SPACE) Matrix

• Strategic Position and Action Evaluation

(SPACE) Matrix
– Aim of SPACE : management tool used to analyse
and understand the overall situation of a company.
– Also it is used to determine the type of corporate
strategy a company should pursue.
– four-quadrant framework indicates whether
aggressive, conservative, defensive, or competitive
strategies are most appropriate for a given
organization
 Steps to Develop a SPACE Matrix
1. First identify FOUR DIMENSIONS OF
SPACE MATRIX
• Internal dimensions
– Financial position (FP)
– Competitive position (CP)

• External dimensions
– Environmental position (EP)
– Industry position (IP)
 Steps to Develop a SPACE Matrix
2. Select a set of variables to define financial position (FP),
competitive position (CP), stability position (SP), and industry
position (IP)
 Steps to Develop a SPACE Matrix
3. a) Assign a numerical value ranging from +1 (worst) to +5 (best) to each of
the variables that make up the FP and IP dimensions.
b) Assign a numerical value ranging from –1 (best) to –5 (worst) to each of the
variables that make up the SP and CP dimensions
Financial Strength (FS) Environmental Stability (ES)

Return on Equity (ROE) 5 Rate of Inflation -3

Leverage 3 Technology Changes -2
Net profit Margin 5 Price Elasticity of Demand -2
Earnings Per Share 6 Competitive Pressure -3
Inventory Turnover 5 Barriers to Entry into Market -3

Financial Strength (FS) Average 4.8 Environmental Stability (ES) Average -2.6

Competitive advantage (CA) Industry Strength (IS)

Market share -1 Growth Potential 5
Product quality -1 Financial Stability 6
Customer loyalty -1.5 Ease of entry into market 4
Technology know-how -1 Equity utilization 4
Control over Supplies and Distributors -2 Profit potential 4

Competitive Advantage (CA) Average -1.3 Industry strength (IS) Average 4.6

4. Compute an average score for FP (4.8), CP (-1.3), IP (4.6), and SP (-2.6)

 Steps to Develop a SPACE Matrix
5. Plot the average scores for FP (4.8), CP (-1.3), IP (4.6), and SP (-2.6)
on the appropriate axis in the SPACE Matrix
SPACE Matrix

FS
6
Conservative Aggressive
5

1
CA IS
-6 -5 -4 -3 -2 -1 1 2 3 4 5 6

-1

-2

-3

-4

Defensive
-5 Competitive
-6
ES
 Steps to Develop a SPACE Matrix
6. Draw line to connect the points from FS to CA to ES and IS
SPACE Matrix

FS
6
Conservative Aggressive
5

1
CA IS
-6 -5 -4 -3 -2 -1 1 2 3 4 5 6

-1

-2

-3

-4

Defensive
-5 Competitive
-6
ES
 Steps to Develop a SPACE Matrix
7. Compute the coordinate of the intersection:
CA +IS(x) = (-1.3) + 4.6 =3.3, FS + ES (y) = 4.8 + (-2.6) = 2.2
Coordinate = (x,y) = (3.1, 1.4) and draw the directional vector from the origin of the SPACE
Matrix through the new intersection point
SPACE Matrix

FS
6
Conservative Aggressive
5

3
(3.3, 2.2)
2

1
CA IS
-6 -5 -4 -3 -2 -1 1 2 3 4 5 6

-1

-2

-3

-4

Defensive
-5 Competitive
-6
ES
 SPACE Matrix
8. This vector reveals the type of strategies recommended for the
organization: aggressive, competitive, defensive, or conservative
Example Strategy Profiles
Example Strategy Profiles
THANK YOU