Brief summary of PIMS
PIMS is an acronym of Profit Impact of Market Strategies and it stands for a project in which the influence affected by the market strategies on the profit, is surveyed and studied. Originally, this project was initiated as an inhouse project of General Electric (G.E.) in 1960, for the sake of explanation and forecasting of the results of operation management. It covered market strategy and rate of return on investment. The G.E. used computer based regression model and experimented for the sake of explanation of essential differential portion of rate of return on investment (R.O.I.) on the bases of large quantity of operation data covering various operational fields. Thereafter, this project was taken over and continued till the beginning of 1970s by Harvard University, Marketing Science Research Institute.
In 1975, a non-profit making organisation called SENRYAKU KEIKAKU KENNKYUSHO (Strategy Planning Research Institute) was established with an aim to integrate the overall activities by member companies in order to promote the PIMS programme at a larger scale. In 1980, more than 200 companies with about 2000 operations participated and supplied the financial data related to different and multiple number of their operation fields. On the other hand, the research institute analysed the data and carried out the analysis of significant information which was obtained through this exercise. The results was provided back to the companies as feedback.
The problems, which are pursued by PIMS can be summed up as given below:
(a) What is the relationship of various factors and average standard of cashflow and R.I.O. in various operation fields?
(b) What would be the type of transmission in cashflow and R.I.O. in future assuming that the market environment and strategy are constant in a particular operation?
(c) How should the marketing strategy be modified so that the performance improves in future in particular operation?
(d) What would be the type of transition in a cashflow and R.I.O. in future due to the change in the strategy to be adopted in a particular operation?
If a suitable solution can be found for all these problem, it will definitely contribute in the actual management from the view point of resource distribution like management and capital as well as the analysis of performance of forecast of profits. Further, it will also be possible probably to apply the finding for the other purpose like evaluation of new operation opportunities.
However, the analysis is unit of PIMS should be so designed that the comparison among these should become meaningful. For the purpose, the following operation division standards have been provided.
· A service or a product which has been clearly differentiated and defined from others is being provided.
· The clear competition rivals are more than a particular fixed number.
· It does not depend upon other divisions for technology, product and marketing. The operation is self-sufficient and independent.
· Has or can have the management strategy for that particular operation.
Results of PIMS
Various findings have been arrived at regarding the relationship between market strategy and the performance as result of PIMS project. The most conspicuous findings are given below.
(a) The market share is the biggest most important factor among the various factors which affect the profits. Specially, the R.O.I. affects the market share in a big way. The concrete results showed that average R.O.I. for an operation having 40% or above market share was 2.5 times of R.O.I. for operation where market share is 10% or less. This means that the R.O.I. increases by 5% on an average when market share has gone up by 10% (figure 2.7)
(b) The qualitative difference of market share price among the enterprises shows the tendency of widening with the passage of time. It was confirmed that certain level of shares form the boundary line. The enterprises having market share above this boundary line show an increase whereas those which have lower market share go further down.
(c) A fixed pattern was confirmed with regard to distribution of shares among the enterprises. Comparing the shares of la few companies with some of the top enterprises in the order of their holding, it was found that in most of the markets, it showed the relationship in geometrical series with about 0.63 as the ratio.
(d) The increase in market cost in excess of market growth rate quality improvement and new product development contributes a great deal to the expansion of market share.
(e) The cost standards do not contributes to the increase or decrease of the market share.
PIMS is an acronym of Profit Impact of Market Strategies and it stands for a project in which the influence affected by the market strategies on the profit, is surveyed and studied. Originally, this project was initiated as an inhouse project of General Electric (G.E.) in 1960, for the sake of explanation and forecasting of the results of operation management. It covered market strategy and rate of return on investment. The G.E. used computer based regression model and experimented for the sake of explanation of essential differential portion of rate of return on investment (R.O.I.) on the bases of large quantity of operation data covering various operational fields. Thereafter, this project was taken over and continued till the beginning of 1970s by Harvard University, Marketing Science Research Institute.
In 1975, a non-profit making organisation called SENRYAKU KEIKAKU KENNKYUSHO (Strategy Planning Research Institute) was established with an aim to integrate the overall activities by member companies in order to promote the PIMS programme at a larger scale. In 1980, more than 200 companies with about 2000 operations participated and supplied the financial data related to different and multiple number of their operation fields. On the other hand, the research institute analysed the data and carried out the analysis of significant information which was obtained through this exercise. The results was provided back to the companies as feedback.
The problems, which are pursued by PIMS can be summed up as given below:
(a) What is the relationship of various factors and average standard of cashflow and R.I.O. in various operation fields?
(b) What would be the type of transmission in cashflow and R.I.O. in future assuming that the market environment and strategy are constant in a particular operation?
(c) How should the marketing strategy be modified so that the performance improves in future in particular operation?
(d) What would be the type of transition in a cashflow and R.I.O. in future due to the change in the strategy to be adopted in a particular operation?
If a suitable solution can be found for all these problem, it will definitely contribute in the actual management from the view point of resource distribution like management and capital as well as the analysis of performance of forecast of profits. Further, it will also be possible probably to apply the finding for the other purpose like evaluation of new operation opportunities.
However, the analysis is unit of PIMS should be so designed that the comparison among these should become meaningful. For the purpose, the following operation division standards have been provided.
· A service or a product which has been clearly differentiated and defined from others is being provided.
· The clear competition rivals are more than a particular fixed number.
· It does not depend upon other divisions for technology, product and marketing. The operation is self-sufficient and independent.
· Has or can have the management strategy for that particular operation.
Results of PIMS
Various findings have been arrived at regarding the relationship between market strategy and the performance as result of PIMS project. The most conspicuous findings are given below.
(a) The market share is the biggest most important factor among the various factors which affect the profits. Specially, the R.O.I. affects the market share in a big way. The concrete results showed that average R.O.I. for an operation having 40% or above market share was 2.5 times of R.O.I. for operation where market share is 10% or less. This means that the R.O.I. increases by 5% on an average when market share has gone up by 10% (figure 2.7)
(b) The qualitative difference of market share price among the enterprises shows the tendency of widening with the passage of time. It was confirmed that certain level of shares form the boundary line. The enterprises having market share above this boundary line show an increase whereas those which have lower market share go further down.
(c) A fixed pattern was confirmed with regard to distribution of shares among the enterprises. Comparing the shares of la few companies with some of the top enterprises in the order of their holding, it was found that in most of the markets, it showed the relationship in geometrical series with about 0.63 as the ratio.
(d) The increase in market cost in excess of market growth rate quality improvement and new product development contributes a great deal to the expansion of market share.
(e) The cost standards do not contributes to the increase or decrease of the market share.