Competitive Profile Matrix (CPM)
Ovidijus Jurevicius | 29.10.2013
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Definition
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 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
matrix is demonstrated below.
Company A
Company B
Company C
Critical Success Factor
Weight
Rating
Score
Rating
Score
Rating
Score
Brand reputation
0.13
0.26
0.39
0.13
Level of product integration
0.08
0.32
0.24
0.08
Range of products
0.05
0.15
0.05
0.10
Successful new introductions
0.04
0.12
0.12
0.12
Market Share
0.14
0.28
0.56
0.56
Sales per employee
0.08
0.08
0.16
0.24
Low cost structure
0.05
0.05
0.15
0.20
Variety of distribution channels
0.07
0.28
0.14
0.14
Customer retention
0.02
0.04
0.08
0.02
Superior IT capabilities
0.11
0.33
0.44
0.44
Strong online presence
0.15
0.45
0.45
0.60
Successful promotions
0.08
0.08
0.16
0.08
Total
1.00
2.44
2.94
2.71
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:
Market Share
Union relations
Power over suppliers
Product Quality
Skilled workforce
Access to key suppliers
Clear strategic direction
Location of facilities
Efficient 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
Effective social media
management
Financial position
Variety of products
Experience and skills
in e-commerce
Cash reserves
Complementary products
Management qualification
and experience
Profit margin
Level of product integration
Innovation in products and
services
Inventory turnover
Successful product promotions
Innovative culture
Employee retention
Superior marketing capabilities
Efficient 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
Strong distribution network
R&D spending
Effectiveness of sales distribution
Product design
Strong patent portfolio
Employee satisfaction
Level of vertical integration
New patents per year
Effective planning and budgeting
Effective corporate social
responsibility programs
Revenue per new product
Variety of distribution channels
Sales per outlet
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 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 industrys 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 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?
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 toplevel 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 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: Googles Android OS, Apples iOS and Microsofts Windows Phone
operating systems will be compared to each other to find out their relative strengths and
weaknesses.
Android OS
iOS
Windows Phone
Critical Success Factor
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 reputation
0.05
0.15
0.15
0.10
Distribution channels
0.11
0.44
0.22
0.33
Usability
0.11
0.33
0.33
0.33
Customization features
0.04
0.16
0.08
0.08
Marketing capabilities
0.04
0.08
0.16
0.08
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 significant industrys areas.
