PIMS= Profit Impact of Market strategy

Author Topic: PIMS= Profit Impact of Market strategy  (Read 448 times)

Offline Shah Alam Kabir Pramanik

  • Hero Member
  • *****
  • Posts: 542
  • Test
    • View Profile
PIMS= Profit Impact of Market strategy
« on: April 15, 2017, 09:11:24 AM »
: PIMS= Profit Impact of Market strategy
The PIMS project analyzed the data they had gathered to identify the options, problems, resources and opportunities faced by each SBU. Based on the spread of each business across different industries, it was hoped that the data could be drawn upon to provide other business, in the same industry, with empirical evidence of which strategies lead to increased profitability.
There is a positive relationship between profitability and market share. The study reveals that return on invested capital is the highest for the firm with the largest market share.
The information deals with such items as—
1. The market condition: a description of the market conditions in which the business operates, including such things as the distribution channels used by the SBU, the number and size of its customers, and rates of market growth and inflation.
2. The business unit competitive position: the business unit’s competitive position in its marketplace, including market share, relative quality, prices and costs relative to the competition, and degree of vertical integration relative to the competition.
3. Annual measure: annual measure of the SSBU’s financial and operating performance over periods ranging from two to twelve years.
Overall result of the study: The original PIMS data survey led the PIMS project to identify 37 variables which account for the majority of business success. From the 37 factors 7 factors are very important. If minimum 7 factors it can work, they are;
a. Return on investment (ROI): The ratio of net pretax income to average investment. Operating income is what is available after deduction of allocated corporate overhead expenses but before deduction of any financial charges on assets employed. “Investment” equals plus long-term debt, or equivalently, total assets, employed minus current liabilities attributed to the business.
b. Market share: The ratio of dollar sales by a business, in a given time period, to total sales by all competitors in the same market. The “market” includes all of the products or services, customer types, and geographic areas that are directly related to the activities of the business. For example, it includes all products and services that are competitive with those sold by the business. 
c. Product quality: The quality of each participating company’s offerings, appraised in the following terms;
   What was the percentage of sales of products or services form each business in each year that was superior to those of competitors?
   What was the percentage of equivalent products?
   Inferior products?

d. Market expenditure: Total costs for sales force, advertising, sales promotion, marketing research, and marketing administration. The figures do not include costs of physical distribution.
e. Research & Development Expenditure: Total costs of product development and process improvement, including those costs incurred by corporate-level units that can be directly attributed to the individual business.
f. Investment intensity: Ratio to total investment to sales.
g. Corporate diversity: An index reflects;
   The number of different 4-digit Standard Industrial Classification industries in which a corporation operates.
   The percentage of total corporate employment in each industry, and
   The degree of similarity or difference among the industries in which it participates.