BMGT

Illustrative example in handicraft industry

Competitive profile matrix (CPM) is one of the helpful quantitative tools that is used in environmental scanning when the strategic researchers use some specific critical success factors in the specific industry to carry out the quantitative analysis so that the analytical outcome can potentially shed insights on the strategic information of the focal company relative to its key competitors in that industry in the global economy.

The critical success factors are broad in nature, but they are important to increase the chances of being successful in a specific industry in the global economy under environmental competitive analysis. Hence, only industry-specific critical success factors are expected to be selected to evaluate the group of key competitors in that particular global industry. In other words, these critical success factors vary from one industry to another among the key competitors in the global economy: They are not one size that fit all industries.

Some of the potential critical success factors are listed for reference only, and they are, by no means, inclusive or definite for any specific industry in the global economy. In compiling their own CPM matrix, a learner is expected to discuss and support why their selected critical success factors are relevant for that industry in the global economy and explain the rationale before they use these factors in compiling the competitive profile matrix. Among these critical success factors for reference purposes are: Market share, product quality, brand reputation, financial position, advertising, global expansion, regional market penetration, expertise of the internal staff, product development, innovation, etc.

Let’s explore why one critical success factor is relevant for one industry, but it is not in another industry. I would select the two industries “handicraft industry” and “computer software industry” that are significantly different from each other: The former industry is often “tradition-oriented” whereas the latter industry is “technology-oriented.” What can critically bring strategically competitive success for one industry may not be relevant for another industry. In the handicraft industry, the “expertise of traditional craftsmanship” can be considered a critical success factor whereas in the computer software industry “software research and development speed” can be considered a critical success factor. If a learner is analyzing the competitive environment of the handicraft industry, then the “software research and development speed” may not be relevant to be qualified as a critical success factor. Alternatively, if a learner is analyzing the competitive environment in the computer software industry, then “expertise of the traditional craftsmanship“ probably is not be relevant as a critical success factor. Therefore, “lifting from the internet” or “copying verbatim” critical success factors from random source material will be a potential strategic management mistake in analyzing the competitive environment of a particular industry if a learner does not sufficiently support the relevancy in the industry with research findings. That is why a learner is expected to support their discussion and analysis with the relevant research findings when they select critical success factors for a particular industry in the global economy. Without a supporting discussion and research findings, the use of critical success factors in a CPM matrix may be misleading and irrelevant.

Weights for critical success factors in CPM matrix

Besides discussing the critical success factors, a learner are expected to understand and support how the weights are assigned to each of the critical success factors. If a learner assigns a “higher” weight for “Critical success factor 1” than “Critical success factor 2”, they are expected to discuss and explain why “Critical success factor 1” is more important to the specific industry than “Critical success factor 2” in that industry. All the weights for the critical success factors in the CPM are assigned in such a way so that the total weights sum up to 1.

Rating for each competitor with respect to critical success factor

A learner is expected to justify why a certain company in the competitor pool in the industry deserves a certain score. A specific company receives higher rating because it is a relative strength for that company with respect to a particular critical success factor than the rest of competitors. It is not sufficient to “blindly” or “without any discussion of why” to give scores for each of the competitors in the competitive pool of companies.

Computation of Weighted scores

A learner is expected to do the multiplication of “weight” times “rating” to derive the weighted score for each critical success factor. It is quite often a mathematical error to blindly or verbatim “copy” from any source without doing actual computations. A learner is expected to double check the math when presenting the CPM matrix; otherwise, would potentially run into the issue “Garbage in, garbage out” in the analysis.

The following is a sample format of a “Competitive Profile Matrix” in the handicraft industry in the global economy. In compiling the CPM matrix for the projects, a learner is expected to use industry-specific critical success factors, rather than copying from this sample matrix, or from any other sources, and is expected to justify what is presented in the analysis.

In this sample CPM matrix, the total weighted scores of Company M are highest among those of the three competitors: The analytical outcomes imply the strategic inference that Company M may potentially have higher chances of succeeding more easily than the other two competitors, given the current environmental factors of the handicraft industry in the global economy.

After compiling the CPM matrix, a learner is expected to discuss the strategic inference from the analytical outcome to draw the strategic insights from the analysis.