复旦大学证券投资协会方法论行业研究bain product line profitability.pptx

Author: Gisele Garraway Contributor: Steve Berez Profitability Product Line March 1998 2 CU7020998JZA Product Line Profitability Agenda PLP overview Applications PLP steps Client example Challenges Key takeaways 3 CU7020998JZA PLP overview Applications PLP steps Client example Challenges Key takeaways Product Line Profitability Agenda 4 CU7020998JZA Product Line Profitability PLP Description Product line profitability (PLP) is a diagnostic tool that helps us determine the “true” profitability of each product within a multi-product portfolio. Picture Frames Operating Margin 2.3% 5.3% 7.0% 10.0% 5 CU7020998JZA Product Line Profitability Profit Improvement Tools PLP analysis is one of the Bain diagnostic tools that can identify sources of profit improvement. 0% 5% 10% 15% 20% 0.1 0.2 0.5 1 2 5 Profitability Relative Market Share Bain profit improvement tool kit PLP BDP RCP VMR 6 CU7020998JZA Profit Line Profitability Why Bain Uses PLP Senior managers can use PLP analysis to make important decisions about product lines. For which products should we increase prices? Where should we focus our cost reduction efforts? Which product lines should we drop? Which products should we focus RD efforts on? Where should we provide sales incentives? 7 CU7020998JZA Product Line Profitability Typical Accounting System Versus Bain PLP Unlike typical accounting systems, PLP involves driving below gross margin and allocating costs to get to an operating margin for each product line. Typical accounting system Bain PLP Cost collection: By function(e.g. RD, advertising) By product line Cost assignedto products: Cost of goods sold direct labor direct materials All costs, including all indirect costs overhead advertising distribution Key product profitability measure: Gross margin(revenue - cost of goods sold) Operating margin Cost allocation method: Accounting standards Activity-based cost drivers Disadvantage: Often does not reflect true commitment of resou