PIMS is the abbreviation of Profit Impact of Market Strategies in English. PIMS analysis is also called strategy and performance analysis, also known as PIMS database analysis method, which means the impact of market strategy on profits.

PIMS was first launched within GE in the United States in 1960. The main purpose is to find out what impact the market share has on the performance of an operating unit. Taking some information from various operating units of the ventilator company as the source of data, after several years of research and verification, the researchers established a regression model. This model can identify some factors closely related to the return on investment, and these factors can strongly explain changes in the return on investment.

By more than 10 years ago, the database had financial and strategic information on nearly 3,000 Strategic Business Units (SBUs), and more than 100 research reports used it to explore many strategic factors that affect performance, and The corresponding market environment. Therefore, it can be said that PIMS, as a variety of market databases that correct competitive advantages and carry out strategic analysis, has become the most comprehensive and detailed source of information on share/profit relationships in the world. Some people even call PIMS the most extensive strategic information database in the world, and it is an unparalleled wide-range database covering industries, products and markets. Later, the main purpose of PIMS research was to discover market rules, which was to find in what kind of competitive environment and what kind of business strategy the business unit adopted would produce what kind of economic effects.

Specifically, it needs to answer the following questions:

The main purpose of PIMS analysis is to determine certain "market rules" that determine business strategy, and to study strategic factors that affect return on investment (ROI), cash and profit changes, and the types of strategies that a particular business can adopt.

The research object of the PIMS analysis project is the strategic operating units in each company. The data collected for these business units mainly include the following categories: the characteristics of the business unit's environment; the competitive position of the business unit; the structure of the production process; the disposable budget allocation method; the performance of the business unit. Through the regression analysis of the above-mentioned multiple variables, PIMS analysts have drawn several research conclusions, including the impact of the following factors on investment returns and cash flows: investment intensity; labor productivity; market competitive position; market growth rate; products (services) Quality; innovation or differentiation; vertical integration; cost factors; current strategic efforts.

The market characteristics of business competition, its competitive position in the market and the strategies adopted determine business performance. The connection between these factors is called the PIMS competitive strategy example. The PIMS competitive strategy example absorbs some important research ideas and ideas, as follows:

1. Scholars in the field of industry organizational economics have conducted in-depth research on the view that differences in market structure have important impact on profitability. Some economics have traditionally focused on explaining the differences in industry average profitability and ignored the explanation of business units, but their research has proved the importance of factors such as market growth rate and entry barriers.

2. In terms of formulating corporate strategies, some authorities, especially those at Harvard Business School, have formed and refined the concept of competitive strategy. They emphasize the view that the most important thing is the position of a company relative to its competitors and the strategies it adopts.

General Electric managers and planning experts have developed methods for measuring competitor status and performance that can achieve a comparison of competitive status and performance across product divisions. They have also created different concepts of business units and service markets, which are the basic units of strategic analysis using PIMS and other aspects.

The basic concepts of business units and service markets are the basis of the PIMS database architecture. Since the 1970s, companies have planned their business units based on other strategic needs and opportunities. These units are called Strategic Business Units, Strategic Business Segm ents, Product/Market Units, or Planning/Control Ling Units, etc. , is a typical sub-department of the traditional product department that constitutes most large companies. In a PIMS program, a business unit, as defined by PIMS, is a department, a product line or other profit center of the company, producing and selling a complete set of clearly defined related products or services; within a rather independent geographical area , serves a clear customer base and compete with clear competitors.

In the competitive strategy database, which is the core of PIMS, each business unit provides basic description information such as products/services, consumers, distribution channels and production processes. The main types of business description information include products and services, the importance of products or services, supply conditions, the percentage of all employees joining the union, etc.

For the collection of service market and competition information of each business unit, in addition to whether competitors exit from the service market and related market share, there are also products and services, users or customers, products or services, supply conditions, and the overall situation. Information on the percentage of employees joining the union, etc.

A large number of businesses in the database are classified according to the type of business and the geographical location of the service market. The PIMS database contains a variety of types of business units classified by years, market entry time, etc. This sample cannot represent all business types. Those mature businesses, market leaders, and large parent companies have a large number of business units in the database, thus becoming more representative, while those small businesses, newer products or industries are small businesses, newer products or industries The representativeness of business units is not very strong.

Each business unit provides basic description information about products, services, consumers, distribution channels and production processes. This mainly includes descriptions of information about the business unit's operations, descriptions of products and services; descriptions of end users and between users; descriptions of distribution channels; descriptions of production processes, supply conditions and employee conditions, etc.

Many indicators that study competitive status or strategic factors come from information in financial statements. An important feature of all financial data is that the data filled in by business units have been modified. These financial data should include net sales, purchases, added value, added value after adjustments in profits, manufacturing and entity allocation costs, gross profit, research and development (R&D) costs, marketing costs, depreciation costs and other costs; Pre-tax operating income, balance sheet categories, accounts receivable, inventory, delivery room and equipment, delivery room and equipment renewal and replacement costs, cash and other assets, total assets, current liabilities, investment, production capacity, equipment Utilization rate, inventory valuation method, and the added value of sales per employee.

PIMS also collects and summarizes the information on the service market and competition situation of each business unit. The main information includes the entry and exit of competitors, market share, market service, and comparison with competitors to discuss market and competition. By analyzing the above coefficients, the current operating performance and market competition trend of the company can be derived, thereby making targeted strategic design and adjustments.

The research object of the PIMS project is the strategic operating units in each company. Therefore, the PIMS project database is a large summary of the situation of these strategic operating units. At present, the PIMS database has adopted more than 2,000 operating units for 4-8 years of information. There are more than 100 information entries collected for each business unit, which can be classified into the following categories:

1. Characteristics of the operating unit environment: ① Long-term market growth rate; ② Short-term market growth rate; ③ Inflation rate of product selling price; ④ Number and scale of customers; ⑤ Purchase frequency and quantity.

2. Competitive position of the operating unit: ① Market share; ② Relative market share; ③ Product quality relative to competitors; ④ Product price relative to competitors; ⑤ Relative to competitors’ remuneration level to employees ; ⑥ The degree of marketing efforts relative to competitors; ⑦ Market segmentation model; ⑧ The frequency of developing new products.

3. Structure of the production process: ① Investment intensity (expressed by the investment amount required for unit sales); ② The degree of vertical integration; ③ The degree of utilization of production capacity; ④ The productivity of equipment; ⑤ Labor productivity; ⑥ Inventory level.

4. Disposable budget allocation model: ① Research and development expenses; ② Advertising and promotion expenses; ③ Sales personnel expenses.

5. Performance of operating units: ① Return on investment; ② Cash flow.

PIMS researchers used multivariate regression method to establish the relationship between the above-mentioned strategic factors and business performance for more than 2,000 business units. Through analysis, it was found that the following strategic factors have a significant impact on investment yield and cash flow:

1. Investment intensity: Investment intensity is measured by the ratio of investment amount to sales, or more accurately, by the ratio of investment amount to added value. In short, higher investment intensity will lead to lower investment yield ROI and cash flow. For capital-intensive operating units, the impact of investment intensity on profits can be reduced by focusing on specific market segments and expanding product line width.

2. Labor productivity: It is expressed in the average added value created by each employee. Labor productivity has a positive impact on operating performance.

3. Market competitive position: The relative market share has a strong positive impact on operating performance, and a higher market share will bring higher returns. Combining high market share and low investment intensity can generate more cash; on the contrary, low market share and high investment intensity will lead to cash exhaustion.

4. Market growth rate: A higher market growth rate will bring more total profits, but it has no impact on investment returns and has an adverse impact on cash flow.

5. Quality of products or services: Product quality is closely related to operating performance. Product quality and market share have a strong positive correlation, and the two play a role in strengthening each other.

6. Innovation or differentiation: If a business unit already has a strong market competitive position, taking measures such as developing more new products will improve operating performance. On the contrary, if the market competitive position of the operating unit is weak, the above measures will have an adverse impact on profits.

7. Vertical integration: Generally speaking, improving the degree of vertical integration will lead to better operating performance for business units in a mature stage or in a stable market. Under market conditions where rapid growth or recession, increasing the degree of vertical integration has an adverse impact on operating performance.

8. Cost factors: The degree and direction of the impact of rising production costs on operating performance such as wage increases and increase in raw materials is relatively complex. It depends on how the operating unit absorbs the rising cost part within it or how the increased cost is passed on to the customer.

9. Realistic strategic direction of efforts: Changing any of the above factors will affect the future performance of the operating unit in the opposite direction.

In addition, PIMS research also found that the characteristics of the product have nothing to do with the performance of the enterprise, and the characteristics of the operating unit play a decisive role.

Usually, the starting point of a successful business strategy is always inseparable from the right choice of the market or industry, because the profitability of a business depends to a large extent on the nature of the market/industry environment. Among them, the most important factors affecting profits include market growth rate, market evolution stage, inflation rate, standardization of products/services, supplier concentration, the importance of products to customers, the number of imports and exports of industries, and the degree of unionization of employees. , They not only directly affect profitability and growth rates, but also influence mutually with competitive position and current strategies.

When evaluating the competitive position of a business unit, you should consider various strategic factors as much as possible and analyze the position you are in in various strategies compared to your competitors so that your future strategy can be compared with your current competitive position Consistent, it has an important impact on business performance. The main measurement criteria for analyzing the competitive position and strategy of PIMS business include competitive position, product/service strategy, pricing strategy, marketing plan, investment strategy, vertical integration, research and development, etc.

Using PIMS database to conduct relevant competitive intelligence research can help determine the main strategic factors that affect profits, thereby providing an effective method for competitive strategic decision-making.