Space Matrix refers to the strategic position and action evaluation matrix. Space matrix is an important strategic management tool used for the purpose of determining the type of a strategy a company should undertake. The top management of an organization could easily identify the most appropriate strategy for a given enterprise. For example they could identify whether to go for aggressive, conservative, defensive, or competitive strategies.
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 Calculations
ES Average Score = -2.00 + Average FS Score( +5.667) = + 3.667
Average CA Score = -1.86 + Average IS Score ( +5.143) = + 3.283
According to the graph above, we noticed that the Company XYZ falls into the aggressive quadrant of the SPACE Matrix. It is located at the coordinates of 3.283 for x-component and a y-component of 3.667. It shows that XYZ has a strong competitive position in the market with rapid growth. It also indicates that XYZ should adopt an aggressive strategy. It needs to use its internal strengths to develop a market penetration and market development strategy. Other possible strategies include product development, integration with other companies and diversification.