Profit Impact of Market Strategies Law and Legal Definition
The Profit Impact of Market Strategies (PIMS) is a comprehensive, long-term study of the performance of strategic business units (SBUs) in 3,000 companies in all major industries. The PIMS project began at General Electric in the mid-1960s. It was conducted at Harvard University between 1972 and 1974. In 1975 PIMS was taken over by a Massachusetts-based nonprofit organization, formed for that purpose, called The Strategic Planning Institute (SPI). Since then, SPI researchers and consultants have continued working on the development and application of PIMS data. The PIMS database is available to individuals for a subscription price (in 2006) of $995 for one month's use and $2,500 for three months' use. Longer periods of subscription are available from SPI by special arrangement.
According to the SPI Website, the PIMS database is "a collection of statistically documented experiences drawn from thousands of businesses, designed to help understand what kinds of strategies (e.g., quality, pricing, vertical integration, innovation, advertising) work best in what kinds of business environments. The data constitute a key resource for such critical management tasks as evaluating business performance, analyzing new business opportunities, evaluating and reality testing new strategies, and screening business portfolios."
The main function of PIMS is to highlight the relationship between a business's key strategic decisions and its results. Analyzed correctly, the data can help managers gain a better understanding of their business environment, identify critical factors in improving the position of their companies, and develop strategies that will enable them to create a sustainable advantage. PIMS principles are taught in business schools, and the data are widely used in academic research. As a result, PIMS has influenced business strategy in companies around the world.
THE PIMS DATABASE
The information comprising the PIMS database is drawn from member companies of SPI. These companies contribute profiles of their SBUs that include financial data as well as information on customers, markets, competitors, and operations. The SBUs in the database are separated into eight classifications: producers of consumer durables, consumer non-durables, capital goods, raw materials, components, or supplies; wholesale and retail distributors; and providers of services. Specific companies and industries are not identified. Each SBU profile includes financial data from the income statement and balance sheet, as well as information about quality, price, new products, market share, and competitive tactics.
The classifications are rather broad, at least from a small business perspective. The category of consumer durables, for instance, includes such diverse products as refrigerators, cell phones, air conditioners, computers, microwave ovens, lawnmowers, television sets, and much else. Thus data averaged from such a category have a rather rough granularity. The data are also drawn from large corporations and then averaged.
Judging by generic, pro-forma sample tabulations available on SPI's web site, the user comes to the database with his or her financial and other ratios as an input and can then derive comparative data from the broad categories listed above and held in the PIMS database. The outputs appear to be statistical and rely on the assumption that broad category averages can effectively guide strategy. PIMS data appear to be a good approach to benchmarking—provided that broad categories are sufficient for the PIMS data users. SPI also provides consulting services, based on PIMS, as SPI Associates, Inc.
SMALL BUSINESS RELEVANCE
Interest in PIMS as an analytical approach does not appear very high in the mid-2000s if recent coverage of the subject in the technical and business press is any indication. A search of Infotrac brings just a few references from the 1990s and 1980s. The most recent book on the subject by Paul W. Farris and Michael J. Moore is largely a look backward—an attempt to assess the contribution PIMS has made to the field of management science. Looking forward, the authors analyze how the PIMS project might be structured if it were launched in the current era. Another broad study of contemporary marketing by Louis E. Boone and David L. Kurtz mentions a comprehensive use of PIMS by the Marketing Science Institute. The MSI study came to the not-so-startling conclusion that (in Boone's and Kurtz's words) "two of the most important factors influencing profitability were product quality and market share."
PIMS was from the outset—and apparently continues as—a "big company" methodology to measure broad strategies capable of being captured by statistical measures. The reliance of this method on concepts (and measurements) like market share performance and marketing expenditures seems to make its relevance to small business marginal at best. Small companies on average find it very difficult even to guess at their own market shares and only very rarely engage in the kinds of major marketing efforts associated with the GEs, IBMs, and Coca-Colas of the world.
Boone, Louis E., and David L. Kurtz. Contemporary Marketing 2005. Thomson South-Western, 2005.
Farris, Paul W., and Michael J. Moore. The Profit Impact of Marketing Strategy Project: Retrospect and Prospects. Cambridge University Press, 2004.
The Strategic Planning Institute. Available from http://www.pimsonline.com/. Retrieved on 5 May 2006.
Hillstrom, Northern Lights
updated by Magee, ECDI