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The Competitive Profile Matrix: Chapter 7: The External Audit By: Nur Syuhada Binti Zaidi

The document discusses the Competitive Profile Matrix (CPM), a tool for analyzing a firm and its competitors. CPM identifies a firm's key competitors and compares them on critical success factors of the industry. Ratings from 1-4 are assigned to each competitor for each factor based on their performance. Weights from 0-1 indicate a factor's importance. A weighted score is calculated by multiplying ratings by weights. CPM reveals a firm's strengths and weaknesses relative to competitors to help identify areas for improvement.

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101 views

The Competitive Profile Matrix: Chapter 7: The External Audit By: Nur Syuhada Binti Zaidi

The document discusses the Competitive Profile Matrix (CPM), a tool for analyzing a firm and its competitors. CPM identifies a firm's key competitors and compares them on critical success factors of the industry. Ratings from 1-4 are assigned to each competitor for each factor based on their performance. Weights from 0-1 indicate a factor's importance. A weighted score is calculated by multiplying ratings by weights. CPM reveals a firm's strengths and weaknesses relative to competitors to help identify areas for improvement.

Uploaded by

MsFruitsJokes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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CPM

THE COMPETITIVE PROFILE MATRIX


CHAPTER 7: THE EXTERNAL AUDIT

BY: NUR SYUHADA BINTI ZAIDI

WHAT IS CPM?
THE COMPETITIVE PROFILE MATRIX
Powerful strategic ANALYSIS TOOLS
Help comparing firms and competitors
Help identifies strengths and weaknesses of firms competitors
Use to perform external audit (same like EFE Matrix) different from IFE Matrix
(Internal Audit)

# The key question is analyzing competition

Competitive profile matrix show the clear picture to the firm about their strong points
and weak points relative to their competitors.
The CPM score is measured on basis of critical success factors, each factor is
measured in same scale mean the weight remain same for every firm only rating
varies. [EXAMPLE ON TEXTBOOK PAGE 247]
The best thing about CPM that it include your firm and also facilitate to add other
competitors make easier the comparative analysis.

Understanding the Tools


In order to better understand the external environment and the
competition in a particular industry, firms often use CPM.
The matrix identifies a firms 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 CPM is demonstrated on the next slide:

What Did CPM Must Have???


Critical Success Factors (same for every firm)
Rating (different)
Weight (same for every firm)
Weighted Score/Score (different)
Next, compare company with competitors

Critical Success Factors


Critical success factors (CSF) are the key areas
CSF must be performed at the highest possible level of excellence if organizations want
succeed in the particular industry
CSFare extracted after deep analysis of internal and external environment of the firm.
Obviously there are some good and some bad for the company in the external
environment and internal environment.
The higher rating show that firm strategy is doing well to support this critical success
factors and lower rating means firm strategy is lacking to support the factor
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:

Rating
The ratings in CPM refer to how well companies are doing in each area.
Highest the rating better the response of the firm towards the critical success
factor,rating range from 1.0 to 4.0 and can be applied to any factor.
They range from 4 to 1, where 4 means a major strength, 3 minor strength, 2
minor weakness and 1 major weakness.
The response is poor represented by 1.0
The response is average is represented by 2.0
The response is above average represented by 3.0
The response is superior represented by 4.0

Ratings, as well as weights, are assigned subjectively to each company, but the
process can be done easier through benchmarking. (page 214-215)
Benchmarking reveals how well companies are doing compared to each other or
industrys average.

Weight
Each critical success factor should be assigned a weight ranging from 0.0 (low
importance) to 1.0 (high importance).
Weight attribute in CPM indicates the relative importance of factor to being successful
in the firms industry.
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.
The weight range from 0.0 means not important and 1.0 means important, sum of all
assigned weight to factors must be equal to 1.0 otherwise the calculation would not be
consider correct.

Weighted Score/Score
Weighted score value is the result achieved after multiplying each factor rating with the weight
( 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 sum of all weighted score is equal to the total weighted score, final value of total weighted
score should be between range 1.0 (low) to 4.0(high).
The average weighted score for CPM matrix is 2.5 any company total weighted score fall below
2.5 consider as weak.
The company total weighted score higher then 2.5 is consider as strong in position.
The other dimension of CPM is the firm with higher total weighted score considered as the
winner among the competitors.

Competitiveness of the firm can be measured on the basis of industry key success
factors and firms strengths.
If variation between the final score is found among the rivals; than with the higher
score getter has the greater netcompetitive advantageand vice versa for lower score
getter.

HOW TO USE CPM:

STEP 1: Identify the Critical Success Factors


To make it easier, use 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 firms possess?
What sustainable competitive advantages
companies have in the industry?
Why some companies succeed and others
fail in the industry?

Identify the critical success


factors

Assign the weights and ratings

Compare the scores and take


action

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.

Check Benchmarking:
https://www.strategicmanagementinsight.com/tools/ben
chmarking.html

Identify the critical success


factors

Assign the weights and ratings

Compare the scores and take


action

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.

Identify the critical success


factors

Assign the weights and ratings

Compare the scores and take


action

SIMPLE CPM STEP

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.

Benefits of CPM

DIFFERENT
BETWEEN
CPM AND EFE

THE END ||||

Q&A

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