Abstract: For any organization, it is very important to analysis its competitive strategy before its formulates the tactical objective. The procedure of calibrating competitive is very important for all company in this financial suitation. This articles illustrate about two tool which are used to assess or calibrate competition. First we discuss about the main one of the important management tool called SPACE Matrix which helps to assess its competitve strategy abd in so doing formulate its strategic planning. Here the SPACE Matrix is employed four dimensionals, to investigate its competitiveness, while the others typical tools used only two or three dimensionals. Second of all the GE / Mickinsy Matrix which is utilized to identiyfy the industry attractiveness and business unit strength.
Keywords: SPACE Matrix, GE/ Mckinsey Matrix, Industry attractiveness, Strategic business device strength.
1. Introduction
In this Modern era, for any company the sucess or failure many is determined by its main Competition. Competitive Startegy like any other stargey play a important role for organisation to acheive is Startegic Goal. Competivite strategy function is to establising a profitable and ecological position an any industry against all pushes in the surroundings like competitors. For just about any strategy which should become sucessful, it will understand all factors like inner environment, external environment, macro environment etc. Having the understanding of these guidelines, which helps the organisation to where and the way to compete, where you can position its product and services and whom to target etc with the available resources in the organisation
Various Conventional Tools
They are various method used to investigate and determine the competiviteness of an organization like,
General Electrical Stoplight Strategy
BCG Matrix
Mckinsey's Industry Attractiveness / company Durability Matrix
Profit Impact of Market Strategy (PIMS)
Scenario Planning
2. SPACE Matrix
On these conventionally methods we have some limitations which can be suggested in the books. Now we are going to analyze a technique which is utilized to defeat the limitations of the above mentioned methods, called SPACE Matrix (Strategic Position and Action Analysis).
When we compare the SPACE matrix with others like General Electric collection and Mckinsey solutions, we discovered that for the reason that above two methods, one axis in the matrix represent the overall attractiveness of the industry and other represents the company ability to be competitive in the completive market space (Loun 1998).
SPACE Matrix or Strategic Position and Action Analysis matrix is a tool used to formulate the company strategy and also used to find its competitive position in the surroundings.
SPACE matrix approach uses another two dimensions in addition to the one which we discuss above, like industry's steadiness and financial strength. All these four sizes are assessed and assessed by several factors. Thus lots of factors help the manger to identify the correct choice strategic from your options available, for betterment of the company.
On analysing, we found that this SPACE matrix is not well known by company in many countries. Though Space matrix is having some books review in the history, many of them missed the actual benefit of this matrix. In this specific article we discuss about the value of the SPACE matrix and a hypothetical case study for our understanding.
2. 1. Four Dimensions
Using the area matrix method we find the strategic position/posture of organisation. We have analyzed four measurements in this technique; two donate to the internal measurements and the other two to exterior dimensions. The inner dimensions includes competitive advantages and the financial strength which are the major factors to determine the proper position of any group. The external dimensions includes the industry durability and the environmental stability which can be used to identify the strategic position on the market. By evaluating these four proportions, we cause four different tactical postures particularly,
Aggressive Strategic Posture
Competitive Strategic Posture
Conservative Strategic Posture
Defensive Strategic Posture
After identifying the correct posture of your organisation, which helps to identify the organisation common competitive strategies. This brings about define the proper thrust for the business. Afterwards the mangers or the very best level management of the company can choose the correct strategy in which their organisation must focus to achieve the tactical objective and goal. The four strategic includes,
Overall cost management strategy
Differentiation strategy
Focus strategy
Defensiveness strategy
Now we will understand the main element factors which afters these four dimensions i. e. competitive strategic posture, competitive strategic pose, conservative strategic pose and defensive tactical posture.
The factor which affects the environmental stableness of an company are technical change, demand variability, rate of inflation, cost range of the competitive company products, competitive pressure, price elasticity and access barrier. The factors which impact the Industry power includes development and profit potential, technology know how, capital intensity, resource utilization, easy to enter in to any new market, production or capacity utilization and financial steadiness. Next the keen factors which affects the competitive advantages includes Product quality, market show, product replacement unit cycles, product life routine, vertical integration, scientific knowhow, competitive capacity usage etc. The factors which impact the Financial power sizes are ROI ( return on investment) liquidity, leverage, capital required or capital available, talk about holder wealth, functioning profit risk included and exit from the marketplace.
Table 1: Factors impacting on the four dimensions
FACTORS
1
Environmental Stability
Rate of inflation
Technological changes
Demand variability
Price selection of products
Entry barrier into the new market
Price elasticity of demand
Others
2
Industry Strength
Growth potential
Financial stability
Profit potential
Technology know how
Capital intensity
Ease of entry
Productivity utilization
Capacity utilization
Adaptability
Flexibility
Others
3
Competitive Advantage
Market share
Product life cycle
Product quality
Customer loyalty
Replacement cycle
Competitors capacity
Vertical integration
Technology know how
4
Financial Strength
ROI - come back on investment
Liquidity
Leverage
Cash flow
Capital required
Capital available
Risk included ( business)
Exit from market
Others
2. 2. Four Strategic Postures
The four postures i. e. ambitious strategic posture, competitive strategic pose, conservative strategic good posture and defensive proper pose are show below in the SPACE matrix graph.
2. 2. 1. Aggressive Strategic Good posture:
This is typical in an attractive industry where in fact the market is under very stable conditions. The industry or company take full advantage of opportunities in own or related industry, for new mergers and acquisition, improve the company market talk about. In this pose it is problematic for any new entrants.
2. 2. 2. Competitive Strategic Posture:
This is typical within an attractive industry where in fact the overall economy is under unpredictable conditions. The company will acquire competitive financial tool; increase its market share and thrust. Increase its sales force and also improve or expands the product brand.
2. 2. 3. Conservative Strategic Posture:
This is within distinctive low development and stable market. They focus on financial stability. Trim cost, prune the product lines, decrease the work force, cash flow improvement, NPD ( new product development and access in to new and attractive marketplaces.
2. 2. 4. Defensive Strategic Position:
The characteristic of this posture is in an unattractive industry. Here the critical factor is the opponents. They lack in financial durability and competitive product. The organization plan for the price reduction strategy reduces its new investment etc.
Figure 1 a : SPACE Matrix
Figure 1 b : SPACE Matrix
Thus we can say the area matrix can help the company to formulate its strategic goal and help identify its competitive position on the market space. If we need to make decision based on several strategic, then we need to go for the other tool called Quantitative Strategic Planning Matrix (QSPM).
3. The McKinsey / General Electric Matrix
Now we discuss about the McKinsey GE Matrix. When the General Electric Company has found that the BCG matrix has not cope up using what the GE expects, the GE check with the Mckinsey for the answer. The Mckinsey Company developed the matrix called McKinsey GE matrix or 9 container matrix or business durability matrix (Adam R 1997). The essential changes that are made to BCG Matrix are, first the marketplace growth is replaced by the marketplace attractiveness. Then your market show is substituted by the competitive power. Thus the McKinsey Standard Electric matrix is employed to get the competitive position of any company.
The GE /McKinsey Matrix can be used to analyze the business portfolio associated with an organisation within proper planning.
3. 1. Factors - Market Attractiveness
There are various factors that have an impact on the market appeal of any organisation. They are shown as follows,
Market Size
Market Profitability
Market Growth
Pricing trends
Competitive rivalry / intensity
Risk involved
Opportunity
Market Segmentation
SCM - Distribution part
3. 2. Fstars - Competitive strength
There are various factors that have an impact on the Competitive durability of any organisation. They are detailed the following,
Strength of competencies
Strength of assets
Market Share
Cust loyalty
Cost structure vs competitors
SCM ( power of the syndication chain)
Technology know how
Financial resources
In GE Mckinsey matrix, each variable has some given some weight age, so the overall attractiveness of any industry can be determined.
The Formula is listed below,
Industry Attractiveness = AF11 + AF22
Where AF11 = Attractiveness Factor 1 Value by Factor 1 weighting
AF22 = Appeal Factor 2 Value by Factor 2 weighting,
Similarly, the business unit power can be computed as
Business Unit Power = SF11 + SF22
Where SF11 = Strength Factor 1 Value by Factor 1 weighting
SF22 = Durability Factor 2 Value by Factor 2 weighting,
The nine stop matrix which is made by two sizes, one is sections power and the other is the industry attractiveness, the matrix is shown below,
From these matrix we can conclude that, if the Industry appeal and the business enterprise unit strength are high, then we can invest in new jobs and can see the expansion. Where as though the Business device strength wants high and the industry elegance is medium then we can easily see there is a selective growth in that particular industry. But if both the Industry attractiveness and the business unit strength are low or medium, then the industry should be very selective in choosing any strategy or investment. The last level discuss that if both dimensions, industry appeal and Business device power are low, the industry must be very careful in the strategy planning. That is it will follow the Harvest and Divest method, in that way it can preserve in the competitive environment.
Industry attractiveness
High Medium Low
Investment and
Growth
Selective Growth
Selectivity
Selective Growth
Selectivity
Harvest/Divest
Selectivity
Harvest/Divest
Harvest/Divest
High
Medium
Low
Figure 2 : GE/ Mckinsey Matrix
4. Conclusion
Since the calibrating the competitiveness is very important for every company in this macro environmental condition, first we examined about how the SPACE matrix helped to formulate the organisation strategy and also used to find its competitive position in the Environment. Subsequently we discuss about the GE / Mckinsey matrix how to judge the industry attractiveness and the business enterprise unit strength. GE / Mckinsey matrix is the main one step move forward tool of BCG matrix, which targets market attractiveness and competitive power alternatively than market growth and market talk about.
