COMPETITIVE PROFILE MATRIX

One of the most practical tools to analyze competition is to prepare a Competitive Profile Matrix (CPM). A CPM
is an essential strategic management tool that compares the entrepreneur’s business with the major players
in the industry. It encompasses both external and internal factors in evaluating the overall position of the
business. These factors are more clearly defined as critical success factors (CSFs) and are the bases for the
CPM score. CSFs encompasses all important elements to achieve business objectives, including how to
ultimately provide value to target customers. Each CSF is assigned to a specific weight depending on the
compelling industry factors present at the time of CPM preparation. These CSFs are scored according to the
following:
4 – Major Strength
3 – Minor Strength
2 – Minor Weakness
1 – Major Weakness
To better understand CPM and how it helps entrepreneurs analyze the competitive environment, refer to the
case below.
Case:
Mr. Marvin Miranda is a fresh graduate of marketing management. He has observed that the current
administration has instituted a number of drastic changes, including the implementation in Baguio City of a
curfew for minors and a 1:00 am liquor ban. Marvin believes that a number of bars in Baguio City might be
affected by these new policies. Additionally, he has also noticed that most of the coffee and tea shops in
Baguio City are always full. An inspiring entrepreneur ever since he was young, Marvin eagerly wants to tap
the market which he believes he knows the most – the youth.
Supposed that after the FGD session where he gathered insightful details, Marvin plans to make a competitive
analysis for the top coffee and tea shops in Baguio City through a CPM. He believes a CPM will help him
devise appropriate competition strategies. Based on his scan, there are three potential competitors: Nova
Coffee, Bueno Coffee, and Milla Coffee Shop. He will name his coffee shop Miranda Coffee Shop.
 Competitive Profile Matrix
Miranda Coffee Bueno Coffee
Nova Coffee Shop Milla Coffee Shop
Shop Shop
CSF Weight
Weighte Weighted Weighte Weighte
Rating Rating Rating Rating
d Score* Score* d Score* d Score*
Coffee and
15 % 2 0.30 3 0.45 3 0.45 3 0.45
Tea Products
Price 10 % 3 0.30 3 0.30 3 0.30 3 0.30
Servicescape
(Overall
15 % 3 0.45 4 0.60 2 0.30 1 0.15
Service
Ambiance)
Service
20 % 3 0.60 4 0.80 3 0.60 2 0.40
Personnel
Brand Image 10 % 2 0.20 3 0.30 3 0.30 2 0.20
Location 10 % 4 0.40 4 0.40 3 0.30 3 0.30
Coffee/Tea
5% 2 0.10 3 0.15 3 0.15 2 0.10
Packaging
Noncoffee/Tea
5% 4 0.20 3 0.15 3 0.15 2 0.15
Products
Digital
5% 4 0.20 3 0.15 3 0.15 3 0.15
Promos
Loyalty
5% 3 0.15 3 0.15 3 0.15 3 0.15
Programs
Total 100 % 2.90 3.45 2.85 2.30
*weight score = Weight x Rating
The results show that Miranda Coffee Shop, which garnered a score of 2.90, can generally compete with
the existing competitors (2.88 is the median score based on the CSF scale of 1 to 4). Miranda Coffee Shop is
strong in terms of strategic location, noncoffee/tea products, and digital promos. However, it needs to be
competitive on basic coffee and tea products, brand image, and coffee/tea packaging since it is still new.
Miranda Coffee Shop must be vigilant with its competitors, especially Nova Coffee Shop which is strong in
overall service ambiance and service personnel.
Competitive Strategies
After assessing and evaluating the competitive strength and position of your business against the
competitors, you, as the entrepreneur, have to come up with competitive strategies to counter the challenges
posed by the competition. Aside from his Five Forces model of competition, Porter also devised three generic
competitive strategies – collectively called Porter’s Generic Competitive Strategies – that can be applied in any
business. They are the cost leadership strategy, differentiation strategy, focus strategy.
Competitive Advantage
Lower Cost Differentiation
Broad Target 1. Cost Leadership 2. Differentiation
Competitive Edge
Narrow Target 3.a Cost Focus 3.b Differentiation Focus

According to businessdictionary.com, cost leadership is a strategy used by businesses to create a low

cost operation within their niche. The use of this strategy is primarily to gain an advantage over competition
by reducing cost of operations below that of the industry. The cost leadership strategy is applied when a
business will produce goods or perform services in bulk achieving economy of scale, where producing more is
more cost-efficient that producing less, in the aspect of production. The same principle applies in marketing.
When a marketing strategy is implemented, it has to target a substantial number of customers rather than a
few (i.e., undifferentiated or mass marketing). This strategy, however, cannot be applied by businesses that
are relatively new and with lesser financial capability. Cost Leadership strategy is a strategy that revolves
around effective and efficient production and pricing and are usually utilized by more established businesses
with established markets.
The differentiation strategy is a strategy that highlights the uniqueness or difference of a product or
service or an attribute of a product or service that the competitors are weak or have none at all. This strategy
makes a product or service stand out form the rest.
 The focus strategy is a strategy applied when the entrepreneur focuses on a certain or specific target
market segment in mind. The previous two strategies are into the undifferentiated market, while the focus
strategy has a differentiated market. The entrepreneur could apply either a cost focus or a differentiated focus
strategy. The cost focus strategy positions low cost as competitive advantage to the target market, while the
differentiation focus strategy positions a unique product or service or a unique feature of a product or service
to the target segment.
A business needs to have a substantial competitive advantage in order to thrive. Therefore, one clear
strategy must be adopted to increase the likelihood of business success. A combination of two strategies will
confuse the market and might lead to the failure of the business. Am example of such a situation is when a
company applies both cost leadership and differentiation strategies for a rubber shoe business. The owner
wants to operate at a minimum cost possible but wants to position its product as a premium brand to
compete with the major players; such a setup is quite contradictory as it is nearly impossible to compete with
branded and well-known rubber shoes companies while maintaining minimum cost.