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What Is A Competitive Profile Matrix And Why It Matters In Business
A Competitive Profile Matrix (CPM) describes the strategic analysis of comparing a business to its competitors in such a way that it reveals its relative strengths and weaknesses. Those will be assessed against a few key components like product range/quality, customer service, brand equity/reputation, marketing innovation, management, and HR competency. Once weighed they get scored for a complete assessment.
Regardless of the industry concerned, organizations have distinct strengths and weaknesses. One might have the most recognizable brand, while another may enjoy the lowest production costs.
A Competitive Profile Matrix is a graphic representational of the most important businesses in a given industry, giving a reasonably detailed overview of the competitive landscape. In the matrix, businesses are rated according to critical success factors with a numerical score. Once each business has been rated, the matrix will naturally show where each is relatively strong and relatively weak.
Key components of a Competitive Profile Matrix
Let’s look at the four key components of an effective CPM.
1. Critical Success Factors
Sometimes called Key Success Factors (KSF), these are factors that have relevance to the success or failure of a business within an industry. The success factors that a business chooses to judge itself on will, of course, be dependent on their specific industry. But in general, most CPMs will assess common factors such as:
Product range and quality.
Customer service.
Brand equity and reputation.
Marketing and innovation.
Management and HR competency.
2. Weighting
Once the critical success factors have been determined, they must be given a weighting from 0.1 to 1. For example, a factor given a weighting of 0.2 means that it is not a particularly large driver of success. A rating of 0.8, on the other hand, denotes a critically important success factor.
A bricks and mortar grocery store may give customer service a weighting of 0.7, while an eCommerce retailer without the need for face-to-face interaction may give the same factor a weighting of 0.3.
3. Score
With critical success factors and their associated weightings determined, a business can now be scored against them. Most use this simple scale:
1 – major weakness – a company lagging behind its competitors.
2 – minor weakness.
3 – minor strength.
4 – major strength – a company that is an industry or market leader.
It’s important to note that scoring is an objective process – so some businesses may find value in expanding the scoring scale to achieve better objectivity. In any case, the weight of each factor must now be multiplied by the score to give the weighted score for each competing business.
4. Total score
To arrive at a total score for each competitor, simply add the weighted scores together. The company with the highest score is the strongest in its industry, relative to its competitors. However, even businesses in strong competitive positions will have one or two relative weaknesses. This is another strength of the CPM, as it allows competitive organizations to further increase market share.
Key takeaways:
A Competitive Profile Matrix is a powerful strategic analysis tool that displays the major players in an industry and their strengths and weaknesses relative to each other.
A Competitive Profile Matrix can be used in any industry with multiple businesses to give a detailed view of the competitive landscape.
A Competitive Profile Matrix has four key components. Critical success factors must be identified, weighted, and then scored to determine the overall market position.
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