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.

Understanding the Competitive Profile Matrix

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.

Connected strategic frameworks

SWOT Analysis

A SWOT Analysis is a framework used for evaluating the business‘s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

PESTEL Analysis

The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

Porter’s Five Forces

Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces

Blue Ocean Strategy

A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

BCG Matrix

In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Balanced Scorecard

First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

Scenario Planning

Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.

Other strategy frameworks

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"