SPACE Matrix PDF
SPACE Matrix PDF
SPACE Matrix PDF
org
ISSN 2224-607X (Paper) ISSN 2225-0565
0565 (Online)
Vol 2, No.8, 2012
Abstract
One of the most important questions for concrete construction firms managers is that what the current status of
their concrete construction firm is. This paper presents the application of strategic position and action evaluation
matrix (Space Analysis) to find the answer of this question for a concrete construction the best degree of strategy
managing to execute four strategies against the rivals, namely aggressive, conservative, defensive and
competitive strategies. Value of each factor mentioned in this matrix, were earned by preparing questionnaire
surveys. These factors were listed in four groups (Financial Strength, Industry Attractiveness, Environmental
Stability and Competitive Advantage)
age) to identify which kind of strategy should be used by this firm.
Key words: Strategy ,Space Analysis, aggressive, conservative, defensive and competitive strategies
1. Introduction
Today, the most important concern of most of the organizations is formulating
formulating the strategies their success is
guaranteed in complex environmental changes. Strategic planning provides some tools for the organizations to
follow the formulation of the strategy in various aspects of the organization and manage their strategic
performance
erformance [11]. Now, strategic management is widely applied in various levels of business.
Strategic management is considered as the set of decisions and operations that are applied by managers for all
the organization levels. This is the set of decisions
decision that can lead into long-term
term activities of the organization [12].
In other words, the general point of strategic management is that the managers need to know what factors are
used to improve the organization condition for the success of the performance in the future [1].
3. Research question
The most important thing in this article tries to answer how we can determine their position in the competitive
environment To find a rational strategy based on. The method used in this article is Strategic Position and Action
Evaluation Matrix In that way it is described in detail.
4. Theoretical base
4.1. SPACE Analysis – Strategic Position and Action Evaluation Matrix
The Strategic Position and Action Evaluation
Evaluati Matrix or SPACE analysis matrix is a super technique for
evaluating the sense and wisdom in a particular strategic plan. It was developed by strategy academics Alan
Rowe, Richard Mason, Karl Dickel, Richard Mann and Robert Mockler.The Strategic Position and ACtion
Evaluation (SPACE) analysis framework is a very useful but not well known tool to develop and review a
company’s strategy : [3]
It can be used at
• The beginning of the exercise to predict the overall key themes
• As a check at the end of the process.
proce
• It can also be used to evaluate individual strategic options generated by using a tool like the Ansoff
Growth Matrix.
SPACE Analysis is a systematictic appraisal of four key issues that balance the external and internal factors that
should determine the general theme of the strategy:
External
• Industry Attractiveness
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• Environmental Stability
Internal
• Competitive Advantage
• Financial Strength
By combining ratings on each dimension on one SPACE matrix diagram, the framework guides the strategic
agenda.
The dimensions are combined in a way that seems strange at first but makes sense because two sets of
factors are assessed as strengths (financial strength and industry strength) and rated positive while the other two
(competitive advantage and environmental
environmental stability) are assessed as potential weaknesses and rated negatively.
The logic is that financial strength is needed to compensate for environmental instability. The more difficult the
future environment is thought to be, the more important it is to have strong financials. [8]
Industry attractiveness and competitive advantage are seen as potentially alternative sources of superior
profit. and indeed there are treated as such in my five pathways to profit in my Profit Tipping Point report. If
both favour the business, then results should be very good, if both are unfavourable, then the business is in
trouble.
4.2. Assessing the SPACE Analysis Scores
Each factor in the Strategic Position and Action Evaluation
Evaluation matrix can be quickly judged but there are benefits for
exploring each in detail.There are a large number of factors that can be considered and each industry will have its
own key features which should be included in the detailed SPACE evaluation. A few factors to be considered to
give you a flavour of what to include in your SPACE analysis are listed below.
4.3. SPACE Analysis Factors For Financial Strength
1. Return on Sales
2. Return on Assets
3. Cash Flow
4. Gearing
5. Working Capital Intensity
The factors for Financial Strength are marked from 1 to 6 and a high score is good, a low score indicates
financial weakness.: [3]
• Return on investment (low to high)
• Leverage (debt to equity ratio) (inbalanced to balanced)
• Liquidity (access to quick money when needed) (inbalanced
( to solid)
• Capital required versus capital available) (high to low)
• Cash flow (low to high)
• Ease of exit from market (difficult to easy)
• Risk involved in the business (much to little)
• Inventory turnover (slow to fast)
• Use of economies of scale ale and experience (low to high)
4.3.1. Interpreting Financial Strength In The SPACE Matrix To Your Situation
High profit margins and access to cash to invest when you want it are valuable in any business.
Several of the financial measures are not black and
a white: [15]
1. Leverage ranges from imbalanced (bad) to balanced (good) on the basis that equity finance is more
expensive than moderate levels of debt so the business should aim for the lowest weighted average cost of
capital
2. Liquidity also ranges from imbalanced
imbalanced (bad) to balanced (good) because high levels of cash will depress
returns on investment while liquidity problems will mean the business struggles to pay creditors as they
fall due and may mean the business is technically insolvent.
Businesses have different financial needs in terms of:
• asset intensity – some businesses need large investments in capital equipment
• working capital cycles – a supermarket will be paid in cash by customers well before it has to pay its
suppliers while a distributor may have to hold high levels of stocks/inventories, finance trade debtors and
even pay for imported goods before they are despatched. [26]
4.3.2. The Impact On Strategic Direction For Different Levels Of Financial Strength
Financial strength is used to offset any environmental instability on the y-axis
y axis of the SPACE matrix diagram.
A strong score on financial strength backed up with reasonable environmental stability suggests that either an
aggressive strategy or conservative strategy is appropriate depending on the position for competitive advantage
and industry attractiveness.
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Vol 2, No.8, 2012
A poor score without remarkable environmental stability indicates that either a competitive strategy or defensive
strategy is required.
4.4. SPACE Analysis Factors For Competitive Advantage
1. Market Share
2. Quality
3. Customer Loyalty
4. Cost Levels
5. Product Range
Competitive advantage is scored -11 (minus
(m 1) great to –6 (minus 6) poor – for more details see Competitive
Advantage In The SPACE Matrix: [3]
• Market share (small to large)
• Product quality (inferiorior to superior)
• Product life cycle (late to early)
• Product replacement cycle (variable to fixed)
• Customer loyalty (low to high)
• Competition’s capacity utilisation (low to high)
• Technological know-how how (low to high)
• Vertical integration (low to high)
• Speed of new product introductions (slow to fast)
4.4.1. Interpreting Competitive Advantage In The SPACE Matrix To Your Situation
This dimension more than any other in the SPACE matrix needs to be adapted to your business sector.The
competitive advantage matrix shows that even market share isn’t necessarily a strong cause of advantage in some
situations.
However to best assess competitive advantage to use in the SPACE matrix, I need to look in detail at my business,
my customers and competitors to see who is providing the best customer value.The .The following strategy techniques
will help are Value chain analysis, Customer value attribute maps and Key Success Factors.
Factors
4.4.2. The
he Impact On Strategic Direction For Different Levels Of Competitive Advantage
The competitive advantage rating will either reinforce or counteract the rating for industry attractiveness as they
are on the same axis in the SPACE matrix.
A strong rating on the Industry Attractiveness / Competitive Advantage axis points to an aggressive strategy or a
competitive strategy.A.A weak rating indicates that a Conservative strategy or defensive strategy is appropriate.
4.5. SPACE Analysis Factors For Industry Attractiveness
1. Growth Potential
2. Life Cycle Stage
3. Entry Barriers
4. Customer Power
5. Substitutes
Industry attractiveness is scored 6 great and 1 poor in the SPACE analysis matrix – for more details see Industry
Attractiveness In The SPACE Matrix:
Matrix [3]
• Growth potential (low to high)
• Profit potential (low to high)
• Financial stability (low to high)
• Technological know-how how (simple to complex)
comple
• Resource utilisation (inefficient to efficient)
• Capital intensity (low to high)
• Ease of entry into the market (easy to difficult)
• Productivity; capacity utilisation (low to high)
• Manufacturer’s bargaining power (low to high)
4.5.1. Interpreting Industry Attractiveness In The SPACE Matrix To Your Situation
The Five Forces model created by Michael Porter should be considered to see if there are additional attributes
which need to be considered for your particular situation. we’d be looking to include some measure for
competitive rivalry but we’ve seen good industries destroyed by kamikaze competition based on price wars.
we’d also want to look at the ability of customers to exercise their bargaining power to squeeze the profits. [7]
4.5.2. The Impact On Strategic Direction For Different Levels Industry Attractiveness
A strong rating on the Industry Attractiveness
Attracti / Competitive Advantage axis points to an aggressive strategy or a
competitive strategy.. A weak rating indicates that a Conservative strategy or defensive strategy is appropriate.
[9]
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ISSN 2224-607X (Paper) ISSN 2225-0565
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The nice thing about the conservative strategy in the SPACE matrix is that the business is not under major
threats from the environment and because of its financial strength, it has time to consider its options.
4.11. Defensive Strategy
A defensive strategy is recommended by SPACE analysis when: [3]
1. The Industry Attractiveness / Competitive Advantage
A axis is negative; and
2. The Financial Strength /Environmental Stability axis is also negative
A defensive strategy doesn’t have to come out of weakness but from strength. Sometimes maintaining the status
quo suits a market leader or someone who is operating under a high price umbrella of a market leader because
profits are high and life is easy. This can be dangerous since the industry
industry is inviting an aggressive move by a new
entrant to the market but sometimes “a bird in the hand is better than two in the bush.”Markets are very
comfortable when competitors co-existexist in their own little spaces and don’t threaten each other beyond localised
loca
skirmishes on the borders. I’ve known plenty of business owners who don’t want to grow their businesses
significantly. they don’t have the desire to manage a big business. [9]
Different defensive strategy options apply in different parts of the business:
busin
4.11.1. Defensive Marketing Strategy
First be clear on which product-markets
markets you want to defend, which you want to grow and which you will allow to
be taken from you without a serious fight.
The growth-share
share matrix from the Boston Consulting Group may help as it looks across the market growth rates
and your market share to create four categories: [7]
• Stars – growing market, high share / to grow aggressively
• Cash cows – stable or shrinking market, high share / to defend strongly – these are your main source s of
profit and cash
• Question marks – growing market, low market share/ live up to their names.
.
• Dogs – stable or shrinking market, low market share/ to harvest i.e. to let your market share drift away as
you manage for short term cash and profit.
5. Methodology
The current study is applied in terms of the type of goal and is descriptive and case study in terms of data
collection and data processing. The most important source in this study is the existing documents in various
sections of the organization
ion as human resources, market research, financial, marketing, production and quality
and in data collection, additional data are used in terms of the views of local and international managers and
experts and research scientific centers.
In this paper, 34 the number of managers and professionals people have responded to the questionnaire
and by Using Strategic Position and Action Evaluation Matrix,
Matrix we define company's 's position. This study is the
use of average weights.
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Dimension
Unstable Stable Unstable Stable Environment
Unattractive Unattractive Attractive Attractive Industry
Weak Weak Strong Strong Competitiveness
Weak High Weak High Financial strength
* Rationalization * Cost * Cost * Growth Appropriate
* Divestment as reduction and reduction, possibly by Strategies
appropriate product/ service productivity acquisition
rationalization improvement, *Investment on
* Invest in raising more opportunities
search for new capital to follow * Innovate to
products/ opportunities sustain
opportunities and strengthen competitive
competitiveness advantage
Possibly merge
less competitive
cashrich
organisation
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FS Aggressive
Conservative
3.56
CA 4 IS
-2.44
-3
Defensive Competitive
ES
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