Explain the strategic position and action evaluation (SPACE) matrix. How may adaptive strategic alternatives be developed using SPACE?

Assignment

Exercises:

1. Why should program evaluation be used for public health and not-for-profit institutions in the development of adaptive strategies?
2. Explain the strategic position and action evaluation (SPACE) matrix. How may adaptive strategic alternatives be developed using SPACE?

Professional Development:

Case Study #8: “Dr. Louis Mickael: The Physician as Strategic Manager”

Develop an environmental assessment and an internal capabilities analysis using decision support tools that have been introduced in this module (such as PLC analysis, BCG portfolio analysis, SPACE analysis and so on). Analyze alternative strategies to include pros and cons of each alternative, then conclude with a recommended strategy and brief implementation plan.

Strategic Alternatives – Expert Answer and Explanation

Program Evaluation

According to Ginter et al. (2013), program evaluation is a strategic analysis technique used mainly by public and not-for-profit organizations to assess their programs and develop strategic alternatives in cases where gaining a competitive edge or market share is not relevant. In most cases, the other tools for developing strategic alternatives, such as SWOT analysis, an organization is usually compared with other competing firms or products.

However, in program evaluation, the analysis is mainly used for internal and external assessment to evaluate whether the various programs are meeting the mission and vision of the organization (Strang, 2018). Other than that, program evaluation is useful in identifying whether the resources allocated to the various programs are sufficient to fulfill the strategic goals of the organization.

In program evaluation, a needs assessment is also conducted to ensure that both public and not-for-profit organizations meet the needs of the communities they are supposed to serve and to identify the best strategic alternatives to fulfill those needs.

SPACE Matrix

A strategic position and action evaluation matrix, also known by the acronym SPACE matrix is a decision support tool that can be used to formulate strategic alternatives (Ginter et al., 2013). The tool expands on the BCG analysis to develop an appropriate strategic profile of the organization. The SPACE matrix uses graphical charts to depict how strategic alternatives can be applied based on various organizational factors (Ginter et al., 2013).

Using the SPACE matrix, adaptive strategic alternatives can be developed by assessing the environmental stability, the competitive position of the organization, the financial and service category strength, after which an examination of the most appropriate adaptive strategic alternative can be done.

Professional Development

One of the challenging aspects of operating an organization is coming up with effective strategies that can assist the organization to navigate the changing business environment mired with stiff competition  For organizations to remain relevant, they have to assess both their internal and external environment, evaluating their strengths and opportunities for growth, eliminating their threats and working on their weaknesses.

This paper will develop an environmental assessment using the case study dubbed: “Dr. Louis Mickael: The Physician as Strategic Manager.” Various decision support tools will be used to assess the strategic positioning of Dr. Louis Mickael amidst the changing business environment.

Environmental Assessment and an Internal Capabilities Analysis of the Business

SWOT Analysis

Using the SWOT analysis tool, there are several internal strengths that were observed in Dr. Lou’s practice. One of the strengths was a good reputation with his clients which enabled the business to have a strong footing within the market space. According to Ginter et al. (2013), a healthy business-client relationship is one of the strengths that can act as a stable foothold in maintaining strategic advantage, and this can be seen by the over 800 patients served by the facility which was fairly higher in comparison to other individual practices.

The aspect of a good client relationship can be attributed to the skilled employees Dr. Lou had employed, who had a good rapport with the clients served in the practice. Dr. Lou also invested some finances, though on a need to basis to enhance the skills and competencies of personnel to deliver better services, and also the application of technology that was relevant at the onset of the business, which acted as a strategic tool in gaining a competitive edge (Aithal, 2019).

Another strength was the fact that Dr. Lou’s practice was linked with most of the third-party payors, which meant that patients served in the facility had a relatively easy time to process their payments.

Concerning opportunities, the growing market was one of the considerable opportunities that Dr. Louis’s practice could capitalize on. While at the onset of the business, Dr. Lou’s main client base consisted of mainly young clients, but with the rapidly expanding populations with new businesses being developed, means that there are substantially more types of market bases that could be tapped.

The development of a university within the business neighborhood also meant that there is an opportunity to capitalize on a joint venture that will provide residence to the young upcoming physicians and office assistants, thus increasing the number of patients tended to, and at the same time, save on some of the work and staff expenses encountered in Dr. Lou’s practice.

Some of the weaknesses that were observed include low financial strength, which is an issue that affected Dr. Lou’s ability to expand and acclimatize to the changing business environment. It can be seen from the financial reports that indicated the firm had yet to have a stable footing in terms of the asset base and the profits generated which could be used to improve the firm’s operations. However, it can be established that the financial strength was steadily improving.

This made Dr. Lou have less than enough time to serve his patients. Another weakness was that the technology he was using was outdated as compared to what the competitors were using. Healthcare information technology is a major component that an organization should possess to improve the efficiency of its services, such as processing of client reimbursements (Aithal, 2019). The size of Dr. Lou’s practice was also considered a weakness. This can be seen from when Dr. Lou found it difficult to introduce a new partner to his practice due to worries for accommodation inadequacies.

As for the threats, one of them is that Dr. Lou was doing most of the administrative duties by himself, including billing and following up with the patients’ reimbursements. This is a threat, in that, there is a high likelihood that he will end up losing a chunk of the unattended clients. Another threat was the entrance of two hospitals which substantially increased the amount of competitive pressure faced by Dr. Lou’s practice.

The introduction of new competitors is one of the main factors that may pose a threat to an organization’s competitive position and by extension, its existence (Manral & Harrigan, 2018). The introduction of more specialty practice also exposed Dr. Lou’s practice, in that, some of the services that he initially offered were now referred to facilities offering specialized care. Another threat was the changing rules, for example, reimbursement policies which drastically changed the activities and workload required to be done by Dr. Lou, at the expense of dealing with his clients.

External/Internal Strategy Matrix

The external/internal strategy matrix builds upon the SWOT analysis earlier conducted. Based on the analysis there are several strategies that were identified, together with alternatives that will be discussed in detail in the next section.

Analysis of Alternative Strategies

Based on the analysis of internal strengths and environment assessment of Dr. Lou’s practice, several strategies can be identified. Starting with strategies dealing with general environmental issues, one of the was product enhancement strategy, whereby, the business could opt to improve some of its products such as care services targeting the majority young population and the increasing elderly population.

The advantage of this strategy is that it will likely lead to enhanced customer loyalty and possibly an increased consumer base (Mathur & Sutton, 2017). As for its disadvantage, it is a strategy that can be easily be countered by other competing organizations so long as they can match the level of quality in terms of service provision.

Another strategy, which was focused on healthcare system issues, divesture was considered an alternative to enhancement strategy. Divestiture strategy is one of the market exit strategies that entails completely pulling out from a business by selling it off, or terminating its entire operations or that of a specific unit (Ginter et al., 2013). The advantage of this strategy is that it allows resources to be employed in better-performing products. Its disadvantage is that it usually affects an organization’s cost structure (Thywissen et al., 2018).

With regard to competitive issues, cost leadership strategy can be a suitable alternative. Cost leadership involves the competitive position of the organization by providing the lowest possible cost for services/products rendered to consumers. The advantage of this strategy is that it is effective in increasing the market size and within a short period (Bryksina et al., 2018). Its disadvantage is that it may not be sustainable in the long run.

References

Aithal, P. S. (2019). Information Communication & Computation Technology (ICCT) as a Strategic Tool for Industry Sectors. International Journal of Applied Engineering and Management Letters (IJAEML), 3(2), 65-80. Retrieved from: https://ssrn.com/abstract=3497777

Bryksina, N., Golovina, A., & Legotin, F. (2018). Implementation of Cost Leadership Strategy by Russian Medical Companies of Laboratory Diagnostics. In Leadership for the Future Sustainable Development of Business and Education (pp. 189-198). Springer, Cham. https://doi.org/10.1007/978-3-319-74216-8_20

Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic Management of Health Care Organizations (7th ed.). San Francisco: Jossey-Bass. (Chapter 4)

Mathur, S., & Sutton, J. (2017). Personalized medicine could transform healthcare. Biomedical Reports, 7(1), 3-5.  https://doi.org/10.3892/br.2017.922

Manral, L., & Harrigan, K. R. (2018). Corporate advantage in Customer-Centric Diversification. Journal of Strategic Marketing, 26(6), 498-519. https://doi.org/10.1080/0965254X.2017.1299789

Strang, K. D. (2018). Strategic analysis of CSF’s for not-for-profit organizations. Measuring Business Excellence. Vol. 22 No. 1, pp. 42-63. https://doi.org/10.1108/MBE-07-2016-0035sour

Thywissen, C., Pidun, U., & Zu Knyphausen-Aufseß, D. (2018). Process Matters—The relevance of the decision-making process for divestiture outcomes. Long Range Planning, 51(2), 267-284. https://doi.org/10.1016/j.lrp.2017.04.002

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The Strategic Position and Action Evaluation (SPACE) Matrix: A  Guide to Strategic Decision Making

The SPACE matrix is a fundamental strategic management tool that helps organizations evaluate their competitive position and determine the most appropriate strategic direction. This analytical framework enables upper management to make strategic choices and decisions by evaluating both internal and external factors that influence organizational performance.

What is the SPACE Matrix?

The Strategic Position and Action Evaluation (SPACE) matrix is a strategic management methodology that helps organizations formulate strategic goals and identify their competitive position in the market space. Developed by Alan Rowe, Richard Mason, Karl Dickel, Richard Mann, and Robert Mockler, this tool provides a systematic approach to strategic planning.

Key Components of SPACE Analysis

The SPACE matrix evaluates organizations across four critical dimensions:

1. Financial Strength (FS) – Internal factors
2. Competitive Advantage (CA) – Internal factors
3. Environmental Stability (ES) – External factors
4. Industry Strength (IS) – External factors

Understanding the Four Dimensions of SPACE Matrix

1. Financial Strength (FS)

Financial strength factors often come from company accounting and include return on investment, leverage, turnover, liquidity, working capital, and cash flow. Organizations with strong financial positions can pursue aggressive growth strategies.

Key Financial Strength Indicators:

• Return on Investment (ROI)
• Cash Flow Stability
• Working Capital Management
• Debt-to-Equity Ratio
• Profit Margins

2. Competitive Advantage (CA)

Competitive advantage measures how well an organization performs relative to its competitors. This dimension focuses on unique capabilities and market positioning.

Competitive Advantage Factors:

• Market Share
• Product Quality
• Brand Recognition
• Customer Loyalty
• Technology Leadership

3. Environmental Stability (ES)

Environmental stability factors include overall economic conditions, GDP growth, inflation, price elasticity, technology changes, and barriers to entry. The stable environmental factors are influenced by technology changes, regulatory changes, and economic volatility.

4. Industry Strength (IS)

Industry strength evaluates the overall attractiveness and growth potential of the industry in which the organization operates.

Industry Strength Measures:

• Growth Potential
• Profit Potential
• Financial Stability
• Resource Utilization
• Technological Innovation

How to Construct a SPACE Matrix: Step-by-Step Guide

Step 1: Identify and Rate Variables

Create a comprehensive list of variables for each dimension and assign ratings:

• Financial Strength & Industry Strength: Scale of 1-6 (1=worst, 6=best)
• Competitive Advantage & Environmental Stability: Scale of -1 to -6 (-1=best, -6=worst)

Step 2: Calculate Average Scores

Step 3: Calculate Coordinate Points

• X-axis coordinate: CA + IS = -2.5 + 4.5 = 2.0
• Y-axis coordinate: FS + ES = 4.0 + (-3.5) = 0.5

Step 4: Plot and Interpret Results

The coordinate (2.0, 0.5) falls in the Aggressive Strategy quadrant, indicating the organization should pursue growth-oriented strategies.

The Four Strategic Postures in SPACE Matrix

The SPACE model creates four strategic positions: aggressive strategy, conservative strategy, defensive strategy, and competitive strategy.

1. Aggressive Strategy (Upper Right Quadrant)

When to Use: High financial strength, stable environment Strategic Actions:

• Market penetration
• Product development
• Diversification
• Acquisition strategies

2. Conservative Strategy (Upper Left Quadrant)

When to Use: Strong financial position, unstable environment Strategic Actions:

• Market penetration with existing products
• Concentric diversification
• Cost reduction initiatives

3. Defensive Strategy (Lower Left Quadrant)

When to Use: Weak financial position, unstable environment Strategic Actions:

• Retrenchment
• Divestiture
• Liquidation
• Cost-cutting measures

4. Competitive Strategy (Lower Right Quadrant)

When to Use: Weak financial position, stable environment Strategic Actions:

• Horizontal integration
• Market development
• Joint ventures
• Strategic alliances

Developing Adaptive Strategic Alternatives Using SPACE

The SPACE matrix enables organizations to develop multiple strategic alternatives based on their positioning. Here’s how adaptive strategies can be formulated:

Adaptive Strategy Development Framework

Multi-Scenario Planning

Organizations can develop adaptive strategic alternatives by considering:

1. Scenario-Based Planning: Create multiple future scenarios and develop strategies for each
2. Dynamic Positioning: Adjust strategies based on changing market conditions
3. Hybrid Strategies: Combine elements from different strategic postures
4. Contingency Planning: Prepare alternative strategies for unexpected changes

SPACE Matrix Examples and Case Studies

Example 1: Technology Startup

Financial Strength: 3.5 (Limited resources but growing) Competitive Advantage: -2.0 (Strong innovation capabilities) Environmental Stability: -4.0 (Rapidly changing technology landscape) Industry Strength: 5.0 (High growth potential)

Coordinates: (3.0, -0.5) → Competitive Strategy Recommended Actions: Form strategic partnerships, focus on niche markets, leverage technology advantages

Example 2: Established Manufacturing Company

Financial Strength: 5.0 (Strong cash position) Competitive Advantage: -3.0 (Moderate market position) Environmental Stability: -2.0 (Stable regulatory environment) Industry Strength: 3.0 (Mature industry with steady demand)

Coordinates: (0.0, 3.0) → Conservative Strategy Recommended Actions: Optimize operations, selective market expansion, maintain market share

Advanced SPACE Matrix Applications

Integration with Other Strategic Tools

The SPACE matrix can be effectively combined with:

• SWOT Analysis: Use SPACE results to prioritize SWOT factors
• BCG Matrix: Apply SPACE insights to business portfolio decisions
• Porter’s Five Forces: Incorporate competitive analysis into SPACE evaluation
• Balanced Scorecard: Align SPACE strategies with performance metrics

Digital Transformation and SPACE Matrix

Modern organizations must consider digital factors in their SPACE analysis:

Digital Financial Strength Indicators:

• Digital revenue growth
• Technology investment ROI
• Digital transformation costs

Digital Competitive Advantage Factors:

• Digital market share
• Technology adoption speed
• Data analytics capabilities

Statistical Insights and Market Trends

SPACE Matrix Adoption Statistics

Recent studies indicate that strategic planning tools usage has evolved significantly:

Industry Applications

The SPACE Matrix is particularly effective in strategic management for organizations across various industries, with highest adoption rates in:

• Technology sector (78%)
• Manufacturing (71%)
• Financial services (69%)
• Healthcare (64%)

Implementation Best Practices

1. Data Collection and Validation

• Use multiple data sources
• Involve cross-functional teams
• Validate assumptions with market research
• Regular updates and reviews

2. Stakeholder Engagement

• Include key stakeholders in the evaluation process
• Communicate results clearly
• Align strategies with organizational capabilities
• Monitor implementation progress

3. Dynamic Application

• Conduct quarterly reviews
• Adjust strategies based on changing conditions
• Maintain flexibility in strategic planning
• Integrate with performance management systems

Common Pitfalls and How to Avoid Them

1. Oversimplification

Problem: Reducing complex strategic decisions to simple quadrants Solution: Use SPACE as one tool among many, not a standalone solution

2. Static Analysis

Problem: Treating SPACE results as permanent Solution: Regular updates and dynamic strategy adjustment

3. Subjective Scoring

Problem: Inconsistent or biased factor ratings Solution: Use objective data sources and multiple evaluators

Future of SPACE Matrix in Strategic Management

Emerging Trends

1. AI-Enhanced Analysis: Machine learning algorithms for factor scoring
2. Real-Time Strategic Positioning: Dynamic SPACE analysis with live data
3. Sustainability Integration: Environmental and social factors in SPACE evaluation
4. Digital Ecosystem Mapping: Extended SPACE analysis for platform businesses

Technology Integration

Modern SPACE matrix applications incorporate:

• Automated data collection
• Predictive analytics
• Scenario modeling
• Interactive visualization tools

Conclusion

The SPACE matrix remains a powerful tool for strategic position and action evaluation, providing organizations with a systematic approach to strategic decision-making. By evaluating financial strength, competitive advantage, industry strength, and environmental stability, the SPACE Matrix helps determine appropriate strategic actions.

Success with the SPACE matrix requires:

• Comprehensive data collection
• Objective factor evaluation
• Regular strategy updates
• Integration with other strategic tools
• Adaptive implementation approaches

Organizations that effectively utilize the SPACE matrix can develop robust strategic alternatives, adapt to changing market conditions, and maintain competitive advantages in their respective industries.

Key Takeaways

1. SPACE matrix provides a systematic framework for strategic evaluation
2. Four strategic postures offer clear direction for strategic actions
3. Adaptive strategic alternatives enable flexible response to market changes
4. Integration with other tools enhances strategic planning effectiveness
5. Regular updates ensure continued relevance and accuracy

By mastering the SPACE matrix methodology, organizations can enhance their strategic planning capabilities and make more informed decisions about their competitive positioning and future direction.