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Competitive Profile Matrix

The Competitive Profile Matrix (CPM) is a tool that compares a firm and its rivals based on critical success factors in an industry. It reveals each company's relative strengths and weaknesses. The CPM involves identifying critical success factors, assigning weights and ratings to the factors, calculating scores, and comparing the total scores to determine the strongest performer. The CPM benefits firms by facilitating an accurate comparison using consistent factors and presenting results visually to inform strategic decision making.

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Talha Javed
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279 views

Competitive Profile Matrix

The Competitive Profile Matrix (CPM) is a tool that compares a firm and its rivals based on critical success factors in an industry. It reveals each company's relative strengths and weaknesses. The CPM involves identifying critical success factors, assigning weights and ratings to the factors, calculating scores, and comparing the total scores to determine the strongest performer. The CPM benefits firms by facilitating an accurate comparison using consistent factors and presenting results visually to inform strategic decision making.

Uploaded by

Talha Javed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Competitive Profile Matrix (CPM)

The Competitive Profile Matrix (CPM) is a tool that compares the firm and its rivals and reveals
their relative strengths and weaknesses.

Understanding the tool


In order to better understand the external environment and the competition in a particular
industry, firms often use CPM. The matrix identifies a firm’s key competitors and compares
them using industry’s critical success factors. The analysis also reveals company’s 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.
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
different 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 definite and you should include industry specific
factors in your matrix:
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 first example, the most
significant 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 industry’s average. Just remember that firms 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 firm 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).

Benefits of the CPM:

 The same factors are used to compare the firms. This makes the comparison more
accurate.
 The analysis displays the information on a matrix, which makes it easy to compare the
companies visually.
 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 industry’s CSF:
 Why consumers prefer Company A over Company B or vice versa?
 What resources, capabilities and competences firms 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 significant 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 company’s relative strengths
and weaknesses are. In our first 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
This is competitive profile matrix example of smartphones operating systems. The main
competitors: Google’s Android OS, Apple’s iOS and Microsoft’s Windows Phone operating
systems will be compared to each other to find out their relative strengths and weaknesses.

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 doesn’t 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 significant industry’s areas.

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