Contents

Need for an external comparison The competitive profile matrix Building the matrix Understanding a CPM for a company Conclusion

Need for External Comparison

Understand key opportunities and threats Develop appropriate strategies to maximize opportunities and counter threats Requires competitive intelligence in the following spheres
Economic Social Political Legal Technological

External Information Sources

Indexes Wall Street Index, Business Periodicals Index Internet Sources New York Stock Exchange, Investor Guide, BigBook.com Magazines Barrons, Forbes, Washington Post Government Department of Commerce, Science and Technology Consultants Boston Consulting Group, Deloitte

Tools for an External Audit

Porters Five Forces Model

Rivalry among competitors Potential entry of new competitors Potential development of substitute products Bargaining power of suppliers Bargaining power of consumers

External Factor Evaluation (EFE) Matrix

Key factors Importance of factors Ranking for factors Sum of weighted score

Competitive Profile Matrix

The Competitive Profile Matrix Steps

Step 1

Identify key factors

Assign factors to each factor ranging from 0 to 1

Step2

Rate each factor from 1 to 4 for each firm. (1 Greatest weakness 4 Biggest Strength) Step 3 Calculate weighted score for each factor Find total weighted score for each firm

Step 4

Step 5

CPM Matrix Example

College Comparisons
Critical Success Factors Weight Faculty 0.15 Infrastructure 0.15 Placements 0.15 ROI 0.1 College Brand 0.2 Campus Life 0.05 Location 0.1 Student Diversity 0.1 TOTAL 1 A B C D E Rating Wt. Score Rating Wt. Score Rating Wt. Score Rating Wt. Score Rating Wt. Score 3 0.45 3 0.45 3 0.45 3 0.45 3 0.45 1 0.15 4 0.6 3 0.45 3 0.45 4 0.6 2 0.3 4 0.6 4 0.6 2 0.3 3 0.45 3 0.3 2 0.2 4 0.4 2 0.2 3 0.3 2 0.4 4 0.8 4 0.8 2 0.4 3 0.6 1 0.05 4 0.2 3 0.15 3 0.15 3 0.15 4 0.4 4 0.4 4 0.4 2 0.2 3 0.3 2 0.2 3 0.3 3 0.3 3 0.3 2 0.2 2.25 3.55 3.55 2.45 3.05

Comparison Of Key Factors Of Different Colleges

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

Advantages
Critical success factors identified Strong and weak points of firm with respect to competitors found out Includes both internal and external factors as parameters Comparative analysis made easier

Limitations
Differences in overall scores of two firms do not reveal by how much a firm is better than the other Possible errors in factor weightage Gives relative strength of firm, not an exact number Not a substitute for intuitive judgement

References

Strategic Management by Fred R. David http://mba-lectures.com/management/strategicmanagement/974/competitive-profile-matrix-formcdonalds.html www.shiksha.com