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--- par_ros [2023/10/04 14:14] – pimsadmin
+++ par_ros [2023/11/30 15:01] (current) – pimsadmin
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 ===== The PAR ROS Model =====
+The strategic factors shown in the diagram fall{{ :par-performance-exp-v2_2x.png?nolink&400|}} into three categories (competitive position, market environment and cost and capital structure) which together explain 75% of the variance across different businesses’ performance. They determine a business’s “PAR” or expected level of profitability. A business at the average for every factor would have average profit: each factor impact is shown as a plus or minus on profit versus the PIMS® mean for that factor.
+The model is calibrated against the PIMS® database, the world leading empirical research on strategic management. It contains market, operational and financial data for over 4’500 SBUs with at least 3 years of data, resulting in 25’000 years of business experience.\\
+We use PAR ROS as a measure of profitability rather than ROI because a significant proportion of businesses these days have nearly zero or negative investment and therefore resource allocation is about people, R&D, marketing etc. not investment.\\
+Many of the ratios used in the model relate to Adjusted Value Added (defined as Sales minus Purchases and EBIT) rather than to Sales or Value Added. This is because both Sales and Value Added include profit, so there is an inherent tautological negative profit impact. It is not a good idea for PAR profit to depend on actual profit!\\
+Definitions of the variables in the model are shown below:
+\\
 Next: [[lookalikes|Strategic Peer Analysis]]