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By discipline:
"Organization and management of enterprise activities"
"SPACE analysis"
Moscow, 2011
1. SPACE-Analiz
Another method of constructive analysis follows directly from SWOT analysis - SPACE analysis. It is based on the assertion that the financial strength of the enterprise - FS ("strength", by component - "finance") and the competitiveness of products - KP ("strength", by component - "products") are the main factors determining the strategic position of the enterprise , while the industry advantages - software and market stability - SR are characteristics that are of great importance for the industry as a whole.
In SPACE analysis, these factors are depicted in the form of graphs with a coordinate division of the scale from -6 to +6. All factors have two types of characteristics: significance (V) and probability (P) of action. At the same time, two factors are determined that the enterprise uses to the greatest extent and which classify it into a certain qualification group (position).
An aggressive position is typical of an active and stable industry in which the enterprise has certain advantages. The emergence of new competitors is critical. The position allows you to actively respond to changes in the market situation, increase your market share, and increase the competitiveness of products: 1) a financially strong enterprise with a competitive product in a stable and growing market; 2) a financially strong enterprise in which financial and economic advantages play a significant role.
The competitive position is typical of active but relatively unstable industries and markets in which the company's products have a competitive advantage. The financial potential of the enterprise is critical: 1) an enterprise with competitive products in a growing market; 2) an enterprise with competitive products in an unstable market.
A conservative position is most often characteristic of a stable industry. Such enterprises have a certain financial potential, however, the competitive characteristics of the products are critical. The main objectives of such enterprises should be to search for new markets, maintain product advantages, develop new types of products, reduce unproductive costs and activate money circulation: 1) an enterprise with competitive products in a stable market; 2) an enterprise with products that temporarily have no competitors.
A defensive position is typical for economically unattractive activities in which competitive advantages do not create economic advantages, or the lack of competition is due to the outflow of capital to economically more profitable industries. Almost all factors are critical, with the exception of the competitive position of the product. An enterprise can continue tactics to “survive” an unfavorable period (which, as a rule, does not bring success) or refocus on other types of activities, reduce production capacity, restructure production and financial resources, limit investments: 1) an enterprise with low competitiveness of products, negative growth in a stable industry; 2) an enterprise with a good financial position in an unstable and inefficient industry.
2. SPACE method
Analysis of the strategic position and assessment of the company's actions
A strategist must be able to assess the most advantageous strategic position of a company, the attractiveness of its business area, and its ability to compete in markets. The business of an organization is a key mechanism for ensuring the interests of the subjects of this organization. Therefore, assessing a business as unattractive may lead to a change in interests. When choosing mechanisms to ensure interests and fend off threats, it is also necessary to correlate them with the position of the organization.
The main method for such assessments is the Strategic Positioning and Action Evaluation (SPACE) matrix.
The SPACE method consists in assessing four groups of factors for an enterprise. Each factor is assessed by experts on a scale from 0 to 6.
Factors of environmental stability (ES)
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Technological changes |
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Inflation rate |
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Demand variability |
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Price range of competing products |
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Barriers to market access |
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Competitive pressure |
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Price elasticity of demand |
inflexible |
Factors of industrial potential (IS)
|
Growth potential |
||||||||||
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Profit Potential |
||||||||||
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Financial stability |
||||||||||
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Technology level |
||||||||||
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Resource utilization rate |
ineffective |
effective |
||||||||
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Capital intensity |
||||||||||
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Ease of market access |
||||||||||
|
Productivity, capacity utilization |
Drivers of Competitive Advantage (CA)
|
Market share |
small |
|||||||||
|
Product quality |
||||||||||
|
Product life cycle |
elementary |
finite |
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|
Product replacement cycle |
fixed |
replaceable |
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Customer loyalty |
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|
Capacity utilization by competitors |
||||||||||
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Vertical integration |
Financial Strength Factors (FS)
|
Return on investment |
||||||||||
|
Financial dependence |
unbalanced |
balanced |
||||||||
|
Liquidity |
unbalanced |
balanced |
||||||||
|
Required/available capital |
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|
Flow of funds |
||||||||||
|
Ease of leaving the market |
||||||||||
|
Enterprise risk |
Having assessed the value of each factor, it is necessary to calculate the average value of the factors within each group, and then plot the obtained values on the coordinate axes shown in Fig. 1.
Rice. 1. Matrix of strategic position and assessment of actions
The result will be a quadrangle of one of the types shown in Fig. 2.
Rice. 2. Graphical representation of various strategic states
strategic matrix company competitive
If the side in the FS - IS quadrant is the furthest away from the center of coordinates, then the company is in an aggressive strategic state. If the party in the IS - ES quadrant is the most distant, then the company is in a competitive strategic state. If the side in the CA - FS quadrant is furthest away, then the company is in a conservative strategic state. If the side in the CA - ES quadrant is furthest away, then the company is in a defensive strategic state.
Depending on the strategic state, the most appropriate are the following groups of strategy mechanisms:
|
Aggressive |
This condition is typical in an attractive industry with little uncertainty. The company receives competitive advantages, which it can maintain and increase with the help of its financial potential. The threats are insignificant; it is necessary to concentrate on ensuring interests. The mechanisms are aimed at: · Expansion of production and sales; · Price war with competitors; · Development of new market sectors; · Brand promotion. |
|
|
Competitive |
This condition is typical for an attractive industry. The organization gains competitive advantage in a relatively unstable environment. The critical factor is financial potential. It is necessary to fend off threats associated with loss of funding. Basic mechanisms: · Search for financial resources; · Development of sales networks. |
|
|
Conservative |
This condition is usually observed in stable markets with low growth rates. In this case, efforts are concentrated on financial stabilization. The most important factor is the competitiveness of the product. Basic mechanisms: · Reducing costs while improving product quality; · Reducing production and entering more promising markets. |
|
|
Defensive |
This condition occurs in a situation where an organization operates in an attractive industry, but lacks product competitiveness and financial resources. The key strategy is: · Particular attention to mechanisms for parrying threats; · Leaving the market. |
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Methods of situational analysis with a certain convention also include the method of SPACE analysis (strategic position and action estimation), intended for analyzing the strategic position and assessing the actions of an organization.
The SPACE method consists of analyzing four groups of factors for an organization. Each factor is assessed by experts on a scale from zero to six. The factors of the four groups are presented sequentially in Table. 4.10–4.13.
Table 4.10. Factors of situation stability ( ES)
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Technological changes |
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Inflation rate |
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|
Demand variability |
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Price range of competing products |
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|
Obstacles for market access |
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|
Competitive pressure |
|||||||||
|
Price elasticity of demand |
Inflexible |
Table 4.11. Factors of industrial potential (IS)
|
Growth potential |
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Profit Potential |
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Financial stability |
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Technology level |
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|
Resource utilization rate |
Ineffective |
Effective |
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Capital intensity |
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Ease of market access |
|||||||||
|
Productivity, capacity utilization |
Table 4.12. Factors of competitive advantage (SA)
|
Market share |
Small |
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Product quality |
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|
Product life cycle |
Elementary |
Finite |
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Product replacement cycle |
Fixed |
Replaceable |
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|
Customer loyalty |
|||||||||||||
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Capacity utilization by competitors |
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|
Vertical integration |
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Table 4.13. Factors of financial potential ( FS)
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Return on investment |
|||||||||
|
Financial dependence |
Unbalanced |
Balanced |
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Liquidity |
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|
Required/available capital |
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|
Flow of funds |
|||||||||
|
Ease of leaving the market |
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|
Enterprise risk |
Having assessed the value of each factor, it is necessary to calculate the average value of the factors for each group, then plot the obtained values on the coordinate axes shown in Fig. 4.14.
The implementation of this evaluation approach makes it possible to construct a quadrangle of one of the types shown in Fig. 4.15, characterizing the proposed four types of strategic positions of a competing organization, which are also presented in table. 4.14.
This method uses an approach to analyzing the external and internal environment, similar to that used when conducting a SWOT analysis. Factors of situational stability partially characterize factors of the external environment, without clearly distinguishing opportunities and threats. Factors of competitive advantage, industrial and financial potential are part of the analysis of the internal environment, presented in much more detail in the SWOT analysis.
The advantages of the SPACE analysis method include the following.
- 1. Clear logic of analysis.
- 2. The ability to make a purely formal, quick assessment. But this attractive side of this method may be the reason for choosing the wrong recommendations.
- 3. The ability to determine enlarged strategic positions (not all).
- 4. Visual presentation of the results obtained and recommendations for choosing courses of action.
Rice. 4.14.
In our opinion, the developers of this method significantly exaggerated its advantages, declaring that it can be used to determine the most advantageous strategic position for a company, as well as certain areas of its activity. And that it is a means that helps a company evaluate the overall attractiveness of its business area, as well as the company’s ability to compete in markets.
However, the disadvantages of this method of analysis significantly exceed its advantages.
- 1. Groups of factors are presented without justification for identifying these particular groups of factors. Why are four rather than another number of factor groups proposed? What are the principles for identifying them? In these groups, both external and internal factors are “mixed”.
- 2. The groups of factors include a far from complete list of these factors, and the inclusion of factors in individual groups is sometimes random, not resulting from the consistent use of any specific classification criteria.
Rice. 4.15.
Table 4.14. Brief description of possible strategic positions of a competing organization
|
Strategic position |
Brief description of strategic positions |
|
|
Aggressive |
This position is typical of an attractive industry with little uncertainty. A competitor organization receives competitive advantages, which it can maintain and increase with the help of financial potential. The threats are minor; it is necessary to concentrate on ensuring the achievement of the set goals. Actions are aimed at: expanding production and sales; |
|
|
active pricing policy in relation to competitors; |
||
|
development of new market segments; |
||
|
brand promotion |
||
|
Competitive |
This position is typical for an attractive industry. A competing organization gains a competitive advantage in a relatively unstable environment. The critical factor is financial potential. It is necessary to fend off threats associated with loss of funding. Main actions: search for financial resources; |
|
|
development of sales networks |
||
|
Conservative |
This position is usually seen in stable markets with low growth rates. In this case, efforts are concentrated on financial stabilization. The most important factor is the competitiveness of the product. Basic actions: reducing costs while improving product quality; |
|
|
reduction in production and entry into more promising markets |
||
|
Defensive |
This position arises in a situation where a competing organization operates in an attractive industry, but lacks product and financial competitiveness. The key actions are: special attention to mechanisms for countering threats; leaving the market |
|
For example, the group of factors called “industrial potential” includes factors of both the external and internal environment, characterizing not only the magnitude of the potential (growth potential, profit potential), but also the level of its use (degree of resource utilization, productivity). Not all factors of “industrial potential” are taken into account. For example, this section does not include human resources factors. Such examples of an incorrect approach to the selection of factors can be given for other groups of factors in this methodology. Financial stability refers to financial factors, not industrial potential factors.
3. There is a repetition of factors placed in different sections of the methodology in slightly modified formulations.
For example, the group of factors for stability of the situation includes the factor “obstacles to market access.” In another formulation - “ease of access to the market”, a similar factor is placed in the group of factors “industrial potential”. Besides, what does industrial potential have to do with it?
4. It should be noted that there is a partial repetition of factors placed in one section of the methodology.
For example, the factors “obstacles to market access” and “competitive pressure” are included in the factors of stability of the situation. The last factor is one of the causes of the previous factor.
5. A far from complete list of strategic positions of a competing organization is presented without any justification.
The number of possible combinations of values of the four groups of factors significantly exceeds the selected four strategic positions. When identifying strategic positions, it would be more correct to specify not a point value of individual groups of factors, but an interval value, falling into which is the basis for developing recommendations for choosing a course of action. This approach is used, for example, in a number of portfolio methods in the matrix GE/McKinsey.
6. To evaluate even quantitative substantive indicators, only expert scores were used.
You can also cite other logical contradictions and substantive errors of this method. Its use appears to confuse marketers. The content and practical value of this technique do not correspond to its “cosmic” name. space- space). Probably for these reasons, this method is not covered in well-known marketing publications.
It seems that to solve problems of assessing the position of an organization and setting goals for its development, the ideas of a balanced scorecard - BSC can be used (balanced scorecard ), set out, for example, in the work. This system is designed to formulate the goals and strategies of a competing organization based on an assessment of its activities based on four balanced groups of indicators, measured quantitatively: 1) finance (return on investment and added value); 2) relationship with clients (satisfying client needs, maintaining and expanding the client base and market share); 3) internal business processes (quality, order fulfillment, cost, development of new products) and 4) training and professional development of personnel (staff satisfaction and availability of information systems). The choice of groups of indicators and the BSC indicators themselves are logically justified and well reasoned. It can be proposed to evaluate the level of achievement of SPP indicators using one of the measurement scales, for example, as in SPACE analysis. Next, depending on the results of such analysis and the capabilities of the competing organization, goals are set for each indicator and means of achieving them are selected. This approach to goal setting may also be useful in gap analysis (see below).
- Other translation options include a balanced scorecard, a balanced scorecard, and a score card.
The SPACE matrix forms the basic profile of the strategic positioning of SZH by determining the parameters of the external and internal environment. The following parameters are offered for analysis:
1. Internal factors:
Factors of industrial potential (IS);
Financial Strength Factors (FS);
2. External factors:
Factors of environmental stability (ES);
Factors of competitive advantage (CA).
Each factor is complex and depends on a number of characteristics (Table 11.1).
Table 11.1
Characteristics of complex parameters of the SPACE matrix
|
Factors |
Characteristics |
|
stability environment (ES) |
Technological changes; Inflation rate; Demand variability; Price range of competing products; Barriers to market access |
|
industrial potential (IS) |
Growth and profit potential; Financial stability; Technology level; Degree of resource utilization; Performance |
|
competitive advantage (CA) |
Market share; Product quality; Product life cycle; Customer loyalty; Vertical integration |
|
financial potential (FS) |
Return on investment; Financial dependence; Liquidity; Required available capital; Cash flow |
The procedure for constructing a matrix is reduced to the following steps:
1. The characteristics of the parameters are assessed on a scale from 0 to 6. When assessing the factors of competitive advantage and stability of the situation, it should be taken into account that the maximum value characterizes the minimum manifestation of the factor. Each characteristic is assigned a weight reflecting its significance in the context of the factor.
2. Based on the obtained assessments, a weighted average assessment is derived for each of the four analyzed factors.
3. Average values for each of the four groups of factors are displayed in the coordinates of the SPACE matrix and connected by lines (Fig. 11.2). The side furthest from the center shows the development vector of the SZH.
4. The following 4 options for the state of the SZH are possible:
If the FS – IS side is the furthest away from the center of coordinates, then the company is in an aggressive state;
If the IS - ES side is the most distant, then the company is in a competitive strategic state;
If the side in the CA - FS quadrant is furthest away, then the company is in a conservative strategic state;
If the side in the CA - ES quadrant is furthest away, then the company is in a defensive strategic state.
Rice. 11.2. Option for the defensive position of the company's agricultural storage facility based on the SPACE matrix
5. Based on the strategy option, a list of actions for its implementation is formed (Table 11.2).
Table 11.2
Characteristics of SZH strategies using the SPACE matrix
|
Position |
Characteristics of the situation and possible actions |
|
Aggressive position |
An aggressive strategy is suitable for a financially strong firm that has advantages in a growing and stable industry. The main actions are aimed at expanding production and sales, price war with competitors, developing new market sectors, promoting brands |
|
Competitive position |
Competitive position is the basis for an offensive strategy, which is used when a firm has a manufacturing advantage in a growing but unstable industry. The main actions are aimed at finding financial resources and developing sales networks |
|
Conservative position |
The condition is observed in stable markets with low growth rates. The company does not have any serious advantages. Efforts are aimed at achieving financial stability. An important factor is the competitiveness of the product. Actions are aimed at reducing costs while improving product quality or reducing output and entering more promising markets |
|
Defensive position |
A situation where the industry is attractive to the industry, but the product has low competitiveness. Actions are aimed at preventing threats, and if there are no prospects, leaving the market |
The recommendations obtained as a result of the analysis can be used to develop strategic guidelines for the company's agricultural sector. The SPACE matrix can be used independently (for an initial assessment of the position of a company's agricultural agricultural holdings in the market) or as a basis for additional analysis that requires the use of other methods of analysis and forecasting.
SPACE analysis – abbreviation from English. Strategic Position and Action Evaluation – assessment of strategic position and actions. It is also a comprehensive method that allows you to establish the strategic position of an enterprise on the basis of two groups of factors: the internal and external position of the enterprise.
The SPACE method is a multicriteria method, where each of the two groups of factors presented consists of a large number of variables. This method involves selecting a statistically reliable subset of characteristics, arranging them into groups and assigning weights to them within the framework of a conventionally accepted rating scale.
In this method, there are four groups of evaluation criteria, which are considered separately:
1) financial strength of the enterprise;
2) the competitiveness of the enterprise and its position in the market;
3) the attractiveness of the sector where the enterprise operates;
4) stability of the industry in which the enterprise operates.
Each group of criteria is formed on the basis of the specific characteristics of a particular enterprise, the tasks assigned to it, the production capabilities available to the enterprise, and the knowledge and skills of its personnel. This problem is solved by a group of experts based on their practical experience in each case in its own way.
Composition of criteria:
– financial strength of the enterprise: rate of return indicator, production costs, return on investment, liquidity, financial debt of the enterprise, cash flow, stability of profit, etc.;
– the competitiveness of the enterprise and its position in the market: the enterprise’s market share and the dynamics of its changes, the market and its size, the structure of the product range, the ability of the enterprise to carry out marketing, the possibility of actively influencing the level of prices and costs, relations with consumers, etc.;
– attractiveness of the industry where the enterprise operates: growth potential, stability of profit, level of technology, degree of resource use, duration of the life cycle of the sector, level of competition in the sector, etc.;
– stability of the industry in which the enterprise operates: technological changes, inflation rates, demand variability, price range of competing products, competitive pressure, public attractiveness of the industry, price elasticity of demand, etc.
Next, the average value is determined for each of the four groups of criteria and they are plotted on the coordinate axes of the SPACE method model. The average values displayed on each axis are connected and a four-sided polygon is obtained, displaying the strategic state, which is the result of this analysis and the basis for choosing one or more alternative strategies for the development of the enterprise.
Regardless of the number of strategies developed, the cost-effectiveness of the proposed strategies should be assessed before a final decision is made. One of the tools that can be used for such an assessment is the methodology for analyzing investment projects based on calculating net present value.
Based on a comparison of the assessment of the economic efficiency of alternative options and strategic analysis, a future strategy is selected and the developed system of measures for its practical implementation is approved.
Determining a company's competitive advantage
Scores are assigned for each factor. The average value is found and plotted on the graphs.
| Factors | Factor assessment | ||
| Market share | Small | 0123456 | Big |
| Product quality | Low | 0123456 | High |
| Product life cycle stage | Late | 0123456 | Early |
| Product replacement cycle | Variable | 0123456 | Fixed |
| Consumer Commitment | Low | 0123456 | High |
| Use of production facilities from competitors | Minimum | 0123456 | Maximum |
| Technological know-how | Small | 0123456 | Big |
| Degree of vertical integration | Low | 0123456 | High |
| Average value | |||
Factors determining the financial position of a company
| Factors | Factor assessment | ||
| Return on investment | Low | 0123456 | High |
| Financial leverage | Unbalanced | 0123456 | Balanced |
| Liquidity | Unbalanced | 0123456 | Balanced |
| Degree of satisfaction of capital needs | Low | 0123456 | High |
| Flow of payments to the company | Small | 0123456 | Big |
| Exit from the market | Difficult | 0123456 | Easy |
| Riskiness of business | High | 0123456 | Low |
| Inventory turnover | Slow | 0123456 | Fast |
| Others | 0123456 | ||
| Average value | |||
Determining the "attractiveness" of an industry
| Factors | Factor assessment | ||
| Growth potential | Short | 0123456 | High |
| Potential Profitability | Short | 0123456 | High |
| Financial stability | Low | 0123456 | High |
| Technological know-how | Simple | 0123456 | Complex |
| Resource usage | Ineffective | 0123456 | Effective |
| Capital intensity | High | 0123456 | Low |
| Access to the market | Easy | 0123456 | Difficult |
| Performance (resource usage) | Low | 0123456 | High |
| Average value | |||
Factors that determine environmental stability
| Factors | Factor assessment | ||
| Technological changes | Large | 0123456 | Small |
| Inflation rate | High | 0123456 | Short |
| Demand Variation | Big | 0123456 | Small |
| Price range of competing products | Big | 0123456 | Small |
| Barriers (restrictions) to entering the market | Small | 0123456 | Large |
| Competitive pressure | High | 0123456 | Low |
| Demand | Elastic | 0123456 | Inelastic |
| Others | 0123456 | ||
| Average value | |||
After all of the listed factors have been assessed, and the indicators for the four coordinates have been calculated, they must be plotted on a graph (Fig.). Then they move on to its analysis and interpretation.
1. Aggressive position
This position is typical for attractive industries in a stable environment. The analyzed company has an undoubted competitive advantage and can maintain it using its existing financial potential.
The critical factor is the ability to withstand the emergence of new competitors.
Recommended Strategies:
1. search for acquisition candidates in our own and related industries;
2. increase in market share;
3. concentration of resources on products that provide the greatest advantage over competitors.
Firm behavior: scout behavior. The desire to explore as many alternatives as possible, loose, decentralized control, not always full use of resources.
2. Competitive position
This position is typical for attractive industries in a relatively unstable environment 
The critical factor is the ability to maintain and strengthen the financial position of the company.
Recommended Strategies:
1. accumulation of additional financial resources to strengthen market potential;
2. strengthening the sales service;
3. expansion and/or adjustment of the range of products;
4. investing in productivity improvements;
5. cost reduction;
6.measures to protect and maintain competitive advantage in a shrinking market;
7. merger with a company with significant cash resources.
The behavior of the company is a line of flexible response. As a consequence, this position turns out to be strategically unstable and often leads to collapse.
3. Conservative position
Typical for stable, slow-growing markets 
The critical factor is the competitiveness of the product.
Recommended Strategies:
1. reduction in assortment;
2. cost reduction;
3. concentration on managing the flow of payments;
4. additional protection of competitive products;
5. development of new products;
6. attempt to penetrate more attractive markets.
Firm behavior: This is the behavior of the analyst. The company's policy is based on a thorough analysis of the opportunities available on the market and their careful use.
4. Defensive position
Characteristic of unattractive industries in which companies lack both competitive products and financial resources 
The critical factor is the competitiveness of the company as a whole.
Recommended Strategies:
1. leaving the market;
2. cessation of production of low-profit products;
3. aggressive cost reduction:
4. reduction of excess production capacity;
5. refrain from investments or minimize them.
Firm behavior: this is the behavior of a defender, the desire to highlight a narrow area of its interests and protect it. Hence the concentration of resources and centralization of management.