PIMS Overview The PIMS (Profit Impact of Market Strategy) of the Strategic Planning Institute is a large scale study

designed to measure the relationship between business actions and business results. The project was initiated and developed at the General Electric Co. from the mid1960s and expanded upon at the Management Science Institute at Harvard in the early 1970s; since 1975 The Strategic Planning Institute has continued the development and application of the PIMS research. The comprehensive profiles of over 3,000 strategic experiences constitute this unique data pool. The items of information were collected by PIMS' trained professionals working directly with participating companies to assure data integrity. The data covers the important characteristics of the market environment, the state of competition, the strategy pursued by each business and the results obtained. For more on data collection click here. Taking a data-driven, empirical approach, PIMS has provided insights that have had a profound impact on business strategy thinking. PIMS principles are taught in most business schools; PIMS data has been used in dozens of academic articles; and PIMS theory guides the thinking of senior executives in major companies around the world. PIMS today is much more than the research study from which it originated. PIMS is

a database of business strategies, used to generate benchmarks and identify winning strategies. a set of data-derived business strategy principles to guide strategic thinking and strategic measurement. a methodology for diagnosing business problems and opportunities, and for measuring the profit potential of a business.

The PIMS database forms the core of all services delivered by The Strategic Planning Institute. The 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 primary role of the PIMS Program of the Strategic Planning Institute is to help managers understand and react to their business environment. PIMS does this by assisting managers as they develop and test strategies that will achieve an acceptable level of winning as defined by various strategies and financial measures. The PIMS database allows for the identification of those critical strategic factors that enable a business to achieve an improved sustainable position. The years of research on the PIMS database and on other cross-sectional databases of business units show quite clearly that profitability is strongly linked to strategic position. The R square of .65 of a regression of ROI on 18 key strategic variables indicates that strategic positioning is the major determinant of business success.

Those businesses that position themselves to win the strategy game through a sustainable advantage also win the performance game. PIMS can also serve as a screen such that a business's future direction, a competitor or a potential acquisition can be evaluated and benchmark performance levels can be measured.

Hotelling's Model
Suppose that two owners of refreshment stands, George and Henry, are trying to decide where to locate along a stretch of beach. Suppose further that there are 100 customers located at even intervals along this beach, and that a customer will buy only from the closest vendor. Finally, assume that the beach is short enough so that total sales are independent of where the vendors locate. Suppose that initially the vendors locate at points A and C in the illustration below. These locations would minimize the average traveling costs of the buyers and would result in each vendor getting one half of the business. However, this solution would not be an equilibrium. If George moved from point A to point B, he would keep all customers to his left, and get some of Henry's customers. For similar reasons, Henry would move toward the center, and in equilibrium, both vendors would locate together in the middle.

This story of the beach was first told a half century ago by Harold Hotelling and is called Hotelling's model. Although it can give some insights into businesses decisions concerning location and product characteristics, the model has been more useful in explaining certain political phenomena. Instead of two refreshment stands along a beach trying to attract dollars from customers, consider two political candidates along the political spectrum trying to attract votes from voters. Only the candidate who attracts the most votes will win, and a candidate must locate nearer to more voters than his opponent to attract votes. With these rules, there is a strong tendency for each candidate to move to the middle.

In American politics this tendency has a predictable consequence for presidential candidates, who must "sell" on two beaches. To gain the nomination, the candidate must position himself in the middle of the party. Because the average Democrat has significantly different views than the average Republican, Republican and Democratic candidates sound quite different before nominations are decided. After the party nominations are determined, the two candidates must "sell" to the same beach. Republican candidates move to the left and Democratic candidates move to the right. By election time, their positions on issues usually sound close enough so that factors such as personality emerge as keys to the election. There have been some notable exceptions to this pattern. In 1964, Barry Goldwater won the Republican nomination standing well to the right of the average voter, and was unable or unwilling to reposition himself in the center. In 1972, George McGovern won the Democratic nomination standing well to the left of the average voter, and was unable or unwilling to reposition himself. Both lost in landslides. A problem with the Hotelling model when applied to commerce is that the results are very sensitive to the cost assumption. There must be some cost to traveling because customers prefer the closest vendor. But these costs must be small, because the people at the end of the beach continue to buy the same amount no matter how far they are from the nearest vendor. If traveling costs are less, then people might not care whether they go to the nearest vendor. If they are greater--so that when the vendor gets far away--people do not bother to go, the vendors will no longer cluster at the middle. Suppose that the beach is a long beach, and people more than 1000 feet away from any seller buy nothing. Also assume that the beach is 4000 feet long, and the two vendors start at the middle. Originally George sells to customers located from the 1000-foot mark to the middle at 2000 feet, and Henry sells from 2000 feet to 3000 feet. If George moves to the 1000-foot mark, he will gain 1000 feet of new territory, and he will lose only 500 feet to Henry. At the 1000-foot mark, he will sell to all people from 0 to 1000 feet. He will also sell to those people between him and Henry who are closer to him. Because Henry did not move, but stayed at the 2000-foot mark, George will get all the customers up to the 1500-foot mark. Equilibrium in this case will occur only when Henry moves to the 3000-foot mark. In Hotelling's original model with small traveling costs, location decisions were not economically efficient. By increasing traveling costs, it seems that we can

have location decisions that are economically efficient. However, the next section shows that adding transport costs results in new efficiency problems.

demandorientedpricing
method of establishing the price for a product or service based on the level of demand; also calleddemandbased pricing. For example, sellers of compact discs charge a higher price for recordings that appeal to a broad market, such as those of Garth Brooks or Madonna, than they charge for recordings of classical music. The manufacturing cost of the product and the required gross profit margin are of secondary importance to demand in setting the price.

Marketing - Pricing approaches and strategies There are three main approaches a business takes to setting price: Cost-based pricing: price is determined by adding a profit element on top of the cost of making the product. Customer-based pricing: where prices are determined by what a firm believes customers will be prepared to pay Competitor-based pricing: where competitor prices are the main influence on the price set

Competitor-based pricing
If there is strong competition in a market, customers are faced with a wide choice of who to buy from. They may buy from the cheapest provider or perhaps from the one which offers the best customer service. But customers will certainly be mindful of what is a reasonable or normal price in the market. Most firms in a competitive market do not have sufficient power to be able to set prices above their competitors. They tend to use going-rate pricing i.e. setting a price that is in line with the prices charged by direct competitors. In effect such businesses are price-takers they must accept the going market price as determined by the forces of demand and supply. An advantage of using competitive pricing is that selling prices should be line with rivals, so price should not be a competitive disadvantage. The main problem is that the business needs some other way to attract customers. It has to use non-price methods to compete e.g. providing distinct customer service or better availability.

Cost based pricing

This involves setting a price by adding a fixed amount or percentage to the cost of making or buying the product. In some ways this is quite an oldfashioned and somewhat discredited pricing strategy, although it is still widely used. After all, customers are not too bothered what it cost to make the product they are interested in what value the product provides them. Cost-plus (or mark-up) pricing is widely used in retailing, where the retailer wants to know with some certainty what the gross profit margin of each sale will be. An advantage of this approach is that the business will know that its costs are being covered. The main disadvantage is that cost-plus pricing may lead to products that are priced un-competitively.

normative model:
The normative model of decision making takes into account the fact that leaders are bound by certain constraints when making decisions. These constraints include personal and environmental factors that reduce rationality, such as time, complexity, uncertainty and resources. The normative model suggests that decision making is characterised by;

Limited information processing - there is a limit to how much information a person can manage. Judgemental heuristics - shortcuts are used to simplify decision making. Satisficing - choosing solutions that meet minimum requirements and are "good enough."[1] A leader will only be able to manage a certain amount of information at any one time, so they make judgements based on their previous experiences wherever possible to speed up the decision making process. Often choosing a solution that is "good enough", is considered effective when there are multiple solutions that will produce similar outcomes. Most people use variations of these theoretical models to make decisions in their day to day lives. Developing your understanding of the decision making process can help you become a better and more effective leader.

Prescriptive Analytics Prescriptive analytics automatically synthesizes big data, mathematical sciences, business rules, and machine learning to make predictions and then suggests decision options to take advantage of the predictions. Prescriptive analytics goes beyond predicting future outcomes by also

suggesting actions to benefit from the predictions and showing the decision maker the implications of each decision option. Prescriptive analytics not only anticipates what will happen and when it will happen, but also why it will happen. Further, prescriptive analytics can suggest decision options on how to take advantage of a future opportunity or mitigate a future risk and illustrate the implication of each decision option. In practice, prescriptive analytics can continually and automatically process new data to improve prediction accuracy and provide better decision options.

Prescriptive analytics synergistically combines data, business rules, and mathematical models. The data inputs to prescriptive analytics may come from multiple sources, internal (inside the organization) and external (social media, et al.). The data may also be structured, which includes numerical and categorical data, as well as unstructured data, such as text, images, audio, and video data, including big data. Business rules define the business process and include constraints, preferences, policies, best practices, and boundaries. Mathematical models are techniques derived from mathematical sciences and related disciplines including applied statistics, machine learning, operations research, and natural language processing. For example, prescriptive analytics can benefit healthcare strategic planning by using analytics to leverage operational and usage data combined with data of external factors such as economic data, population demographic trends and population health trends, to more accurately plan for future capital investments such as new facilities and equipment utilization as well as understand the trade-offs between adding additional beds and expanding an existing facility versus building a new one.

descriptive modeling
Part of AAA inShare Email Comment RSS Print A AA the Business intelligence - business analytics glossary:

Descriptive modeling is a mathematical process that describes realworld events and the relationships between factors responsible for them. The process is used by consumer-driven organizations to help them target their marketing and advertising efforts.

In descriptive modeling, customer groups are clustered according to demographics, purchasing behavior, expressed interests and other descriptive factors. Statistics can identify where the customer groups share similarities and where they differ. The most active customers get special attention because they offer the greatest ROI (return on investment). The main aspects of descriptive modeling include:

Customer segmentation: Partitions a customer base into groups with various impacts on marketing and service. Value-based segmentation: Identifies and quantifies the value of a customer to the organization. Behavior-based segmentation: Analyzes customer product usage and purchasing patterns. Needs-based segmentation: Identifies ways to capitalize on

motives that drive customer behavior. Descriptive modeling can help an organization to understand its customers, but predictive modeling is necessary to facilitate the desired outcomes. Both descriptive and predictive modeling constitute key elements of data mining and Web mining.

What are the five types of elasticitys of demand?

The degree of responsiveness of quantity demanded of a commodity to the change in price is called elasticity of demand. price elasticity of demand is popularly called elasticity of demand. It is the rate of which quantity demanded changes in response to the change in price. Elasticity of demand expresses the magnitude of change in quantity of a commodity. Precisely stated, price elasticity demand is defined as the ratio of percentage change in quantity demanded to a percentage change in price. Thus elasticity of demand can be expressed in form of the following as price and quantity demanded move opposite. Five cases of Elasticity of Demand: 1. Perfectly elastic demand 2. Perfectly inelastic demand

3. Relatively elastic demand 4. Relatively inelastic demand 5. Unitary elastic demand 1. Perfectly elastic demand: The demand is said to be perfectly .elastic when a very insignificant change in price leads to an infinite change in quantity demanded. A very small fall in price causes demand to rise infinitely. Likewise a very insignificant rise in price reduces the demand to zero. This case is theoretical which is never found in real life. 2. Perfectly inelastic demand: The demand is said to be perfectly inelastic when a change in price produces no change in the quantity demanded of a commodity. In such a case quantity demanded remains constant regardless of change in price. The amount demanded is totally unresponsive of change in price. The elasticity of demand is said to be zero. 3. Relatively more elastic demand: The demand is relatively more elastic when a small change in price causes a greater change in quantity demanded. In such a case a proportionate change in price of a commodity causes more than proportionate change in quantity demanded. If price changes by 10% the quantity demanded of the commodity change by more than 10% i.e. 25%. The demand curve in such a situation is relatively flatter. 4. Relatively inelastic demand: It is a situation where a greater change in price leads to smaller change in quantity demanded. The demand is said to be relatively inelastic when a proportionate change in price is greater than the proportionate change in quantity demanded. For example If price falls by 20% quantity demanded rises by less than 20% i.e 15%. 5. Unitary elastic demand: The demand is said to be unit when a change in price produces exactly the same percentage change in the quantity demanded of a commodity. In such a situation the percentage change in both the price and quantity demanded is the same. For example if the price falls by 25% the quantity demanded rises by the same 25%. It takes the shape of a rectangular hyperbola. Numerically elasticity of demand is said to be equal to 1.(ed = 1).