1. STRATEGY EVALUATION
AND CHOICE
PRESENTED BY GROUP TWO (2)

2. What are we looking at ?
 We are not going into the core evaluation strategies where a
strategy ought to be Suitable to organisational objectives and
goals, Acceptable, Feasible, should have Competitive
Advantage and in Consonance with the external environ and
major changes within it.
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3. What are we looking at? Cont’d
 We will basically be tackling Profit Impact of Market strategy
(PIMS) as some rendition has been done on the Boston
Consulting Group matrix and the various matrices by Group
One
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4. PROFIT IMPACT OF MARKET
STRATEGY
We are looking at PIMS across the
different stages of industry life cycle;
Embryonic, Growth, Matured and Aging

5. BACKGROUND OF PIMS
 PIMS was set up by the Strategic Planning Institute (SPI) in
Cambridge. It was set up based on the background study or
research conducted by General Electric Company in the
1950s.
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6. BACKGROUND OF PIMS cont‘d
The corporate planners observed differences in the Return On Investment
(ROI) of various businesses and began researching into those factors
Sidney Schaeffer led project
In 1960, a research project was set up by the Marketing Research Institute under
the direction of Sidney Schaeffer to investigate the difference in ROI
•The relationship between market share and operating economies
•Factors that determine ROI

7. The goals/ideas/objectives of PIMS
 The basic idea of PIMS is to provide corporate planners, corporate top
management, marketing executives etc. with more insight and information
on expected profit performance of different kinds of businesses under
different competitive environment
 To develop an up to date database which truly explains the experience of
businesses
 To make research findings available to participating businesses and by so
doing,
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8. The goals/ideas/objectives of PIMS
cont‘d
 Managers would be provided answers to the following questions:
I. What rate of ROI, cash flow, profit level etc is normal with a given market
and industry condition?
II.What major factors explain the differences in typical levels of ROI, cash
flows etc among various kinds of businesses?
III.What strategy should be employed to achieve what level of ROI?
IV.What strategies should particular businesses pursue in order to meet
their objectives?
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9. Profit Determinants
 Our main emphasis here would be on the major determinants
of ROI though such analysis is done under various conditions
such as:
a.Characteristics of the business
b.The type of environment
c.Competitive position
d.Business structure
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10. Major Determinants of ROI
 Market share (position)
 Investment intensity
 Product or service quality
 Marketing expenditures
 Research and Development expenditures
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11. Market share
In relation to ROI as a major determinant of profitability.
A high relative market share has a positive effect on profit due
to economies of scale and bargaining power
ROI goes up steadily as market share increases
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12. Marketing expenditure in relation to ROI
 Higher marketing expenditure damages profitability
 When quality is relatively low in relation to competition, then
the relationship between marketing expenditure and ROI is
negative
 ROI diminished by a high level marketing expenditure even
for business with average/superior relative product quality
 Heavy marketing is no substitute for low product quality
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13. Research and Development in relation to
ROI
 Highly R/D spending hurts profitability when market position is weak but
increase ROI when the market share is high
 The higher the level of R/D spending, the lower the profit
 R/D activities are very unprofitable if they don’t yield high product quality
 When R/D spending is successfully converted into new products, then it
can pay off
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14. Investment Intensity
 The relationship between ROI and capital intensity is that of
an inverse one. That is, the higher the ratio of investment to
sales, the lower ROI tends to be
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15. Importance/Application of PIMS
 Aid in profit forecasting for individual business unit
 Standard for measuring management performance
 To estimate the effects of strategic changes on profitability
 Insight into the reasons for the past performance and the most fruitful
direction for change
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16. Limitations of PIMS
 PIMS ascertain that there should be positive correlation between relative
market share and ROI but that does not always hold
 PIMS assumes the goal of maximising ROI, as the best measured of
performance is too narrow view of business performance eg. Growth,
survival
 PIMS studies are too concerned with the US big businesses to be of real
value to smaller business operating in Europe, Africa etc.
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17. Conclusion
Despite the limitations and criticisms,
 PIMS is still unique with such a vast pool of business
experience database
 It is seen as more experience accumulated, the quality
and accuracy of predictions is improved.
 PIMS is the best business database available, with the
huge amount of data upon which it is built.
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18. Profit Impact of Market Strategy
Some recap
 Market share in relation to ROI
 Investment intensity
 Product or service quality
 Marketing expenditure
 R/D expenditure
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19. THANK YOU
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