SPACE matrix in strategic management: how to compute it
Compute a SPACE matrix (strategic position and action evaluation): rate four dimensions, average each, plot the vector and read your strategic profile.
The SPACE (strategic position and action evaluation) matrix rates a firm on four dimensions: financial position (FP) and competitive position (CP) inside the firm, and stability position (SP) and industry position (IP) outside it. Rate FP and IP from +1 (worst) to +6 (best), and CP and SP from −1 (best) to −6 (worst), then average each dimension. The x-axis value is the CP average plus the IP average, and the y-axis value is the FP average plus the SP average.
The quadrant of that point gives the profile: aggressive (upper right), conservative (upper left), defensive (lower left) or competitive (lower right).
Your SPACE ratings draw on the same audits as your EFE and IFE. Try the sample EFE, no account needed.
On this page (13)
What the SPACE matrix is for
The SPACE matrix is a matching-stage tool in the strategy-formulation framework. It looks at your firm from the inside and the outside at once and sums the result into one strategic profile.
- It is fed by your audits. Evidence for the ratings comes from the same sources as your EFE matrix, your IFE matrix and your competitive profile matrix.
- It sits beside the TOWS matrix, the BCG matrix, the IE matrix and the grand strategy matrix, and its profile can inform which strategies you carry to the QSPM.
What you need before you start
You need a few sourced factors for each of the four dimensions, taken from your external and internal audits: financial ratios for FP, market position for CP, the economic and competitive environment for SP, and the state of the industry for IP. Every dimension needs at least one rating, and the 4 dimensions in the sample have 16 between them.
A rating with no evidence behind it is hard to defend, so write the source next to each factor before you rate it.
Step 1: Choose factors for the four dimensions
Two dimensions describe the firm and two describe its environment. Pick the factors that matter for your firm and keep each one distinct. The sample uses 4 factors per dimension.
| Dimension | Side | Rating scale | Axis |
|---|---|---|---|
| Financial position (FP) | Internal | +1 (worst) to +6 (best) | y |
| Competitive position (CP) | Internal | −1 (best) to −6 (worst) | x |
| Stability position (SP) | External | −1 (best) to −6 (worst) | y |
| Industry position (IP) | External | +1 (worst) to +6 (best) | x |
Step 2: Rate each factor on its own scale
Rate every factor with a whole number, and watch the direction of the scale, because it is not the same for all four dimensions:
- FP and IP: +1 is the worst and +6 the best, so a higher number is better.
- CP and SP: −1 is the best and −6 the worst, so a number closer to zero is better.
Recent editions of David rate on +1 to +7 and −1 to −7. Earlier editions used +1 to +6 and −1 to −6, which is what this guide and Strama's SPACE matrix use. The steps and the quadrant reading are the same on either scale. Only the numbers change, and each axis runs from −6 to +6 instead of −5 to +5. Use the scale your program's edition gives.
The negative scales are what pull a weak competitive position or an unstable environment toward the left and bottom of the chart.
“Why did you give this factor a rating of −4?”
Show the evidence for that factor and say which way the scale runs. On CP and SP a −4 is on the weak side, so it should match a weakness your audit already describes.
Step 3: Average each dimension
Add the ratings in each dimension and divide by the number of ratings in it. Averaging keeps the four dimensions on the same footing even when you rated a different number of factors in each.
Average = sum of ratings ÷ number of ratings
Step 4: Add the averages to get x and y
Add the averages on each axis. The x-axis combines competitive position and industry position, and the y-axis combines financial position and stability position.
x = CP average + IP averagey = FP average + SP average
With these scales each axis runs from −5 to +5. The point (x, y) is the end of your directional vector, which starts at the origin.
Step 5: Plot the vector and read the quadrant
Plot the point and read the quadrant it lands in:
- Aggressive: x and y both positive (upper right).
- Conservative: x negative and y positive (upper left).
- Defensive: x and y both negative (lower left).
- Competitive: x positive and y negative (lower right).
If x or y is exactly 0 the point sits on an axis and belongs to no quadrant, so decide which side to read it on and explain why.
David lists the strategies usually considered for each profile. They are options to shortlist, not a decision, and the wording varies by edition, so check the edition your program uses.
- Aggressive: Intensive, integrative or diversification strategies.
- Conservative: Market penetration, market development, product development and related diversification.
- Defensive: Retrenchment, divestiture, liquidation and related diversification.
- Competitive: Backward, forward and horizontal integration, market penetration, market development and product development.
Worked example: Tala Provisions (fictional)
Tala Provisions, Inc. is a fictional coffee roaster. Its factors and ratings are made up for this guide: 16 ratings across the four dimensions.
| Factor | Rating |
|---|---|
| Financial position (FP), +1 (worst) to +6 (best) | |
| FP1 Liquidity | +3 |
| FP2 Working capital | +3 |
| FP3 Cash flow | +3 |
| FP4 Return on investment | +4 |
| Competitive position (CP), −1 (best) to −6 (worst) | |
| CP1 Market share | −4 |
| CP2 Product quality | −2 |
| CP3 Customer loyalty | −3 |
| CP4 Control over suppliers | −3 |
| Stability position (SP), −1 (best) to −6 (worst) | |
| SP1 Rate of inflation | −4 |
| SP2 Demand variability | −3 |
| SP3 Barriers to entry into the market | −4 |
| SP4 Price range of competing products | −5 |
| Industry position (IP), +1 (worst) to +6 (best) | |
| IP1 Growth potential | +5 |
| IP2 Profit potential | +4 |
| IP3 Resource utilization | +4 |
| IP4 Productivity and capacity use | +3 |
| Dimension | Scale | Ratings | Average |
|---|---|---|---|
| Financial position (FP) | +1 (worst) to +6 (best) | +3, +3, +3, +4 | 3.25 |
| Competitive position (CP) | −1 (best) to −6 (worst) | −4, −2, −3, −3 | −3.00 |
| Stability position (SP) | −1 (best) to −6 (worst) | −4, −3, −4, −5 | −4.00 |
| Industry position (IP) | +1 (worst) to +6 (best) | +5, +4, +4, +3 | 4.00 |
| x (CP + IP) | −3.00 + 4.00 | 1.00 | |
| y (FP + SP) | 3.25 + (−4.00) | −0.75 |
Take financial position. Its ratings add to +13 across 4 factors, so its average is 3.25.
Average = sum of ratings ÷ number of ratings+13 ÷ 4 = 3.25
The other three averages work the same way: CP −3.00, SP −4.00 and IP 4.00. Then the two axes:
x = −3.00 + 4.00 = 1.00y = 3.25 + (−4.00) = −0.75
The point (1.00, −0.75) has a positive x and a negative y, so Tala lands in the competitive quadrant, the lower right.
Your SPACE ratings draw on the same audits as your EFE and IFE. Try the sample EFE, no account needed.
How to read the result
The quadrant names the profile your analysis suggests for the firm as a whole: competitive for Tala. It is a reading of your ratings, not a recommendation. Take it to your matching-stage work and the QSPM, and say how it fits the strategies you are comparing.
Look at the length of the vector as well as its quadrant. Tala's is about 1.25 on axes that run to 5, so it sits close to the origin. One rating moved by one point shifts its dimension's average by 0.25, and y is only −0.75, so a few changes could put Tala in a different quadrant. Say that in your paper, and check which ratings you are least sure of.
Where sources disagree: editions differ in the top of the rating scale (+7 and −7 in recent editions, +6 and −6 in earlier ones) and in the dimension names (earlier editions say financial strength, industry strength, competitive advantage and environmental stability). Strama uses the six-point scales above. Check the edition your program uses and follow it. Your SPACE matrix and your IE matrix can also point different ways, because they measure different things. If they do, say which you weigh more and why.
Common mistakes
Rating CP or SP on the positive scale.
Those two dimensions run from −1 (best) to −6 (worst). A positive number puts a weak position on the strong side of the chart.
Fix: write the scale beside each dimension, and check that a bad factor has a number far from zero.
Adding the ratings instead of averaging them.
A dimension with six factors then outweighs one with three, and the axes stop being comparable.
Fix: divide each dimension's sum by its number of ratings before you add anything.
Putting the dimensions on the wrong axis.
CP and IP make x, and FP and SP make y. Swapping them can move the point to a different quadrant.
Fix: write both formulas above your plot and read the point from them.
Reading the quadrant as the final strategy.
The profile describes the firm's overall position. It does not choose between your alternatives.
Fix: carry the profile into the decision stage and let the QSPM compare the strategies.
Rating without evidence.
The matrix looks precise, but it is made of judged numbers. A rating you cannot source is the first one a panel will test.
Fix: keep a source or a reason beside every factor.
What your panel will ask
What do the four dimensions measure, and why are two of them negative?
FP and CP are about the firm, SP and IP about its environment. CP and SP use negative scales, with −1 best, so a weak competitive position or an unstable environment pulls the point left or down. Show your averages.
Why does your firm fall in this quadrant?
Walk from the averages to x and y and then to the sign of each. Point to the ratings that move the point most, and the evidence behind them.
How did you rate these factors?
Name the source for each rating, the audit or matrix it came from, and which way the scale runs for that dimension.
Does your SPACE result agree with your other matching matrices?
Compare it with your TOWS, BCG and IE results. If they point different ways, say what each one measures and which you give more weight.
Which edition's scale are you using?
Say which edition your program uses and show that your scales and dimension names follow it.
Where it goes next
Upstream are your audits and the EFE matrix and competitive profile matrix, which give evidence for the external and competitive ratings. Beside it in the matching stage are the TOWS matrix, the BCG matrix, the IE matrix and the grand strategy matrix. Downstream, the QSPM compares the strategies your matching stage produced.
Your SPACE ratings draw on the same audits as your EFE and IFE. Try the sample EFE, no account needed.
Where this fits in your paper: the STRAMA paper format guide.
Sources
Method: Fred R. David's strategy-formulation framework, as set out in his Strategic Management: Concepts and Cases. Editions differ in detail, so check the edition your program uses for page references.
Tala Provisions, Inc., its factors, its ratings and its sources are fictional, made up for this guide.
Get early access
An invite before the public opening. We invite the list in batches, before Strama opens to everyone.
Your SPACE ratings draw on the same audits as your EFE and IFE. Try the sample EFE, no account needed.
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