The Steps Required to Develop a SPACE Matrix

The Strategic Position and Action Evaluation (SPACE) Matrix is one of the strategic management tool for analyzing the company and its environment to formulating the strategies. It is four-quadrant structure which specify whether aggressive, defensive competitive or conservative strategies are most suitable for a given organization, company or business.

 

The Strategic Position and Action Evaluation Matrix Analysis is most frequently in use during professional industry or market analysis of a company. The SPACE Matrix axis signify the 2 external proportions which are industry strength (IS) environmental stability (ES) and two internal dimensions of a competitive company which are competitive advantage (CA) and financial strength (FS). These 4 dimensions are the most significant determinants of a company's overall strategic position in the industry or marketplace.

A number of factors could frame worked each of the dimensions/quadrants characterized on the axis of SPACE matrix usually depend upon the nature of company its environment and industry. Variables that required to developing the SPACE matrix are found in the company’s Internal Factor Evaluation (IFE) External Factor Evaluation (EFE) matrix.

 

SPACE matrix also contains the other significant factors that are used to its assessment are company’s financial performance for instance liquidity, cash flows, working capital and return on investment (ROI) generally are measured formative variables of an firm’s financial strength. Similar to the TOWS, the SPACE matrix would be modified to the exacting company being considered and based on realistic information derived from market data and industry data.         

Steps essential to construct a SPACE Matrix are described below:

• Choose a combination of factors that best characterize Competitive Advantage (CA), Environmental Stability (ES), Financial Strength (FS) and Industry Strength (IS).

• To the CA and ES dimensions allot a numerical value ranging from -6 (worst) to -1 (best) to each of the factors. Allot value ranging from +6 (best) to +1 (worst) to all of the factors that constitute the IS and FS dimensions.

• Calculate an average score for IS, ES, CA and FS by summing the numbers allotted to the factors of the entire dimension separately and dividing by the set of factors included in the particular dimension.

• Plot the average scores for each dimensions such as ES, CA, IS and FS on the proper axis in the matrix.

• Add or combine the scores of two dimensions that lay in the x-axis and design the resultant point on X, in the same way add scores of dimensions that lay in the y-axis and plot the consequential point on Y. Then, plot the intersection of the both new XY points.

• Sketch a directional vector from the basis of the Strategic Position and Action Evaluation (SPACE) matrix throughout the new intersection points. This vector discloses the kind of strategies suggested for the firm such as aggressive, defensive, conservative or competitive.

The directional vector related with every specified quadrant which proposes the kind of strategies to follow which are: aggressive, defensive, competitive or conservative. When a firm's directional vector is positioned in the aggressive vector (upper-right quadrant) of the matrix, it shows that a firm is in an outstanding position to utilize its Internal Strengths (IS) to surmount internal weaknesses, obtain the advantage of external opportunities, and evade external threats. 

As a result, market development, market penetration, product development, forward, backward and horizontal integration, concentric, conglomerate and horizontal diversification or a mix of strategies can be employed, depending on the particular environment that the firm is practicing at the time.