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Strategic Management

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Strategic Management ­ MGT603
VU
Lesson 26
THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
These dimensions are explained below:
Internal Strategic Position
External Strategic Position
Financial Strength (FS)
Environmental Stability (ES)
Impact of technology
Risk involved in business
Price elasticity of demand
Debt to equity ratio
Political situation
Working capital condition
Leverage
Liquidity
Demand variability
Ease of exit from market
Price range of competing products
Cash flow statement
Rate of inflation
Return on investment
Competitive pressure
Competitive Advantage (CA)
Industry Strength (IS)
Demand and supply factors
Access to the market
Resource utilization
Market share
Growth potential
Quality of product and services
Profit potential
Product life cycle
Financial stability
Customer loyalty
Technological know-how
Capacity, location and layout
Productivity, capacity utilization
Technological know-how
Capital intensity
Backward and forward integration
Ease of entry into market
After the selection of variables the rating is assigned to each. After the addition of these variables taking the
average. For example financial strength is explain below
Financial Strength (FS)
Rating
High Return on investment
3
Large amount of capital
2
Consistently increasing revenue
4
Working capital condition
1
Financial strength average is (3+2+4+1)/4 = 2.5
The industry strength is explained as follows
Industry Strength (IS)
Rating
Demand and supply factors
5
Resource utilization
3
Profit potential
3
Technological know-how
6
101
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Strategic Management ­ MGT603
VU
Ease of entry into market
2
Industry
strength
average
is
(5+3+3+6+2)/5
=
3.8.
It
is
plotted
on
graph:
6
FS
5
4
(2.5, 3.8)
3
2
1
IS
1
2
3
4
5
6
The graph indicates that firm adopts aggressive strategy
Steps for the preparation of SPACE Matrix
The steps required to develop a SPACE Matrix are as follows:
1. Select a set of variables to relating to financial strength, competitive advantage, environmental
stability, and industry strength.
2. Assign a numerical value ranging from +1 (worst) to +6 (best) to each of the variables that make
up the financial strength and industry strength dimensions. Assign a numerical value ranging from -
1 (best) to -6 (worst) to each of the variables that make up the environmental stability and
competitive advantage dimensions.
3. Compute an average score and dividing by the number of variables
4. Plot the average scores in the SPACE Matrix.
5. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-
axis and plot the resultant point on Y. Plot the intersection of the new xy point.
6. Draw a directional vector from the origin of the SPACE Matrix through the new intersection point.
This vector reveals the type of strategies recommended for the organization: aggressive,
competitive, defensive, or conservative.
102
Table of Contents:
  1. NATURE OF STRATEGIC MANAGEMENT:Interpretation, Strategy evaluation
  2. KEY TERMS IN STRATEGIC MANAGEMENT:Adapting to change, Mission Statements
  3. INTERNAL FACTORS & LONG TERM GOALS:Strategies, Annual Objectives
  4. BENEFITS OF STRATEGIC MANAGEMENT:Non- financial Benefits, Nature of global competition
  5. COMPREHENSIVE STRATEGIC MODEL:Mission statement, Narrow Mission:
  6. CHARACTERISTICS OF A MISSION STATEMENT:A Declaration of Attitude
  7. EXTERNAL ASSESSMENT:The Nature of an External Audit, Economic Forces
  8. KEY EXTERNAL FACTORS:Economic Forces, Trends for the 2000ís USA
  9. EXTERNAL ASSESSMENT (KEY EXTERNAL FACTORS):Political, Governmental, and Legal Forces
  10. TECHNOLOGICAL FORCES:Technology-based issues
  11. INDUSTRY ANALYSIS:Global challenge, The Competitive Profile Matrix (CPM)
  12. IFE MATRIX:The Internal Factor Evaluation (IFE) Matrix, Internal Audit
  13. FUNCTIONS OF MANAGEMENT:Planning, Organizing, Motivating, Staffing
  14. FUNCTIONS OF MANAGEMENT:Customer Analysis, Product and Service Planning, Pricing
  15. INTERNAL ASSESSMENT (FINANCE/ACCOUNTING):Basic Types of Financial Ratios
  16. ANALYTICAL TOOLS:Research and Development, The functional support role
  17. THE INTERNAL FACTOR EVALUATION (IFE) MATRIX:Explanation
  18. TYPES OF STRATEGIES:The Nature of Long-Term Objectives, Integration Strategies
  19. TYPES OF STRATEGIES:Horizontal Integration, Michael Porterís Generic Strategies
  20. TYPES OF STRATEGIES:Intensive Strategies, Market Development, Product Development
  21. TYPES OF STRATEGIES:Diversification Strategies, Conglomerate Diversification
  22. TYPES OF STRATEGIES:Guidelines for Divestiture, Guidelines for Liquidation
  23. STRATEGY-FORMULATION FRAMEWORK:A Comprehensive Strategy-Formulation Framework
  24. THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS) MATRIX:WT Strategies
  25. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  26. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  27. BOSTON CONSULTING GROUP (BCG) MATRIX:Cash cows, Question marks
  28. BOSTON CONSULTING GROUP (BCG) MATRIX:Steps for the development of IE matrix
  29. GRAND STRATEGY MATRIX:RAPID MARKET GROWTH, SLOW MARKET GROWTH
  30. GRAND STRATEGY MATRIX:Preparation of matrix, Key External Factors
  31. THE NATURE OF STRATEGY IMPLEMENTATION:Management Perspectives, The SMART criteria
  32. RESOURCE ALLOCATION
  33. ORGANIZATIONAL STRUCTURE:Divisional Structure, The Matrix Structure
  34. RESTRUCTURING:Characteristics, Results, Reengineering
  35. PRODUCTION/OPERATIONS CONCERNS WHEN IMPLEMENTING STRATEGIES:Philosophy
  36. MARKET SEGMENTATION:Demographic Segmentation, Behavioralistic Segmentation
  37. MARKET SEGMENTATION:Product Decisions, Distribution (Place) Decisions, Product Positioning
  38. FINANCE/ACCOUNTING ISSUES:DEBIT, USES OF PRO FORMA STATEMENTS
  39. RESEARCH AND DEVELOPMENT ISSUES
  40. STRATEGY REVIEW, EVALUATION AND CONTROL:Evaluation, The threat of new entrants
  41. PORTER SUPPLY CHAIN MODEL:The activities of the Value Chain, Support activities
  42. STRATEGY EVALUATION:Consistency, The process of evaluating Strategies
  43. REVIEWING BASES OF STRATEGY:Measuring Organizational Performance
  44. MEASURING ORGANIZATIONAL PERFORMANCE
  45. CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM:Contingency Planning