Marketing Strategy and Competitive Positioning pdf ebook

Table 3.2 
SPACE analysis – components
Figure 3.14
SPACE analysis 
map
Source: Based on Rowe 
et al. (1989) Exhibit 6.10, 
p. 145.
COMPANY
DIMENSIONS
b
a
A
B
Financial
Strength
Competitive
Disadvantage
Industry
Strength
Strategic
postures
Environmental
Stability
INDUSTRY
DIMENSIONS
Conservative
Defensive
Competitive
Aggressive

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THE ADVANTAGE MATRIX
Industry strength is the second environmental dimension considered. This focuses on 
attractiveness of the industry in terms of growth potential, profitability and the ability to 
use its resources efficiently. For a company within the industry, these strengths are no virtue 
unless a company has a competitive advantage. SPACE analysis, therefore, opposes indus-
try strength by competitive advantage (see Figure 3.14 ) to provide a gauge of a company’s 
position relative to the industry.
Rating a company and the industry on each of the four dimensions gives the competitive 
profile abAB in Figure 3.14 . The example clearly shows a company in a weak position: mod-
erately high environmental instability is not balanced by financial strength, and the com-
petitive advantage of the company is not great compared with the overall industry strength. 
The relative size of the opposing dimension gives a guide to the appropriate strategic 
posture of a firm. For example, from Figure 3.14 , A
+ a and B + b show the overall weight 
of the SPACE analysis to be towards the bottom right-hand quadrant. This indicates a 
competitive posture , which is typical of a company with a competitive advantage in an 
attractive industry. However, the company’s financial strength is insufficient to balance the 
environmental instability it faces. Such firms clearly need more financial resources to main-
tain their competitive position. In the long term this may be achieved by greater efficiency 
and productivity, but likely is the need to raise capital or merge with a cash-rich company. 
Firms that find their strategic posture within the aggressive quadrant are enjoying sig-
nificant advantages, yet are likely to face threats from new competition. The chief danger 
is complacency, which prevents them gaining further market dominance by developing 
products with a definite competitive edge. The excessive financial strength of these com-
panies may also make it attractive for them to seek acquisition candidates in their own or 
related industries. 
A conservative posture is typical of companies in mature markets, where the lack of need 
for investment has generated financial surpluses. The lack of investment can mean that 
these companies compete at a disadvantage, and lack of opportunities within their existing 
markets makes them vulnerable in the long term. They must, therefore, defend their exist-
ing products to ensure a continued cash flow while they seek new market opportunities. 
Companies with a defensive posture are clearly vulnerable. Having little residual strength 
to combat competition, they need to foster resources by operating efficiently and be pre-
pared to retreat from competitive markets in order to concentrate on ones they have a 
chance of defending. For these, it just appears to be a matter of time before either competi-
tion or the environment gets the better of them.
3.13 
The Advantage Matrix 
Once strategic groups within a market have been identified, it becomes apparent that the 
groups have differing levels of profitability. For instance, in the machine tool industry, con-
ventional lathes are almost a commodity and are frequently produced at low cost in the 
emerging economies. But in another part of the industry, say flexible manufacturing systems, 
profits can be quite high for those companies with special skills. Recognition of this pattern 
led the Boston Consulting Group (1979) to develop the Advantage Matrix, which helps to 
classify the competitive environments that can co-exist within an industry. The framework 
identifies two dimensions: the number of approaches to achieving advantage within a mar-
ket, and the potential size advantage. In Figure 3.15 , the quadrants of the Advantage Matrix 
show how relationships between relative size and return on assets for companies can differ.
The stalemate quadrant represents markets with few ways of achieving advantage and 
where the potential size advantage is small. Companies in such a strategic group would 
therefore find trading akin to a commodity market. These can be relatively complex prod-
ucts, as in the case of desktop computers, where the technologies are well known, product 

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