Some PIMS-Based Business Strategy Principles

Business performance is a function of two primary factors: market attractiveness and competitive position. These two factors can be decomposed into a few key component parts which influence business results in a statistically predictable way. Understanding how these components impact business results enhances strategic thinking.


PIMS general findings

PIMS has identified and measured the key components of market attractiveness and competitive position, and has quantified their overall impact on business results. Samples of statistically powerful findings with respect to profitability are:

• Profit impact of market attractiveness
  • Real market growth helps profitability a little.
  • Investment intensity hurts profitability a lot.
  
  
• Profit impact of competitive position
  • Market leadership pays
  • Competing on quality is better than many other options

Situation-specific findings

The PIMS general findings are only part of the story. The odds of strategic success for a business depends on the market attractiveness and competitive situation. For example:

• Gain in market share can depend on how fast the market is growing.
• Vertical integration can enhance the profitability of dominant businesses.
  

PIMS analyses, therefore, focus on segments of the database that are relevant to the business being studied.

Learning from the experience of comparables with pimsonline.com

The way to use PIMS effectively is to analyze the experience of comparables by (1) profiling the specific business situation and identifying the key issues, and then (2) accessing and analyzing the experience of a sample of PIMS businesses situationally comparable to this business. Example, if the business is a high-quality, #2-ranked player in a declining market, examine the experience of other high-quality #2s in declining markets. This ability to study cross-sectional business comparables is the real power of PIMS.

The experience of PIMS comparables can be used to support thinking about (1) market strategies for an individual business, and (2) investment strategies for a corporation's portfolio of businesses. The business studied can be an existing business, or proposed acquisition or new venture.