The Strategic Position and Action Evaluation Matrix commonly (SPACE Matrix) is one of the important tools to assess the company and its environment. It has four quadrants and each quadrant indicates which strategy a firm should adopt i.e. competitive, aggressive, conservative, or defensive in a current position. X axis of the SPACE Matrix contain internal dimensions (Competitive Advantage (CA) and Financial Strengths (FS)) and Y-axis contain external dimensions (Industry Strengths (IS) and Environmental Stability (ES)). These four dimensions are the most important determinants of a firm’s overall strategic position. Each dimension holds many factors from EFE, IFE, and SWOT Analysis etc.
How to Construct Space Matrix?
Following are some of the important steps involved in the construction of Space Matrix.
Choose a set of variables to define industry strength (IS), Environmental stability (ES), Competitive advantage (CA), and financial strength (FS).
Assign numerical values to all the variables of FS and IS ranging from +1(worst) to +6 (best).
Assign numerical values to all the variables of ES and CA ranging from -1(best) to -6 (worst).
Calculate the scores for CA, ES, FS, and IS.
Plot the average for CA, ES, FS, and IS on the appropriate axis.
Now add the two scores on the Y-axis and plot the resultant point on Y. Similarly add the two scores on the x axis and plot the resultant point on X and Plot the intersection of the new XY point.
Sketch a directional vector from the origin of the SPACE Matrix through the new intersection point. The vector shows the type of strategies recommended for the organization: competitive, conservative defensive, and aggressive.
SPACE Matrix of Coca – Cola Company
Space Matrix Calculations
ES Average Score = -1.83 + Average FS Score (+5.00) = +3.17
Average CA Score = -1.50 + Average IS Score (+5.00) = +3.50
According to the graph above, we noticed that the Coca-Cola Company falls into the aggressive quadrant of the SPACE matrix. It is located at the coordinates of +3.50 for x-component and a y-component of 3.17. It shows that the company has an admirable position to use its IS in order to take advantage of external opportunities, overcome weaknesses, and avoid threats. So, in this position Coca-Cola Company has set of possible strategies such as market development, product development, market penetration, forward integration, backward integration, horizontal integration, horizontal diversification, concentric diversification and conglomerate diversification depending on detailed conditions that face the company.