SPACE Analysis or the SPACE Matrix with an example - Simplest Explanation Ever

Mister Simplify
17 Oct 202011:21

Summary

TLDRIn this tutorial on Space Analysis (Space Matrix), the concept of evaluating a company's strategic position is explored. The Space Matrix helps businesses assess internal and external factors using four key metrics: Industry Attractiveness, Competitive Advantage, Financial Strength, and Environmental Stability. The matrix divides into four quadrants, each suggesting a different strategic approach, from aggressive growth to defensive cost-cutting. By calculating average scores for each factor, companies can determine their dominant quadrant and select the most suitable strategy for growth or improvement in their competitive environment.

Takeaways

  • 😀 Space Analysis (Space Matrix) is a strategic management tool that helps evaluate both internal and external factors affecting a business.
  • 😀 The X-axis of the Space Matrix represents **Industry Attractiveness (IA)** (external) and **Competitive Advantage (CA)** (internal).
  • 😀 The Y-axis of the Space Matrix represents **Financial Strength (FS)** (internal) and **Environmental Stability (ES)** (external).
  • 😀 Each factor in the Space Matrix is rated on a scale from 0 to 6 (positive) or -2 to -6 (negative).
  • 😀 Industry Attractiveness is influenced by growth potential, profit potential, and market complexity, among other factors.
  • 😀 Competitive Advantage is influenced by sub-factors like market share, product quality, and customer loyalty.
  • 😀 Financial Strength is assessed based on return on investment, liquidity, and cash flow.
  • 😀 Environmental Stability considers factors like technological change, inflation, and price volatility.
  • 😀 After rating each factor, the average score is calculated and plotted to find the dominant quadrant of the matrix.
  • 😀 The four quadrants of the Space Matrix represent strategic positions: Aggressive, Conservative, Defensive, and Competitive.
  • 😀 The Aggressive position (Top Right Quadrant) indicates a strong, stable industry with a competitive advantage, suggesting growth in market share.
  • 😀 The Conservative position (Top Left Quadrant) is for companies in stable industries but low growth, recommending slow and steady expansion into new industries.
  • 😀 The Defensive position (Bottom Left Quadrant) suggests a weak industry and financial position, recommending cost-cutting and potential exit from the industry.
  • 😀 The Competitive position (Bottom Right Quadrant) is for industries that are attractive but unstable, urging companies to improve financial stability and efficiency.

Q & A

  • What does the term 'Space Analysis' stand for?

    -Space Analysis stands for 'Strategic Position and Action Evaluation'. It is a technique used in strategic management to evaluate the internal and external factors affecting a business.

  • What are the two axes of the Space Matrix?

    -The Space Matrix consists of the X-axis and the Y-axis. The X-axis includes 'Industry Attractiveness (IA)' as an external factor and 'Competitive Advantage (CA)' as an internal factor. The Y-axis includes 'Financial Strength (FS)' as an internal factor and 'Environmental Stability (ES)' as an external factor.

  • How are the factors on the Space Matrix scored?

    -Each factor is scored on a scale from 0 to 6 on the positive axis, and from 0 to -6 on the negative axis. Positive scores indicate favorable conditions, while negative scores indicate unfavorable conditions.

  • What is the process of creating a Space Matrix?

    -To create a Space Matrix, you first score the relevant sub-factors for each factor, calculate averages for each axis, then plot the scores on the matrix. The resulting points form a quadrilateral, which is analyzed to determine the dominant quadrant.

  • What does a high positive score on the X-axis indicate?

    -A high positive score on the X-axis (Industry Attractiveness and Competitive Advantage) indicates favorable external and internal conditions that benefit the business.

  • What do the four quadrants of the Space Matrix represent?

    -The four quadrants of the Space Matrix represent different strategic positions a company can adopt: Aggressive (Quadrant I), Conservative (Quadrant II), Defensive (Quadrant III), and Competitive (Quadrant IV). Each quadrant suggests a different strategic action.

  • What is the recommended strategy for a company in Quadrant I (Aggressive Position)?

    -In Quadrant I, where both industry attractiveness and competitive advantage are high, the recommended strategy is to aggressively grow market share and protect the competitive advantage.

  • What does a company in Quadrant III (Defensive Position) need to focus on?

    -A company in Quadrant III, where both industry attractiveness and financial strength are low, should focus on minimizing costs, reducing investments in the current industry, and considering exiting the industry.

  • Why is it important to average the scores for each factor before plotting them on the matrix?

    -Averaging the scores ensures that all relevant sub-factors are taken into account, providing a more accurate and balanced assessment of each axis. This helps in determining the overall strategic position of the company.

  • What strategic advice is given to a company in Quadrant II (Conservative Position)?

    -In Quadrant II, where the industry is stable but has low growth, the company should focus on safeguarding its existing products and consider expanding into new industries at a steady pace, ensuring financial stability.

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Étiquettes Connexes
SPACE AnalysisStrategic PlanningSWOT AlternativeBusiness StrategyMarket PositioningFinancial StrengthIndustry AttractivenessCompetitive AdvantageEnvironmental StabilityStrategic QuadrantsBusiness Tools
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