The SPACE Matrix or more formally, the Strategic Position and Action Evaluation Matrix recommends one of four basic strategic approaches for a business and today I’m going to focus on the Conservative Strategy dimension.
This is when the business is in a good position in its financial strength and environmental stability but its market offers limited opportunities because it is either unattractive or the business has a competitive disadvantage or both.
The SPACE Matrix
The SPACE matrix assesses the strategic position of a business along four dimensions – Industry attractiveness, Competitive advantage, Environmental stability and Financial strength.
The SPACE matrix recommends four broad strategic directions depending on the assessment of each dimension:
- Aggressive strategy
. - Defensive strategy
. - Conservative strategy
. - Competitive strategy
Conservative Strategy In The SPACE Matrix
The business is trapped into a weak position in an unexciting market – this is the dog position in the Growth Share Matrix characterised by low market share and low (perhaps negative) market growth.
The company has a choice:
- To improve its current competitive position by developing competitive advantages or focusing on the more attractive niches of the overall market.
- Looking outside the current market for profitable opportunities, either building on existing resources and capabilities or diversifying into a new area.
Which approach makes sense depends on how badly it rates on the Industry Attractiveness / Competitive Advantage matrix.
Combined the individual assessments are negative but this may be:
- IA and CA are both weak
- IA is OK but CA is weak
- IA is weak but CA is OK
If the industry looks bad and the business has significant competitive advantages, then any remaining profitability is under major threat and the business can become a cash drain which will reduce financial strength to diversify elsewhere.
The business should look to trim costs and any loss making customers and products wherever it can to buy more time to find attractive diversification opportunities. It should also cut back on capacity so that it shrinks to fit the future market expectations.
Otherwise, the business may be able to improve its position through a determined strategy to improve its competitive advantages.
Businesses new to strategic management and customer value strategies may find they can make major gains through focused action and even find overlooked assets and opportunities. The business should be careful it doesn’t over-invest since upside is weak because the market isn’t considered to be attractive. The business may identify niches where it does have advantages or can quickly develop advantages that are not appreciated in the wider market.
The nice thing about the conservative strategy in the SPACE matrix is that the business is not under major threats from the environment and because of its financial strength, it has time to consider its options.
