Instructions to Complete a SPACE Matrix (Chapter 6)
The axes of the SPACE matrix represent two internal dimensions (Financial Position FP and Competitive Position CP) and two external dimensions (Stability Position SP and Industry Position IP). These four factors are the most important determinants of a company’s overall strategic position. Examples of these factors are included in Chapter 6 Table 6-2:
Example Factors that Make Up the SPACE Matrix Axes
| Internal Strategic Position | External Strategic Position | ||
| Financial Position (FP)
▪Return on Investment ▪Leverage ▪Liquidity ▪Working capital ▪Cash flow ▪Inventory turnover ▪Earnings per share ▪Price earnings ratio
|
Competitive Position (CP)
▪Market share ▪Product quality ▪Product life cycle ▪Customer loyalty ▪Capacity utilization ▪Technological know-how ▪Control over suppliers and distributors |
Stability Position (SP)
▪Technological changes ▪Rate of inflation ▪Demand variability ▪Price range of competing products ▪Barriers to entry into market ▪Competitive pressure ▪Ease of exit from market ▪Risk involved in business |
Industry Position (IP)
▪Growth potential ▪Profit potential ▪Financial stability ▪Extent leveraged ▪Resource utilization ▪Ease of entry into market ▪Productivity ▪Capacity utilization |
- For your case study company, select the appropriate factors that define FP, CP, SP, and IP.
- Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the selected FP and IP factors.
- Assign a numerical value ranging from -1 (best) to -7 (worst) to each of the selected SP and CP factors.
On the internal FP and CP axes, make comparisons to competitors (same industry).
On the external SP and IP axes, make comparisons to other industries.
On the SP axis, know that a -7 denotes highly unstable industry conditions, whereas a -1 denotes highly stable conditions.
- Compute the average score for FP, CP, IP, and SP. For example, if the FP axis had 5 selected factors, sum the 5 assigned values and divide by 5.
- Plot the resulting 4 average scores for FP, IP, SP, and CP on the appropriate axis in the SPACE matrix.
- Add the two average scores on the x-axis (CP average score + IP average score) and plot the resulting point on X.
- Add the two average scores on the y-axis (FP average score + SP average score) and plot the resulting point on Y.
- Plot the intersection of the new (x, y) coordinates.
- Draw a directional vector from the origin of the SPACE matrix (0,0) through the new (x, y) coordinate.
This vector, located in one of the four matrix quadrants, reveals the particular strategy types the organization should select from to formulate the right strategy statements.
