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Competitive Pro le Matrix (CPM)

Ovi d i j u s Ju revi ci u s | 29.10.2013

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De nition
The Competitive Pro le Matrix (CPM) is a tool that compares the rm and its
rivals and reveals their relative strengths and weaknesses.

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Understanding the tool

In order to better understand the external environment and the competition in a
particular industry, rms often use CPM. The matrix identi es a rms key
competitors and compares them using industrys critical success factors. The
analysis also reveals companys relative strengths and weaknesses against its
competitors, so a company would know, which areas it should improve and, which
areas to protect. An example of a matrix is demonstrated below.

CPM Table
Company A
Critical
Success
Factor
Brand

Company B

Company C

Weight

Rating

Score

Rating

Score

Rating

Score

0.13

0.26

0.39

0.13

0.08

0.32

0.24

0.08

reputation
Level of
product

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integration
Range of
products

0.05

0.15

0.05

0.10

Successful new

0.04

0.12

0.12

0.12

Market Share

0.14

0.28

0.56

0.56

Sales per

0.08

0.08

0.16

0.24

Low cost
structure

0.05

0.05

0.15

0.20

Variety of

0.07

0.28

0.14

0.14

0.02

0.04

0.08

0.02

0.11

0.33

0.44

0.44

Strong online
presence

0.15

0.45

0.45

0.60

Successful

0.08

0.08

0.16

0.08

1.00

2.44

2.94

2.71

introductions

employee

distribution
channels
Customer
retention
Superior IT
capabilities

promotions

Total

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Critical Success Factors

Critical success factors (CSF) are the key areas, which must be performed at the
highest possible level of excellence if organizations want succeed in the particular
industry. They vary between di erent industries or even strategic groups and include
both internal and external factors. In our example, we have included 11 CSF, which is
usually not enough. The more critical success factors are included the more robust
and accurate the analysis is. The following list provides some of the general CSF, but
the list is not de nite and you should include industry speci c factors in your matrix:

Market Share

Union relations

Power over suppliers

Product Quality

Skilled workforce

Access to key suppliers

Location of facilities

E cient supply chain

Customer service

Production capacity

Supply chain integration

Customer loyalty

Added product features

On time delivery

Brand reputation

Price competitiveness

Strong online presence

Customer satisfaction

Low cost structure

E ective social media

management

Clear strategic
direction

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Financial position

Competitive Profile Matrix (CPM) | Strategic Management Insight

Variety of products

Experience and skills

in e-commerce
Management

Cash reserves

Pro t margin

Complementary products

Level of product integration

quali cation
and experience
Innovation in products
and
services

Inventory turnover

Successful product
promotions

Innovative culture

Employee retention

Superior marketing
capabilities

E cient production

Income per employee

Superior advertising
capabilities

Lean production system

Innovations per
employee

Superior IT capabilities

Strong supplier network

Cost per employee

Size of advertising budget

R&D spending

E ectiveness of sales
distribution

Strong distribution
network
Product design

Strong patent
portfolio

Employee satisfaction

Level of vertical
integration

New patents per year

E ective planning and

budgeting

E ective corporate
social
responsibility programs

Revenue per new

Variety of distribution

product

channels

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Sales per outlet

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Successful new
introductions

Power over distributors

Parent company
support

Weight
Each critical success factor should be assigned a weight ranging from 0.0 (low
importance) to 1.0 (high importance). The number indicates how important the
factor is in succeeding in the industry. If there were no weights assigned, all factors
would be equally important, which is an impossible scenario in the real world. The
sum of all the weights must equal 1.0. Separate factors should not be given too much
emphasis (assigning a weight of 0.3 or more) because the success in an industry is
rarely determined by one or few factors. In our rst example, the most signi cant
factors are strong online presence (0.15), market share (0.14), brand reputation
(0.13).
Rating
The ratings in CPM refer to how well companies are doing in each area. They range
from 4 to 1, where 4 means a major strength, 3 minor strength, 2 minor weakness
and 1 major weakness. Ratings, as well as weights, are assigned subjectively to each
company, but the process can be done easier through benchmarking. Benchmarking
reveals how well companies are doing compared to each other or industrys average.
Just remember that rms can be assigned equal ratings for the same factor. For
example, if Company A, Company B and Company C, have the market share of 25%,
27% & 28% accordingly, they would all receive the rating of 4 rather than receiving
ratings 2, 3 & 4.
Score & Total Score
The score is the result of weight multiplied by rating. Each company receives a score
on each factor. Total score is simply the sum of all individual score for the company.
The rm that receives the highest total score is relatively stronger than its
competitors. In our example, the strongest performer in the market should be
Company B (2.94 points).
Bene ts of the CPM:
The same factors are used to compare the rms. This makes the comparison
more accurate.
The analysis displays the information on a matrix, which makes it easy to
compare the companies visually.
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The results of the matrix facilitate decision-making. Companies can easily decide
which areas they should strengthen, protect or what strategies they should
pursue.

Using the tool

Step 1. Identify the critical success factors
To make it easier, use our list of CSF and include as many factors as possible. In
addition, following questions should be helpful identifying industrys CSF:
Why consumers prefer Company A over Company B or vice versa?
What resources, capabilities and competences rms possess?
What sustainable competitive advantages companies have in the industry?
Why some companies succeed and others fail in the industry?
Step 2. Assign the weights and ratings
The best way to identify what weights should be assigned to each factor is to
compare the best and worst performing companies in the industry. Well performing
companies will usually undertake activities that are signi cant for success in the
industry. They will put most of their resources and energy into those activities as
compared to low performing organizations. Weights can also be determined in
discussion with other top-level managers.
Ratings should be assigned using benchmarking or during team discussions.
Step 3. Compare the scores and take action
You should compare the scores on each factor to identify where companys relative
strengths and weaknesses are. In our rst example, Company A had relative strength
in level of product integration, product range and variety of distribution channels.
Therefore, Company A should protect these areas while trying to improve its
weaknesses in sales per employee and market share.
The company should also improve its strategy to become more successful in the
industry.

Example
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This is competitive pro le matrix example of smartphones operating systems. The

main competitors: Googles Android OS, Apples iOS and Microsofts Windows Phone
operating systems will be compared to each other to nd out their relative strengths
and weaknesses.

CPM Example
Android OS

iOS

Windows
Phone

Critical

Weight

Rating

Score

Rating

Score

Rating

Score

Market share

0.13

0.52

0.26

0.26

Number of
apps in store

0.10

0.40

0.40

0.20

Frequency of
updates

0.06

0.18

0.24

0.12

Design

0.07

0.21

0.21

0.21

Product brand

0.05

0.15

0.15

0.10

0.11

0.44

0.22

0.33

Usability

0.11

0.33

0.33

0.33

Customization

0.04

0.16

0.08

0.08

0.04

0.08

0.16

0.08

Success
Factor

reputation
Distribution
channels

features
Marketing

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capabilities
Company
brand
reputation

0.10

0.40

0.40

0.30

Openness

0.02

0.08

0.04

0.04

Cloud
integration

0.12

0.48

0.24

0.24

Rate of OS
crashes

0.08

0.08

0.32

0.24

Total

1.00

3.51

3.05

2.53

The CPM analysis reveals that Android is the strongest player in the industry with
relative strengths in market share, distribution channels, customization features,
openness and cloud integration. On the other hand, iOS prevails in frequency
updates, marketing capabilities and the rate of OS crashes. Windows Phone is the
weakest of them all and doesnt have any relative strengths against its rivals. The
companies should create their strategies according to their strengths and weakness
and improve their ratings in the most signi cant industrys areas.

Next Topic
BCG Matrix

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Benchmarking

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Benchmarking
Identifying the best practices in the industry

Value Chain Analysis

Improving business value chain to strengthen its competitive advantage

PEST & PESTEL Analysis

Knowing the external factors a ecting your company

supplier
power

buyer
power
RIVALRY

barriers
to enter

threat of

Porter's Five Forces

Evaluating industry's level of competition and its pro tability

substitutes

SWOT Analysis - How to do it properly!

Revealing organization's strong and weak points alongside opportunities
and threats

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