditionalchannelNon-traditionalchannelPillz*-SummaryPillz’sprofitability(ROS)ishighlycorrelatedwithregionalRMSPillz’scompetitorshavesignificantcostadvantagesBecausethenormativebandforthenon-traditionalchannelissteeperthanforthetraditionalchannel,anincreaseinrelativemarketshareforanon-traditionalchannelcompetitorhasagreaterimpactonprofitabilitythanthesameincreasewouldhaveforatraditionaldrugstorecompetitorPreliminaryROS/RMSanalysishelpedtheBainteamdevelopsomekeyinsights.Agenda

ROS/RMSoverviewApplicationsROS/RMSstepsClientexampleswirelessinfrastructuredrugretailingChallengesKeytakeawaysChallenges

Insomesituations,ROS/RMSanalysisisdifficulttoconduct.ItisdifficulttodefinethebusinessCompetitionhassignificantsharedexperiencefromotherbusinessesthatisdifficulttocaptureintheRMSmeasureMarketsharesmustbeweightedbecausethebusinessislocalorregionalOneormoresizablecompetitorsarenotleveragingtheiraccumulatedexperiencetoreducecostsOtherBainTools

BainusesothertoolstoestimatepotentialprofitabilitywhenRMSorscaleisnottheprofitdriver.ExampleindustriesBaintoolKeyprofitdriverCustomerloyaltyPercentofcategorywhichispremiumpricedandrelativemarketshare

ofcategorySpeedofproductdevelopmentandreleaseRetentionHighroad/LowroadTime-to-marketAutoinsuranceCreditcardsAdvertisingConsumergoodstoothpasteready-to-eat-cerealsTechnologysemi-conductorsRetailfashionathleticgymshoesAgenda

ROS/RMSoverviewApplicationsROS/RMSstepsClientexampleswireles