Question

Evaluate the SPACE Matrix and decide which strategy (s) is best for your firm?NOTE: Name of your firm is Nestle and your competitors are Unilever, Engro and P&G *

Answer 1

ANS.

The SPACE matrix is a management tool used to analyze a company. It is used to determine what type of a strategy a company should undertake.

The Strategic Position & ACtion Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization.

The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix).These dimensions form the SPACE matrix ( and the factors that can be included in each one of them can be stated as follows:

--Financial Strength (FS): This is an internal dimension which can include return on investment, leverage, liquidity, capital, risk involved in business etc. as key factors.

--Competitive Advantage (CA): This is an internal dimension which can include market share, product quality, product life cycles etc. as key factors.

--Industry Strength (IS): This is an external dimension which can include growth and profit potential, financial stability, technological know-how etc. as key factors.

--Environmental Stability (ES): This is an external dimension which can include technological change, rate of inflation, demand variability, prace range of competing products etc. as key factors.

To explain how the SPACE matrix works, it is best to reverse-engineer it. First, let's take a look at what the outcome of a SPACE matrix analysis can be, take a look at the picture below. The SPACE matrix is broken down to four quadrants where each quadrant suggests a different type or a nature of a strategy:

• Aggressive
• Conservative
• Defensive
• Competitive

There are many SPACE matrix factors under the internal strategic dimension. These factors analyze a business internal strategic position. The financial strength factors often come from company accounting. These SPACE matrix factors can include for example return on investment, leverage, turnover, liquidity, working capital, cash flow, and others. Competitive advantage factors include for example the speed of innovation by the company, market niche position, customer loyalty, product quality, market share, product life cycle, and others.

Every business is also affected by the environment in which it operates. SPACE matrix factors related to business external strategic dimension are for example overall economic condition, GDP growth, inflation, price elasticity, technology, barriers to entry, competitive pressures, industry growth potential, and others. These factors can be well analyzed using the Michael Porter's Five Forces model.

Frameworks such as SWOT, Five Forces, BCG Matrix can be useful to guide strategy, but they are somewhat limited. Matrix frameworks are mostly useful for organizing data. For real decisions different frameworks must be combined and it is especially important to use quantitative figures. Real numbers allow you to do a lot more with these models.