3/7/2016

SPACEMatrixStrategicManagementMethod

SPACEMatrixStrategicManagementMethod
TheSPACEmatrixisamanagementtoolusedtoanalyzeacompany.Itisusedtodeterminewhat
typeofastrategyacompanyshouldundertake.
TheStrategicPosition&ACtionEvaluationmatrixorshortaSPACEmatrixisastrategic
managementtoolthatfocusesonstrategyformulationespeciallyasrelatedtothecompetitive
positionofanorganization.
TheSPACEmatrixcanbeusedasabasisforotheranalyses,suchastheSWOTanalysis,BCG
matrixmodel,industryanalysis,orassessingstrategicalternatives(IEmatrix).
WhatistheSPACEmatrixstrategicmanagementmethod?
ToexplainhowtheSPACEmatrixworks,itisbesttoreverseengineerit.First,let'stakealookat
whattheoutcomeofaSPACEmatrixanalysiscanbe,takealookatthepicturebelow.TheSPACE
matrixisbrokendowntofourquadrantswhereeachquadrantsuggestsadifferenttypeoranatureof
astrategy:
Aggressive
Conservative
Defensive
Competitive
ThisiswhatacompletedSPACEmatrixlookslike:

ThisparticularSPACEmatrixtellsusthatourcompanyshouldpursueanaggressivestrategy.Our
companyhasastrongcompetitivepositionitthemarketwithrapidgrowth.Itneedstouseitsinternal
strengthstodevelopamarketpenetrationandmarketdevelopmentstrategy.Thiscaninclude
productdevelopment,integrationwithothercompanies,acquisitionofcompetitors,andsoon.
Now,howdowegettothepossibleoutcomesshownintheSPACEmatrix?TheSPACEMatrix
analysisfunctionsupontwointernalandtwoexternalstrategicdimensionsinordertodeterminethe
http://www.maxipedia.com/space+matrix+model+strategic+management+method

1/3

3/7/2016

SPACEMatrixStrategicManagementMethod

organization'sstrategicpostureintheindustry.TheSPACEmatrixisbasedonfourareasofanalysis.
Internalstrategicdimensions:Financialstrength(FS)
Competitiveadvantage(CA)Externalstrategicdimensions:Environmentalstability(ES)
Industrystrength(IS)
TherearemanySPACEmatrixfactorsundertheinternalstrategicdimension.Thesefactorsanalyze
abusinessinternalstrategicposition.Thefinancialstrengthfactorsoftencomefromcompany
accounting.TheseSPACEmatrixfactorscanincludeforexamplereturnoninvestment,leverage,
turnover,liquidity,workingcapital,cashflow,andothers.Competitiveadvantagefactorsincludefor
examplethespeedofinnovationbythecompany,marketnicheposition,customerloyalty,product
quality,marketshare,productlifecycle,andothers.
Everybusinessisalsoaffectedbytheenvironmentinwhichitoperates.SPACEmatrixfactorsrelated
tobusinessexternalstrategicdimensionareforexampleoveralleconomiccondition,GDPgrowth,
inflation,priceelasticity,technology,barrierstoentry,competitivepressures,industrygrowth
potential,andothers.ThesefactorscanbewellanalyzedusingtheMichaelPorter'sFiveForces
model.
TheSPACEmatrixcalculatestheimportanceofeachofthesedimensionsandplacesthemona
CartesiangraphwithXandYcoordinates.
Thefollowingareafewmodeltechnicalassumptions:
Bydefinition,theCAandISvaluesintheSPACEmatrixareplottedontheXaxis.
CAvaluescanrangefrom1to6.
ISvaluescantake+1to+6.
TheFSandESdimensionsofthemodelareplottedontheYaxis.
ESvaluescanbebetween1and6.
FSvaluesrangefrom+1to+6.
HowdoIconstructaSPACEmatrix?
TheSPACEmatrixisconstructedbyplottingcalculatedvaluesforthecompetitiveadvantage(CA)
andindustrystrength(IS)dimensionsontheXaxis.TheYaxisisbasedontheenvironmental
stability(ES)andfinancialstrength(FS)dimensions.TheSPACEmatrixcanbecreatedusingthe
followingsevensteps:
Step1:Chooseasetofvariablestobeusedtogaugethecompetitiveadvantage(CA),industry
strength(IS),environmentalstability(ES),andfinancialstrength(FS).
Step2:Rateindividualfactorsusingratingsystemspecifictoeachdimension.Ratecompetitive
advantage(CA)andenvironmentalstability(ES)usingratingscalefrom6(worst)to1(best).Rate
industrystrength(IS)andfinancialstrength(FS)usingratingscalefrom+1(worst)to+6(best).
Step3:Findtheaveragescoresforcompetitiveadvantage(CA),industrystrength(IS),
environmentalstability(ES),andfinancialstrength(FS).
http://www.maxipedia.com/space+matrix+model+strategic+management+method

2/3

3/7/2016

SPACEMatrixStrategicManagementMethod

Step4:Plotvaluesfromstep3foreachdimensionontheSPACEmatrixontheappropriateaxis.
Step5:Addtheaveragescoreforthecompetitiveadvantage(CA)andindustrystrength(IS)
dimensions.ThiswillbeyourfinalpointonaxisXontheSPACEmatrix.
Step6:AddtheaveragescorefortheSPACEmatrixenvironmentalstability(ES)andfinancial
strength(FS)dimensionstofindyourfinalpointontheaxisY.
Step7:FindintersectionofyourXandYpoints.DrawalinefromthecenteroftheSPACEmatrixto
yourpoint.Thislinerevealsthetypeofstrategythecompanyshouldpursue.
SPACEmatrixexample
ThefollowingtableshowswhatvalueswereusedtocreatetheSPACEmatrixdisplayedabove.

Eachfactorwithineachstrategicdimensionisratedusingappropriateratingscale.Thenaverages
arecalculated.Addingindividualstrategicdimensionaveragesprovidesvaluesthatareplottedonthe
axisXandY.
WheredoIgonext?
TheSPACEmatrixcanhelptofindastrategy.But,whatifwehave23strategiesandneedtodecide
whichoneisthebestone?TheQuantitativeStrategicPlanningMatrix(QSPM)modelcanhelpto
answerthisquestion.
ShouldyouhaveanyquestionsabouttheSPACEmatrix,youmightwanttosubmitthematour
managementdiscussionforum.
.

http://www.maxipedia.com/space+matrix+model+strategic+management+method

3/3