The SPACE matrix assesses a business along four dimensions to find an appropriate strategic thrust and in this article, we’ll look at the SPACE factors for competitive advantage.
Competitive Advantage In The SPACE Matrix
According to the creators of the Strategic Position and Action Evaluation Matrix, (Strategic Management – A Methodical Approach”, Rowe, Mason, Dickel, Mann and Mockler. Published by Addison Wesley) the following items should be considered when assessing Competitive Advantage:
- Market share (small to large)
- Product quality (inferior to superior)
- Product life cycle (late to early)
- Product replacement cycle (variable to fixed)
- Customer loyalty (low to high)
- Competition’s capacity utilisation (low to high)
- Technological know-how (low to high)
- Vertical integration (low to high)
- Speed of new product introductions (slow to fast)
Each variable within the competitive advantage dimension of SPACE is assessed from 1 to 6 with high scores good, low scores bad.
Interpreting Competitive Advantage In The SPACE Matrix To Your Situation
While the list of potential sources of competitive advantage is interesting, this dimension more than any other in the SPACE matrix needs to be adapted to your business sector.
The competitive advantage matrix shows that even market share isn’t necessarily a strong cause of advantage in some situations.
For more general sources of competitive advantage (or disadvantage) I’d look to the PIMS database and Porter’s generic strategies.
However to best assess competitive advantage to use in the SPACE matrix, you need to look in detail at your business, your customers and competitors to see who is providing the best customer value.
The following strategy techniques will help:
This may mean that using SPACE analysis at different stages of your strategic planning work will generate different conclusions as you better get to understand the sources of competitive advantage.
The Impact On Strategic Direction For Different Levels Of Competitive Advantage
The competitive advantage rating will either reinforce or counteract the rating for industry attractiveness as they are on the same axis in the SPACE matrix. The other axis compares financial strength and environmental stability.
A strong rating on the Industry Attractiveness / Competitive Advantage axis (i.e. the business has a strong competitive advantage in an attractive industry) points to an aggressive strategy or a competitive strategy.