linuszz/business-planning-skills/ros-rms-analysis

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Analyze relationship between profitability and market share. Use for competitive advantage assessment, scale economies analysis, and strategy validation.

Install

npx vskill@latest install linuszz/business-planning-skills/ros-rms-analysis

SKILL.md

ROS/RMS Analysis

Metadata

  • Name: ros-rms-analysis
  • Description: Return on Sales vs Relative Market Share analysis
  • Triggers: ROS, RMS, economies of scale, competitive advantage, profitability

Instructions

Analyze relationship between Return on Sales (ROS) and Relative Market Share (RMS) to identify competitive advantage from scale.

Framework

The ROS/RMS Equation
ROS = Operating Profit / Revenue
RMS = Our Market Share / Largest Competitor Market Share
Key Insight

If ROS > Industry Average AND RMS > 1 → Both superior profitability AND scale advantage = strong competitive position

Economies of Scale Logic:

  • Larger RMS → Should have lower costs → Higher ROS
  • Smaller RMS → Acceptable to have higher costs → Lower ROS
Chart Types

Scatter Plot - ROS on Y-axis, RMS on X-axis (log scale) Trend Line - Industry average ROS vs RMS Sector Chart - Multiple competitors positioned in quadrants

Output Process

  1. Define industry - Boundaries, products, geography
  2. Gather data - Revenue, profits, market shares
  3. Calculate metrics - ROS for all players, RMS for us
  4. Benchmark - Industry average ROS, competitive thresholds
  5. Create visualization - Scatter or sector chart
  6. Interpret results - Identify positioning and scale effects

Output Format

## ROS/RMS Analysis: [Industry/Company]
 
### Company Positioning
 
| Competitor | Revenue | Profit | ROS | RMS | Position | Scale | Position |
|------------|---------|--------|------|----------|---------|
| [Company A] | $X M | $Y M | Z% | 0.5 | Small | ❌ Cost disadvantage |
| [Company B] | $X M | $Y M | Z% | 1.2 | Medium | ❌ Cost disadvantage |
| [Company C] | $X M | $Y M | Z% | 0.8 | Large | ⚠️ Mixed |
| [Company D] | $X M | $Y M | Z% | 2.5 | Leader | ✅ Scale advantage |
 
### Trend Analysis
 
| Metric | Our Value | Industry Avg | Assessment |
|--------|-----------|-------------|------------|
| ROS | X% | Y% | 🟢 Below average |
| Market Share | Z% | - | 🟡 Losing share |
| Growth Rate | X% | Y% | 🟢 Below market |
 
---
 
### Economies of Scale Analysis
 
**Regression Line:** ROS = a × (1/RMS) + b
- If 'a' is significant and positive → Strong economies of scale
- If 'a' is insignificant → Weak or no scale economies
 
**Implications:**
1. **[Implication 1]** - [Analysis]
2. **[Implication 2]** - [Analysis]
 
### Strategic Recommendations
 
1. **[Recommendation 1]** - [Description]
2. **[Recommendation 2]** - [Description]
3. **[Recommendation 3]** - [Description]

Tips

  • Use multi-year averages for ROS (3-5 years)
  • RMS on log scale (1.0 = equal to leader, 0.5 = half)
  • Industry ROS varies by sector - don't assume universality
  • Look for outliers - they tell important stories
  • Consider market share trends - gaining share can compensate for lower ROS
 
## References
 
- Henderson, Bruce. *The Logic of Business Strategy*. 1979.
- Buzzell, Robert & Gale, Bradley. *Market Structure and Competitive Strategy*. 1981.

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Source

Popularity

Repository stars
53
Repository forks
2
7-day trend score
20

Stars and forks are for the whole GitHub repository, not this skill alone. Refreshed 18 Mar 2026, 7 months ago.

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