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 industry attractiveness.
Industry Attractiveness 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 Industry Attractiveness or Industry Strength:
- Growth potential (low to high)
. - Profit potential (low to high)
. - Financial stability (low to high)
. - Technological know-how (simple to complex)
. - Resource utilisation (inefficient to efficient)
. - Capital intensity (low to high)
. - Ease of entry into the market (easy to difficult)
. - Productivity; capacity utilisation (low to high)
. - Manufacturer’s bargaining power (low to high)
Industry attractiveness is on the same axis as competitive advantage and a good score is a high score.
Interpreting Industry Attractiveness In The SPACE Matrix To Your Situation
The Five Forces model created by Michael Porter should be considered to see if there are additional attributes which need to be considered for your particular situation.
I’d be looking to include some measure for competitive rivalry – although the authors may argue that it is implied in the profit potential – but I’ve seen good industries destroyed by kamikaze competition based on price wars. I’d also want to look at the ability of customers to exercise their bargaining power to squeeze the profits.
The level of industry attractiveness is compared with an assessment of the competitive advantage of the business on the x-axis. The other axis contrasts financial strength and environmental stability.
A strong rating on the Industry Attractiveness / Competitive Advantage axis points to an aggressive strategy or a competitive strategy.
A weak rating indicates that a Conservative strategy or defensive strategy is appropriate.
