Competitive Profile Matrix (CPM)
Adapted from Ovidijus Jurevicius 2013
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.
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.
Using the tool
Step 1. Identify the critical success factors
Identify and include as many factors as possible. The more critical success factors are
included the more robust and accurate the analysis is. 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
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 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.
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.
Step 3. Compare the scores and take action
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. You
should compare the scores on each factor to identify where company’s relative
strengths and weaknesses are. Companies should protect the areas of strengths while
trying to improve their weaknesses
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.
Android OS iOS Windows Phone
Critical Success Factor Weight Rating Score Rating Score Rating Score
Market share 0.13 4 0.52 2 0.26 2 0.26
Number of apps in 0.10 4 0.40 4 0.40 2 0.20
store
Frequency of updates 0.06 3 0.18 4 0.24 2 0.12
Design 0.07 3 0.21 3 0.21 3 0.21
Product brand 0.05 3 0.15 3 0.15 2 0.10
reputation
Distribution channels 0.11 4 0.44 2 0.22 3 0.33
Usability 0.11 3 0.33 3 0.33 3 0.33
Customization features 0.04 4 0.16 2 0.08 2 0.08
Marketing capabilities 0.04 2 0.08 4 0.16 2 0.08
Company brand 0.10 4 0.40 4 0.40 3 0.30
reputation
Openness 0.02 4 0.08 2 0.04 2 0.04
Cloud integration 0.12 4 0.48 2 0.24 2 0.24
Rate of OS crashes 0.08 1 0.08 4 0.32 3 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 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.
