Assignment 08: Internal Strengths and Weaknesses
crtshhill58
Chapter21.pptxStrategic Analysis for Healthcare
Chapter 21
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
1
SPACE Matrix
The strategic position and action evaluation (SPACE) matrix is a four-direction system used to analyze whether conservative, aggressive, defensive, or competitive strategies are most appropriate for a company’s approach (Rowe et al. 1982).
The analysis looks internally at the organization’s financial strength and competitive advantage, as well as externally at the stability of the environment and the strength of the industry in which the organization competes.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
SPACE Matrix
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
SPACE Matrix
In the SPACE matrix, financial strength (FS) is plotted against environmental stability (ES), and competitive advantage (CA) is plotted against industry strength (IS).
A position in the top left quadrant of the SPACE matrix suggests a conservative strategy is appropriate for the company.
The top right quadrant suggests an aggressive strategy.
The bottom right suggests defensive strategies, and
The bottom left suggests competitive strategies.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
SPACE Matrix
The steps in completing the SPACE matrix are as follows:
Determine what variables to measure. You should have approximately five per factor.
The variables should involve critical success factors in the industry and be good indicators of financial strength, competitive advantage, environmental stability, and industry strength.
For example, for the issue of financial strength, what are the five or six key indicators of financial health for a company in your industry?
Obviously, the variables will change by industry (retail may have very different indicators of financial health than does a hospital), but certain key indicators are common.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
SPACE Matrix
Some examples are provided below:
Financial strength (FS) variables: return on investment (ROI), return on equity (ROE), earnings per share (EPS), leverage, liquidity, other measures from the ratio analysis
Competitive advantage (CA) variables: market share, product quality, life cycle position, customer loyalty, manufacturing capability, other factors from the five forces analysis or SWOT
Environmental stability (ES) variables: technology, inflation, other factors from PEST and environmental analysis
Industry strength (IS) variables: growth potential, profit potential, productivity, other factors from the five forces analysis and environmental analysis
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
SPACE Matrix
Give a score ranging from +1 (terrible) to +6 (great) for each of the variables that make up financial strength (FS) and industry strength (IS).
Give a score ranging from –1 (great) to –6 (terrible) for each of the variables that make up environmental stability (ES) and competitive advantage (CA).
Find the average score for the FS variables, then for the ES variables, then for the CA variables, and finally for the IS variables.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
SPACE Matrix
Plot the values for each dimension on the appropriate axes of the SPACE matrix.
Add the average score for FS to the average score for ES to yield the y value.
Add the average score for CA to the average score for IS to yield the x value. Once you have both an x value and a y value, you will be able to plot a single point on the SPACE matrix.
Find the intersection of the x-axis score and the y-axis score. Draw a line from the center of the SPACE matrix to the intersection point. This line points to the type of strategies the organization should pursue.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
SPACE Matrix
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
SPACE Matrix
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Exercise
In the space provided on page 143, create a SPACE matrix for your project organization.
Copyright © 2016 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press
Health Administration Press
Financial Strength (FS)
Environmental Stability (ES)
Competitive Advantage (CA)
Industry Strength (IS)
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
+6
+5
+4
+3
+2
+1
-1
-2
-3
-4
-5
-6
Conservative
Aggressive
Competitive Defensive
Financial Strength (FS)
Environmental Stability (ES)
Competitive Advantage (CA)
Industry Strength (IS)
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
6
5
4
3
2
1
-1
-2
-3
-4
-5
-6
Conservative
Aggressive
Competitive Defensive
Y:2.60; X:2.20
Exhibit 21.4
