Competitive Profile Matrix (CPM)

Competitive Profile Matrix (CPM) is a strategic management tool which is used to identify the major strengths and weaknesses of a firm in relation to the rival’s firm strategic position. On the basis of this comparison, the firm can design wise offensive or defensive strategies. Two types of systems can be used for the construction of competitive profile matrix i.e. weighted rating system (each measure of critical success factor is assigned a weight based on its perceived importance) and unweighted (each critical success factor measured is assumed to be equally important) rating system.  It is important to note that the meaning of weights and total weighted scores is same in both EFE (external factor evaluation) and CPM (competitive profile matrix).

 

Differences between EFE and CPM

 

Following are some of the important differences between EFE (external factor evaluation) and CPM (competitive profile matrix).

  1. In competitive profile matrix, critical success factors include both internal and external issues.
  2. In external factor evaluation, critical success factors are grouped into opportunities and threats whereas such grouping does not exist in competitive profile matrix.
  3. In external factor evaluation, total weighted scores of a firm can not be compared to the total weighted scores of rival firms whereas such comparison is possible in competitive profile matrix.

 

Steps in the Construction of CPM

 

Here we will be using weighted rating system for the construction of competitive profile matrix. Some of the important steps involved in the construction of competitive profile matrix are given below.

  1. In the first column, lists down all the key success factors of Industry (usually from 6 to 10).
  2. In the second column, assign weights to each factor ranging from 0.0 (not important to 1 (most important). Greater weights should be given to those factors which have grater influence on the organizational performance. The sum of all weights must equal 1.
  3. Now rate each factor ranging from 1 to 4 for all the firms in analysis. Here, rating 1 represents major weakness, rating 2 shows minor weakness. Similarly, rating 3 indicates minor strength whereas rating 4 shows major strength. It means that weakness must receive 1 or 2 rating while strength must get 3 or 4 rating.
  4. Calculate weighted score by multiplying each factor’s score by its rating.
  5. Find the total weighted score of all the firms by adding the weighted scores for each variable.

 

Competitive Profile Matrix for Dell Computer

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The overall competitiveness of a firm can be evaluated on the basis of its overall strength rating. If the difference between a firm’s overall rating and the scores of lower-rated rivals is higher then the firm has greater net competitive advantage. On the other hand, if the difference between a firm’s overall rating and the scores of higher-rated rivals is bigger then the firm has greater net competitive disadvantage. In the above example, competitive profile matrix shows that the total weighted score of Dell is higher than Gateway and Apple which means that Dell enjoys the strongest competitive position. On the other hand, Apple has net competitive disadvantage because of its lower total weighted score than Dell and Gateway.

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8 responses to Competitive Profile Matrix (CPM)

sooo nicee…this is great….it really helpful me nd my exm preperation….thkxxx…..

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