Aspects of Strategic Management

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Assessing the essence of strategic management, it should be pointed out that its main basis could be considered in adjusting changes. Among strategic management characteristics is orienting the production activity toward consumer’s demands, implementing flexible regulation and well timed changes in the organization that allows achieving competitive advantage, and accordingly reaching its goal in the long-term perspective.

One of the methods in assessing the strategic position of the organization is “Strategic Position & Action Evaluation” (SPACE) matrix. SPACE method allows describing the current strategic position of the company, generally assessing the interest of the company sphere of activity, and the company’s capability of competing. In this paper SPACE analysis will implemented on a company with a weak financial situation with a weak competitiveness in a stable industry and low profit and revenue growth.

SPACE matrix is a method for analyzing the competitiveness of a company. The method allocates the company’s strategic position in its field, operating with two internal indicators, i.e. financial strength (FS) and competitive advantage (CA), and two external indicators, i.e. environmental stability (ES) and industry strength (IS).

Assigning the dimensions scores from the company’s description, the information can be obtained:

  • Environment stability dimension – a stable industry means that the score is about -1 — -2.
  • Industry strength dimension – a low profit and a low revenue growth results in a score of 4—5
  • Competitive advantage dimension –being a weak competitor means that the company does not have a competitive advantage within a strong competition, i.e. a mean score of about -5 — -6
  • Financial strength dimension- The statement that the company is financially weak corresponds to a mean score of 1—2.

Accordingly the matrix will have the following shape:

Matrix

Accordingly, constructing the variables based on the provided information

Internal Strategic Position External Strategic position
X CA ES
  • Low product quality
  • Small market share
  • Low customer loyalty
  • Low technology know-how
  • High rate of inflation
  • Many technological changes
  • Large demand of variability
  • High competitive pressure
  • Elastic price of demand
Average= -5 — -6 Average= -1 — -2
Y FS IS
  • Low return on investment
  • Imbalanced liquidity and leverage
  • Low cash flow
  • High ration of required/available capital
  • Relatively stable industry
  • Low growth potential
  • Large capital outlays
Average=1—2 Average=4—5

The conservative posture is characteristic of stable markets with low growth rates. Improving the company’s strategy would imply concentrating on financial stability. Important factors in that case include lowering the cost price simultaneously raising the products quality, shrinkage in production capacity considering an entry into a more perspective market.

References

Radder, L. & Louw, L. (1998) The SPACE matrix: A tool for calibrating competition. Long Range Planning, 31, 549-559.

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