A competitive profile matrix (CPM) classifies a firm’s major competitors and its meticulous strengths and weaknesses in relation to an illustration firm’s strategic point. In CPM we evaluate company as well its competitors by giving weights and rating to their critical success factors than identify their strategic competitive position with its competitors. Company which gets higher weighted score would have the strong competitive position than its competitors.
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.
- In the first column, lists down all the key success factors of Industry (usually from 6 to 10).
- 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.
- 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.
- Calculate weighted score by multiplying each factor’s score by its rating.
- Find the total weighted score of all the firms by adding the weighted scores for each variable.
Competitive Profile Matrix for Wal-Mart
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 Wal-Mart is the market leader and dominates its competitors with highest score 3.50. Target is on the second position dominating the Kmart and Kmart is the weakest competitor among these three with the score of 2.55.