space-analysis

What Is The SPACE Analysis? The SPACE Analysis In A Nutshell

The SPACE (Strategic Position and Action Evaluation) analysis was developed by strategy academics Alan Rowe, Richard Mason, Karl Dickel, Richard Mann, and Robert Mockler. The particular focus of this framework is strategy formation as it relates to the competitive position of an organization. The SPACE analysis is a technique used in strategic management and planning. 

SPACE AnalysisDescriptionAnalysisImplicationsApplicationsExamples
1. Strategic Dimensions (S)SPACE Analysis assesses four strategic dimensions: Aggressive, Conservative, Defensive, and Competitive.– Evaluate the current strategic position of an organization along each dimension based on internal and external factors. – Assign a position on a scale from -6 to +6 for each dimension.– Provides a holistic view of the organization’s strategic stance and potential vulnerabilities. – Highlights whether the organization is proactive, defensive, or balanced in its approach.– Assessing the strategic position of a retail company in a competitive market. – Analyzing the strategic stance of a tech startup in a dynamic industry.Strategic Dimensions Example: Aggressive (+6), Conservative (-3), Defensive (-2), Competitive (+4).
2. Internal Strategic Factors (I)Internal Strategic Factors include the financial strength (FS) and competitive advantage (CA) of the organization.– Evaluate the financial strength based on factors like profitability, liquidity, and solvency. – Assess the competitive advantage considering factors like market share, brand image, and innovation.– Influences the strategic dimension positions by reflecting the organization’s internal capabilities. – Determines whether the organization has a strong or weak foundation for strategic actions.– Evaluating the financial strength and competitive advantage of a retail chain. – Assessing a tech company’s market share and innovation capabilities.Internal Factors Example: Financial Strength (FS) = +3, Competitive Advantage (CA) = +2.
3. External Strategic Factors (E)External Strategic Factors include environmental stability (ES) and industry strength (IS).– Evaluate the environmental stability based on factors like market growth, demand stability, and technological change. – Assess the industry strength considering factors like barriers to entry, rivalry, and profitability.– Influences the strategic dimension positions by reflecting external conditions and industry dynamics. – Determines whether the external environment is conducive or challenging for strategic actions.– Analyzing the market growth and technological change in the technology sector. – Assessing industry rivalry and barriers to entry in the automotive industry.External Factors Example: Environmental Stability (ES) = -1, Industry Strength (IS) = +4.
4. Strategic Position (SP)Strategic Position is determined by the sum of the internal and external strategic factors.– Calculate the strategic position (SP) by adding the internal factors (FS and CA) and subtracting the external factors (ES and IS). – SP = (FS + CA) – (ES + IS).– Provides a quantitative measure of the organization’s strategic position in relation to its internal strengths and external opportunities. – Helps identify whether the organization is in a strong or weak position.– Calculating the SP of a pharmaceutical company with strong financials but a challenging regulatory environment. – Assessing the SP of a restaurant chain in a competitive market with high demand.Strategic Position Example: SP = (3 + 2) – (-1 + 4) = 10.
5. Recommended Actions (RA)Recommended Actions suggest strategic actions based on the calculated Strategic Position (SP).– Interpret the SP value and recommend appropriate actions, such as aggressive, competitive, defensive, or conservative strategies. – Determine the desired strategic posture.– Guides decision-makers in selecting the most suitable strategic posture based on the SP. – Helps align strategic actions with the organization’s current position and desired outcomes.– Recommending an aggressive expansion strategy for a tech startup with a high SP. – Suggesting a conservative approach for a retail company with a low SP.Recommended Actions Example: SP = 10 suggests an Aggressive strategy.

Understanding the SPACE analysis

The analysis can be used to:

  • Evaluate the viability of a strategic plan.
  • Predict the broader key themes during project planning.
  • Perform a check at the completion of the process, and
  • Evaluate a list of strategic options generated by a tool like the Ansoff growth matrix.

Similarly, the SPACE analysis can also form the basis of similar analyses, including the SWOT analysis, BCG matrix, and IE matrix.

The four key components of the SPACE analysis

The SPACE analysis is best represented by a matrix diagram, with two internal and external strategic dimensions used to determine the competitive strength of an organization.

This yields four areas of analysis in total. Each area in turn is influenced by several sub-factors which are listed below.

Internal strategic dimensions

  1. Financial strength (FS) inventory turnover, cash flow, debt ratio, available vs. required capital, return on investment, and liquidity.
  2. Competitive advantage (CA) – market share, innovation cycle, customer loyalty, vertical integration, product quality, and product lifecycle.

External strategic dimensions

  1. Environmental stability (ES) – technological change, inflation rate, price elasticity of demand, pressure from substitutes, inflation rate, price range of competitive products, and demand volatility.
  2. Industry attractiveness (IA)growth potential, profit potential, resource utilization, complexity of entering the industry, labor productivity, capacity utilization, manufacturer bargaining power, financial stability.

Scoring the SPACE analysis matrix

Each of these sub-factors is then assigned a score. Financial strength and industry attractiveness are given a score between 0 and 6, with higher scores representing a more favorable position. 

Conversely, competitive advantage and environmental stability are given a score between -6 and 0, with lower scores representing a less favorable or weak position.

The business must then average sub-factor scores for each of the four areas of analysis. 

The average values are then plotted on the matrix according to cartesian x and y coordinates, with each point joined to form a four-sided shape.

To interpret the matrix results, the business must determine the quadrant in which the shape occupies the largest area.

Each quadrant determines the strategy the business should pursue according to its unique position in the market. The SPACE analysis calls these “postures”.

The four postures are:

  1. Aggressive – in general, companies in this quadrant occupy a stable industry with a protectable competitive advantage. Having said that, new entrants remain a constant threat. Strategy should focus on increasing market share through mergers, acquisitions, or product diversification.
  2. Competitive – this quadrant describes companies in attractive industries without the financial strength to capitalize on them. As a result, the short-term strategy should focus on raising capital, improving profitability, or seeking out a merger with a cash-rich organization.
  3. Conservative – or companies with a moderate to strong financial position operating in stable markets with little scope for growth. New product development and/or the identification of more profitable markets should be a priority.
  4. Defensive – the least enviable position a company can occupy. Fundamentally, these companies lack a strong competitive advantage in a highly competitive industry. Strategy favors selling off non-competitive assets to concentrate available resources on potentially more profitable opportunities.

Case Studies

  • Aggressive Strategy in the Smartphone Industry:
    • Financial Strength (FS): Strong financial resources, high cash flow, and a solid market position (Score: 6).
    • Competitive Advantage (CA): Strong brand, innovation capability, and loyal customer base (Score: 6).
    • Environmental Stability (ES): Rapid technological changes and high demand for smartphones (Score: -4).
    • Industry Attractiveness (IA): Highly attractive due to high consumer demand and innovation (Score: 5).
    • Quadrant: Aggressive (due to strong financials, competitive advantage, and industry attractiveness).
    • Strategy: Focus on innovation, aggressive marketing, and potential mergers or acquisitions to increase market share.
  • Competitive Posture in the Airline Industry:
    • Financial Strength (FS): Struggling with high operational costs and debt (Score: -3).
    • Competitive Advantage (CA): Moderate brand strength but not a clear differentiator (Score: -2).
    • Environmental Stability (ES): Competitive and volatile with price wars (Score: -4).
    • Industry Attractiveness (IA): Attractive due to customer demand (Score: 4).
    • Quadrant: Competitive (due to industry attractiveness despite financial challenges).
    • Strategy: Short-term efforts involve cost reduction, improving profitability through pricing strategies, and exploring partnerships or mergers to gain financial stability.
  • Conservative Approach in Cloud Computing:
    • Financial Strength (FS): Strong financial position, substantial capital (Score: 5).
    • Competitive Advantage (CA): Established clientele and reputation (Score: 3).
    • Environmental Stability (ES): Stable market with moderate growth (Score: 3).
    • Industry Attractiveness (IA): Moderate growth potential (Score: 3).
    • Quadrant: Conservative (due to a strong financial position and moderate industry growth).
    • Strategy: Prioritize the development of new cloud services or expand into related markets to maintain steady growth and profitability.
  • Defensive Strategy for a Social Media Platform:
    • Financial Strength (FS): Moderate financial resources (Score: 2).
    • Competitive Advantage (CA): No clear competitive advantage (Score: -2).
    • Environmental Stability (ES): Highly competitive with emerging competitors (Score: -5).
    • Industry Attractiveness (IA): Attractive due to user demand (Score: 4).
    • Quadrant: Defensive (due to lack of competitive advantage and intense competition).
    • Strategy: Divest non-core assets, streamline operations, and focus on improving user experience to defend market position.
  • Conservative Posture in the Traditional Retail Industry:
    • Financial Strength (FS): Stable financial position with steady cash flow (Score: 4).
    • Competitive Advantage (CA): Established brand and customer loyalty (Score: 3).
    • Environmental Stability (ES): Moderate technological change and stable demand (Score: 3).
    • Industry Attractiveness (IA): Limited growth potential due to e-commerce competition (Score: 2).
    • Quadrant: Conservative (due to stable financials and industry, but limited growth).
    • Strategy: Focus on optimizing in-store operations, exploring cost-effective e-commerce solutions, and diversifying into related markets.
  • Aggressive Strategy for a Start-up Tech Company:
    • Financial Strength (FS): Limited initial capital (Score: -3).
    • Competitive Advantage (CA): Innovative technology with potential for disruption (Score: 5).
    • Environmental Stability (ES): Rapid technological advancements (Score: -4).
    • Industry Attractiveness (IA): High growth potential in emerging tech sector (Score: 6).
    • Quadrant: Aggressive (due to innovative technology and high industry growth).
    • Strategy: Seek venture capital funding, rapid product development, and aggressive market expansion to capitalize on growth potential.
  • Competitive Posture in the Software Development Industry:
    • Financial Strength (FS): Healthy financials with consistent revenue streams (Score: 5).
    • Competitive Advantage (CA): Strong portfolio of proprietary software solutions (Score: 4).
    • Environmental Stability (ES): Moderate technological changes and steady demand (Score: 3).
    • Industry Attractiveness (IA): Attractive due to growing software needs (Score: 4).
    • Quadrant: Competitive (due to strong financials, competitive advantage, and industry attractiveness).
    • Strategy: Focus on expanding the software product portfolio, exploring new markets, and enhancing customer support to maintain competitiveness.
  • Defensive Approach in the Semiconductor Industry:
    • Financial Strength (FS): Limited resources for R&D (Score: -3).
    • Competitive Advantage (CA): Facing competition from larger players (Score: -4).
    • Environmental Stability (ES): Rapid technological shifts and evolving market (Score: -5).
    • Industry Attractiveness (IA): Attractive due to high demand for semiconductors (Score: 4).
    • Quadrant: Defensive (due to resource constraints and industry challenges).
    • Strategy: Explore partnerships for R&D, focus on niche markets or specialized products, and consider alliances to stay competitive.

Key takeaways:

  • The SPACE analysis is a technique used in strategic management and planning. It was developed by a team of researchers to guide strategy formation with respect to competitive position.
  • The SPACE analysis is best represented on a matrix consisting of two internal and two external dimensions: financial strength, competitive advantage, environmental stability, and industry attractiveness. Each dimension comprises various criteria the business can rate itself against.
  • With each dimension scored, averaged, and plotted on the SPACE analysis matrix, each business will predominantly occupy one of four quadrants. Each quadrant defines four postures that guide strategy formation.

Key Highlights

  • Definition: The SPACE Analysis is a strategic management and planning tool developed by Alan Rowe, Richard Mason, Karl Dickel, Richard Mann, and Robert Mockler. It focuses on evaluating the competitive position of an organization and guiding strategy formation.
  • Purpose of Analysis: The SPACE Analysis serves various purposes, including evaluating strategic plan viability, predicting key themes during project planning, checking at the process completion, and assessing strategic options generated by tools like the Ansoff growth matrix.
  • Influences Similar Analyses: The SPACE Analysis can form the basis for other analyses like SWOT analysis, BCG matrix, and IE matrix.
  • Four Key Components of the SPACE Analysis:
    • Internal Strategic Dimensions: Includes Financial Strength (FS) and Competitive Advantage (CA) factors.
    • External Strategic Dimensions: Involves Environmental Stability (ES) and Industry Attractiveness (IA) factors.
  • Scoring and Averaging: Sub-factors within each dimension are scored between 0 and 6 or between -6 and 0, depending on their nature. The scores are averaged for each dimension.
  • Matrix Plotting: The average values are plotted on a matrix using cartesian x and y coordinates, creating a four-sided shape.
  • Quadrant Determination: The quadrant with the largest area on the shape indicates the organization’s strategic position.
  • Four Postures:
    • Aggressive: Stable industry with a competitive advantage but facing threats from new entrants. Strategy focuses on increasing market share.
    • Competitive: In attractive industries but lacking financial strength. Short-term strategy involves raising capital or seeking mergers.
    • Conservative: Moderate to strong financial position in stable markets. Priority lies in new product development or finding more profitable markets.
    • Defensive: Weak competitive advantage in a highly competitive industry. Strategy focuses on selling non-competitive assets and reallocating resources.

Connected Analysis Frameworks

Failure Mode And Effects Analysis

failure-mode-and-effects-analysis
A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.

Agile Business Analysis

agile-business-analysis
Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.

Business Valuation

valuation
Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.

Paired Comparison Analysis

paired-comparison-analysis
A paired comparison analysis is used to rate or rank options where evaluation criteria are subjective by nature. The analysis is particularly useful when there is a lack of clear priorities or objective data to base decisions on. A paired comparison analysis evaluates a range of options by comparing them against each other.

Monte Carlo Analysis

monte-carlo-analysis
The Monte Carlo analysis is a quantitative risk management technique. The Monte Carlo analysis was developed by nuclear scientist Stanislaw Ulam in 1940 as work progressed on the atom bomb. The analysis first considers the impact of certain risks on project management such as time or budgetary constraints. Then, a computerized mathematical output gives businesses a range of possible outcomes and their probability of occurrence.

Cost-Benefit Analysis

cost-benefit-analysis
A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.

CATWOE Analysis

catwoe-analysis
The CATWOE analysis is a problem-solving strategy that asks businesses to look at an issue from six different perspectives. The CATWOE analysis is an in-depth and holistic approach to problem-solving because it enables businesses to consider all perspectives. This often forces management out of habitual ways of thinking that would otherwise hinder growth and profitability. Most importantly, the CATWOE analysis allows businesses to combine multiple perspectives into a single, unifying solution.

VTDF Framework

competitor-analysis
It’s possible to identify the key players that overlap with a company’s business model with a competitor analysis. This overlapping can be analyzed in terms of key customers, technologies, distribution, and financial models. When all those elements are analyzed, it is possible to map all the facets of competition for a tech business model to understand better where a business stands in the marketplace and its possible future developments.

Pareto Analysis

pareto-principle-pareto-analysis
The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.

Comparable Analysis

comparable-company-analysis
A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.

SWOT Analysis

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

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.

Business Analysis

business-analysis
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

Financial Structure

financial-structure
In corporate finance, the financial structure is how corporations finance their assets (usually either through debt or equity). For the sake of reverse engineering businesses, we want to look at three critical elements to determine the model used to sustain its assets: cost structure, profitability, and cash flow generation.

Financial Modeling

financial-modeling
Financial modeling involves the analysis of accounting, finance, and business data to predict future financial performance. Financial modeling is often used in valuation, which consists of estimating the value in dollar terms of a company based on several parameters. Some of the most common financial models comprise discounted cash flows, the M&A model, and the CCA model.

Value Investing

value-investing
Value investing is an investment philosophy that looks at companies’ fundamentals, to discover those companies whose intrinsic value is higher than what the market is currently pricing, in short value investing tries to evaluate a business by starting by its fundamentals.

Buffet Indicator

buffet-indicator
The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Financial Analysis

financial-accounting
Financial accounting is a subdiscipline within accounting that helps organizations provide reporting related to three critical areas of a business: its assets and liabilities (balance sheet), its revenues and expenses (income statement), and its cash flows (cash flow statement). Together those areas can be used for internal and external purposes.

Post-Mortem Analysis

post-mortem-analysis
Post-mortem analyses review projects from start to finish to determine process improvements and ensure that inefficiencies are not repeated in the future. In the Project Management Book of Knowledge (PMBOK), this process is referred to as “lessons learned”.

Retrospective Analysis

retrospective-analysis
Retrospective analyses are held after a project to determine what worked well and what did not. They are also conducted at the end of an iteration in Agile project management. Agile practitioners call these meetings retrospectives or retros. They are an effective way to check the pulse of a project team, reflect on the work performed to date, and reach a consensus on how to tackle the next sprint cycle.

Root Cause Analysis

root-cause-analysis
In essence, a root cause analysis involves the identification of problem root causes to devise the most effective solutions. Note that the root cause is an underlying factor that sets the problem in motion or causes a particular situation such as non-conformance.

Blindspot Analysis

blindspot-analysis

Break-even Analysis

break-even-analysis
A break-even analysis is commonly used to determine the point at which a new product or service will become profitable. The analysis is a financial calculation that tells the business how many products it must sell to cover its production costs.  A break-even analysis is a small business accounting process that tells the business what it needs to do to break even or recoup its initial investment. 

Decision Analysis

decision-analysis
Stanford University Professor Ronald A. Howard first defined decision analysis as a profession in 1964. Over the ensuing decades, Howard has supervised many doctoral theses on the subject across topics including nuclear waste disposal, investment planning, hurricane seeding, and research strategy. Decision analysis (DA) is a systematic, visual, and quantitative decision-making approach where all aspects of a decision are evaluated before making an optimal choice.

DESTEP Analysis

destep-analysis
A DESTEP analysis is a framework used by businesses to understand their external environment and the issues which may impact them. The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar. The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.

STEEP Analysis

steep-analysis
The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.

STEEPLE Analysis

steeple-analysis
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.

Activity-Based Management

activity-based-management-abm
Activity-based management (ABM) is a framework for determining the profitability of every aspect of a business. The end goal is to maximize organizational strengths while minimizing or eliminating weaknesses. Activity-based management can be described in the following steps: identification and analysis, evaluation and identification of areas of improvement.

PMESII-PT Analysis

pmesii-pt
PMESII-PT is a tool that helps users organize large amounts of operations information. PMESII-PT is an environmental scanning and monitoring technique, like the SWOT, PESTLE, and QUEST analysis. Developed by the United States Army, used as a way to execute a more complex strategy in foreign countries with a complex and uncertain context to map.

SPACE Analysis

space-analysis
The SPACE (Strategic Position and Action Evaluation) analysis was developed by strategy academics Alan Rowe, Richard Mason, Karl Dickel, Richard Mann, and Robert Mockler. The particular focus of this framework is strategy formation as it relates to the competitive position of an organization. The SPACE analysis is a technique used in strategic management and planning. 

Lotus Diagram

lotus-diagram
A lotus diagram is a creative tool for ideation and brainstorming. The diagram identifies the key concepts from a broad topic for simple analysis or prioritization.

Functional Decomposition

functional-decomposition
Functional decomposition is an analysis method where complex processes are examined by dividing them into their constituent parts. According to the Business Analysis Body of Knowledge (BABOK), functional decomposition “helps manage complexity and reduce uncertainty by breaking down processes, systems, functional areas, or deliverables into their simpler constituent parts and allowing each part to be analyzed independently.”

Multi-Criteria Analysis

multi-criteria-analysis
The multi-criteria analysis provides a systematic approach for ranking adaptation options against multiple decision criteria. These criteria are weighted to reflect their importance relative to other criteria. A multi-criteria analysis (MCA) is a decision-making framework suited to solving problems with many alternative courses of action.

Stakeholder Analysis

stakeholder-analysis
A stakeholder analysis is a process where the participation, interest, and influence level of key project stakeholders is identified. A stakeholder analysis is used to leverage the support of key personnel and purposefully align project teams with wider organizational goals. The analysis can also be used to resolve potential sources of conflict before project commencement.

Strategic Analysis

strategic-analysis
Strategic analysis is a process to understand the organization’s environment and competitive landscape to formulate informed business decisions, to plan for the organizational structure and long-term direction. Strategic planning is also useful to experiment with business model design and assess the fit with the long-term vision of the business.

Related Strategy Concepts: Go-To-Market StrategyMarketing StrategyBusiness ModelsTech Business ModelsJobs-To-Be DoneDesign ThinkingLean Startup CanvasValue ChainValue Proposition CanvasBalanced ScorecardBusiness Model CanvasSWOT AnalysisGrowth HackingBundlingUnbundlingBootstrappingVenture CapitalPorter’s Five ForcesPorter’s Generic StrategiesPorter’s Five ForcesPESTEL AnalysisSWOTPorter’s Diamond ModelAnsoffTechnology Adoption CurveTOWSSOARBalanced ScorecardOKRAgile MethodologyValue PropositionVTDF FrameworkBCG MatrixGE McKinsey MatrixKotter’s 8-Step Change Model.

Main Guides:

About The Author

Scroll to Top
FourWeekMBA