COMPETITIVE PROFILE MATRIX (CPM)

AS A COMPETITORSANALYSIS TOOL:
A THEORETICAL PERSPECTIVE
-Shanewaz Mahmood Sohel1
-Abu Mohammad Atiqur Rahman

-Md. Aftab Uddin3 (Corresponding Author)

ABSTRACT
This paper aims to critically appraise the importance of CPM in providing information for a companys competitive advantage and its role in formulating companys strategy. In addition, this paper also pinpoints some other
popular techniques for competitors analysis and their merits. Its an exploratory and conceptual analysis based on literature review emphasizing the
emergence of strategic analysis tools for engendering factors of achieving
competitiveness in the fierce competitive market. The study extensively reviews
published materials from different sources to explain the relevant concepts on
the issue. In this connection, different concepts, ideas, approaches, areas, contemporary practices and issues either from books or journals on CPM and
other competitors analysis tool-kits have been addressed to explain the topic.
Finally, conclusions and future directions have been attached therewith.

KEW WORDS
CPM, KEY SUCCESS FACTORS (KSFS), STRATEGIC TOOL,
COMPETITIVENESS

1. INTRODUCTION
Competition is one of the most inevitable issues in todays business world.
No matter a firm is big or small; it has competitors in the industry and the strategies
of these competitors affect the process of formulating strategic plan for the company. Competitors represent a major determinant of corporate success, and failure
of a company to analyze its competitors strengths, weaknesses, strategies, and
areas of vulnerability may lead to suboptimal performance in the business (Wilson,
1994). So, analyzing the competitors is crucial for firms strategy formulation and
implementation as well as competitive preparation (Ho & Lee, 2008; Bloodgood &
Bauerschmidt, 2002). As most of the managers acknowledge the importance of
understanding their industry and competitors, there is a growing interest to use
various competitive analysis techniques to help formulate and implement strategy
(Prescott & Grant, 1988). Some of these popular techniques include: SWOT analy40

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sis, Boston Consulting Group (BCG) approach, General Electric Stoplight Strategy,
McKinseys Industry Strength Matrix, Porters Five Forces model & Value Chain
Analysis, SPACE matrix, External Factor Evaluation Matrix (EFE), Internal Factor
Evaluation Matrix (IFE), PESTEL analysis, and Competitive Profile Matrix (CPM)
(Hill & Westbrook, 1997; Radder & Louw, 1998; Porter, 2000; Bygrave &
Zacharakis, 2011). As strategic analysis and planning tools, these conventional
matrices provide valuable insight about competitive scenario to help managers plan
an organizations future competitive position (Capps III & Glissmeyer, 2012). Among
these techniques, CPM not only creates a powerful visual catch-point but also
conveys information about your competitive advantage and is the basis for your
companys strategy (Bygrave & Zacharakis, 2011, p. 244).

2. LITERATURE REVIEW ON ESSENCE OF COMPETITORS

ANALYSIS TOOLS
Researchers have proposed some strategic techniques which are useful
for analyzing the competitive scenario of the industry. Coman & Ronen (2009)
mention that SWOT (Strengths-Weaknesses-Opportunities-Threats) analysis is one
of the most useful tools for defining a companys strategic action by analyzing
companys internal capabilities and external environment to identify appropriate
opportunities and threats. However, the problem of SWOT analysis is that it does
not prioritize or weight the internal or external factors identified (Hill & Westbrook,
1997) whereas the CPM method includes the weight of all identified CSF for analyzing the competitive advantages. Porter (2000) identifies another popular tool
known as five forces model to analyze the industry attractiveness of a firm. This
model focuses on five forces that shape the competition within an industry: a) the
threat of new entry, b) the threat of substitutes, c) the bargaining power of buyers,
d) the bargaining power of suppliers, and e) the extent of rivalry between competitors within an industry (Hill & Jones, 2001). On the basis of analyzing these factors, Porter argues that an organization can develop a generic competitive strategy
of differentiation or cost leadership, capable of delivering superior performance
through an appropriate configuration and coordination of its value chain activities
(Stonehouse & Snowdon, 2007; p. 257). This model offers not only a valuable
starting point for strategic analysis (Johnson, et. al., 2011), but it also has some
limitations. According to Porter (2000), this model helps a company assess the
potential profitability of a particular industry but Rumelt (1991) argues that the
profitability does not depend on industry-wide factors; firm-specific factors such as
unique endowment, individual competence, and strategies are more important to
the profitability of the business. The Porter model also indicates that five forces
apply equally to all firms in an industry but in reality the strength of those forces
may vary from business to business in terms of size or strength of brand name
(Stonehouse & Snowdon, 2007, p. 258). In addition, Porters five forces model
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assumes that the relationships with competitors, suppliers, and buyers are adversarial
but in reality buyers and suppliers may have long lasting relationships as partners
which is more soften and less aggressive than that implied in the Porters model
(Campbell, Stonehouse, & Houston, 2002; p. 142). Another competitive analysis
tool SPACE (Strategic Position and Action Evaluation) matrix is proposed by Rowe,
Mason, Dickel, Mann, & Mockler (as cited in Radder & Louw, 1998) which analyzes the industry competition based on two dimension; first, internal dimension
includes financial strength and competitive advantage which are the major determinants of companys strategic position and second, external dimension includes environment stability and industry strength that indicate the strategic position of entire
industry. Radder and Louw (1998) indicate that the different dimensions in the
matrix result in different strategic postures (aggressive, competitive, conservative,
and defensive) which can be translated into generic competitive strategy to help
manager develop appropriate competitive strategy for the company. However, this
matrix suffers from some limitations. There are no scientific procedure to select
the factors in the dimensions and each individual factor carry equal weight analyzing the competition (Radder & Louw, 1998). But in CPM, the KSFs carry different
weights according to their importance to the firm and, and in their industry environment.

3. COMPETITIVEPROFILE MATRIX:CONCEPTUALFRAMEWORK
Zimmerer, Scarborough, & Wilson (2008) define Competitor Profile Matrix (CPM) as a tool which helps the companies assess themselves against their
major competitors using the critical success factors for that industry. Zimmerer et
al. (2008) state three steps to construct a CPM for a company. The first step is to
find the KSFs for the company and attach weight to those factors according to their
relative importance. In the next step, company need to identify its major competitors and rate each competitors including company itself on each of the KSFs. KSFs
include both internal and external issues and different ratings have been given from
1 to 4 considering their relative importance to the organization where 1 stands for
major weakness, 2 stands for minor weakness, 3 stands for minor strength,
and 4 stands for major strength. Same method has been applied when rating to
the KSFs of competitors. Lastly, company has to multiply the weight by the rating
for each factor to get a weighted score and then adds up each competitors weighted
scores to get a total weighted score. A hypothetical example of a CPM is given
below:

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Table 1: Competitive Profile Matrix of Company A

Company A
Key Success Factors
Innovation
Advertising
Brand Name
Product Quality
Customer Service
Price Competitiveness
Technological Competence
Total

Weight
0.25
0.20
0.20
0.15
0.10
0.05
0.05
1.00

Score
4
2
1
4
3
3
3

Competitor 1

Competitor 2

Weighted Score Weighted Score Weighted

Score
Score
Score
1.00
3
1.00
4
0.75
0.40
4
0.60
3
0.80
0.20
2
0.80
4
0.40
0.60
2
0.30
2
0.30
0.30
1
0.20
2
0.10
0.15
4
0.15
3
0.20
0.15
2
0.05
1
0.10
2.80
3.10
2.65

This table portrays the competitive scenarios of the company and its competitors in the industry. From this table, it is found that the company A scores better
(strengths) in innovation and product quality, and assumes minor strength in customer service, price competitiveness, and in technological competence. Albeit, company has minor weakness in advertising and major weakness is in brand name. As
a whole, its total score is 2.80 and on the other hand, its competitor As and competitor Bs total scores are 3.10, and 2.65 respectively. From this competitive profile
matrix, it is revealed that competitor 1 enjoys more competitive advantages by 0.30
than the company itself while competitor 2 is lagging behind by 0.15.

4. STRENGTHS OF CPM AS A COMPETITOR ANALYSIS TOOL

As a strategic analysis tool, CPM provides several benefits to the company. Capps III and Glissmeyer (2012) argue that CPM includes companys KSFs
which help the company identify strengths and deficiencies in those significant areas. Analyzing organizations in this manner is an effective way to evaluate many
competitors in one framework to support an effective strategic plan (Fleisher &
Bensoussan, 2003, 2007; as cited in Capps III & Glissmeyer, 2012, p. 1060). CPM
enables a company to evaluate the strengths and weaknesses of its major competitors which is matter to develop an effective competitive strategy. Wilson (1994)
argues that in competitor analysis, detail attention is given to each competitors
apparent objectives, resources and competitive moves which lead a company to
readily identify the area of strengths and weaknesses of the competitors and this
can be used in the process of developing effective strategy. Johnson, Whittington,
and Scholes (2011) also state that one of the key elements of a strategic plan is to
analyze the capabilities of an organization which should include a clear identification of the key strength and weaknesses of the organization relative to its competitors. Through a comparative analysis of KSFs between a company and its major
competitors CPM provides important internal strategic information to managers
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and help them develop effective strategy for the company (David, 2011). In addition, to construct CPM, a company needs to identify the KSFs of the industry
where it operates. Identifying these KSFs are also crucial for developing effective
strategy. Because KSFs can be used to direct a companys effort for developing
strategies, it can also be used to identify critical issues associated with implementation of strategy, and it might also assist managers to establish a guideline for monitoring companys activities (Munro & Wheeler, 1980; Ferguson & Dickinson, 1982;
as cited in Boynton & Zmud, 1984). Zimmerer et al. (2008) also state that identifying the KSFs in an industry helps managers decide where they should focus their
companys resources strategically. Moreover, Capps III and Glissmeyer, (2012)
state that while IFE matrix for competitors analysis summarizes only companys
major strength and weaknesses and EFE matrix provides a synopsis of companys
opportunities and threats from external environments but CPM includes both internal and external factors that most impact on organization and provide information
about companys potential competitive advantages.

5. WEAKNESSES OF CPM AS A COMPETITOR ANALYSIS TOOL

Though CPM is a sensible tool for managers to use for competitors analysis but it suffers from some limitations (Capps III & Glissmeyer, 2012). Chang and
Huang (2006) identifies two major drawbacks of CPM; 1) the ratings of KSFs are
subjectively assigned between 1 and 4, so objective and quantified data (such as
business volume) is missing, 2) non-uniformity may occur because of weights of
CSFs being assigned subjectively by the evaluators without any consistency test. In
CPM, managers assigned the weight to different key success factors based on
their assumptions. No scientific method is used to evaluate the relative importance
of each KSF for the company. Moreover, Boynton and Zmud, (1984) argue that the
procedure of identifying the KSFs may be biased by managers belief, values or
availability of information. Beside this, Though CPM provides information about
companys performance relative to its competitors based on some key success
factors but it is difficult to measure the effectiveness of the company in terms of
those key factors because Rangone (1997) states that competitive advantage of a
company does not depend on specific factors and disadvantage in one factor may
be paid off by an advantage in another factor. To avoid this problem, in CPM,
managers assess the overall effectiveness of the company with respect to competitors by calculating some total scores based on the companys performance in all
KSFs but it is also difficult because of the heterogeneity of the KSFs which may be
financial, non-financial, quantitative or qualitative (Rangone, 1997). Managers also
faces problem in interpreting the scores derived from CPM to compare the performance of the company against their competitors. For example, Just because one
firm receives a 3.20 rating and another receives a 2.80 rating in a Competitive
Profile Matrix, it does not mean that the first firm is 20 percent better than the
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second (David, 2011; p. 82). He also argue that total score in CPM just reveal the
relative strength of a firm but their accuracy as tool for relative measurement of
two companies performance may not be appropriate. Beside this, managers may
face problems collecting information about their competitors while preparing the
CPM. It is easy for the managers to collect information about a competitor if it is a
public company but very difficult if it is a private company or operating in stealth
mode. (Bygrave & Zacharakis, 2011).

6. IMPLICATIONS
Competitive Profile Matrix is a simple but powerful tool to provide information of the competitive scenario of an industry and help manager develop appropriate strategy for the company. Managers need competitive information to understand the industry and its competitors and to identify areas in which the competitors
are weak and to evaluate the impact of strategic action on competitors (David,
2011). Using this model enables them to outperform the competitors by the effective design and implementation of strategic plans. Academics have miles to go with
this model in this field. They can push this model down from the theoretical frame
to the practical arena and encourage the industrial corporate to use this in the
competitive analysis of their own firm and its competitors. Students in business
discipline will also be benefited as to the assessment of the firm and their industrys
competitive environment.

7. CONCLUSION & FUTURE DIRECTIONS

By identifying the KSFs of the industry and evaluating the company against
its major competitors based on the ratings of the KSFs, CPM provides a clear
synopsis of strengths and weaknesses of the company and its competitors which
might assists managers to develop effective competitive strategy for the business.
However, the major problem using this technique is that KSFs are not identified
scientifically and the weights are not assigned subjectively and lack the consistency
test. Moreover, the overall effectiveness of the company cannot be measured by
using KSFs because Ketelhohn (1998) argues that mastering on industry KSFs
does not ensure profits for the company, they prepare the company for competition.
However, despite of some limitations, CPM is a powerful tool that helps manager
or entrepreneur explains why the business is weak in some areas and why it is
better in others. By carefully interpreting the results of CPM, an entrepreneur can
start defining the ideal competitive strategy for his company (Zimmerer et al., 2008).
This research suggests that CPM is useful to unlock the key drivers of competitiveness based on firms internal and external environment. Empirical research might
be more accurate for figuring out the right tool of competitive analysis. In addition,
an empirical research on comparative analysis of different tools like, SWOT analysis, PESTEL analysis, VCA model, Five Forces Model, BCG matrix, EFE matrix,
IFE matrix, General Electric Stoplight Strategy, Company Strength Matrix, and CPM
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might be useful for a group of firms to explore the superiority of the specific model
over others for an effective competitor analysis.

REFERENCES:

Bloodgood, J. M., & Bauerschmidt, A. (2002). Competitive analysis: do managers accurately compare their firms to competitors?. Journal of Managerial Issues, 418-434.

Boynton, A. C., & Zmud, R. W. (1984). An assessment of critical success factors. Sloan
Management Review (pre-1986), 25(4), 17-27.

Bygrave, W. D., & Zacharakis, A. (2011). Entrepreneurship (2nd ed.), NJ, USA: Wiley
Campbell, D. J., Stonehouse, G., and Houston, B. (2002). Business strategy: an introduction (2nd Ed.), Oxford, UK: Butterworth-Heinemann

Capps III, C. J., & Glissmeyer, M. D. (2012). Extending The Competitive Profile Matrix
Using Internal Factor Evaluation And External Factor Evaluation Matrix Concepts. Journal
of Applied Business Research (JABR), 28(5), 1059-1062.

Chang, H. H., & Huang, W. C. (2006). Application of a quantification SWOT analytical

method. Mathematical and Computer Modeling, 43(1), 158-169.

Coman, A., & Ronen, B. (2009). Focused SWOT: diagnosing critical strengths and weaknesses. International Journal of Production Research, 47(20), 5677-5689.

David, F. R. (2011). Strategic management: Concepts and cases (13th ed.). Upper Saddle
River, NJ: Prentice Hall.

Hill, C. W., & Jones, G. R. (2001). Strategic Management: An Integrated Approach (5th Ed.).
New York: Houghton Mifflin

Hill, T., & Westbrook, R. (1997). SWOT analysis: its time for a product recall. Long range
planning, 30(1), 46-52.

Ho, J. C., & Lee, C. S. (2008). The DNA of industrial competitors. Research-Technology
Management, 51(4), 17-20.

Johnson, G., Whittington, R., & Scholes, K. (2011). Exploring corporate strategy: Text and
cases (9th ed.). England: Pearson Education.

Ketelhohn, W. (1998). What is a key success factor?. European Management Journal,

16(3), 335-340.

Porter, M. E. (2000). How competitive forces shape strategy. Strategic Planning: Readings, 102.

Prescott, J. E., & Grant, J. H. (1988). A managers guide for evaluating competitive analysis
techniques. Interfaces, 18(3), 10-22.

Radder, L., & Louw, L. (1998). The SPACE matrix: a tool for calibrating competition. Long
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Rangone, A. (1997). Linking organizational effectiveness, key success factors and performance measures: an analytical framework. Management Accounting Research, 8(2), 207-219.

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Stonehouse, G., & Snowdon, B. (2007). Competitive advantage revisited: Michael Porter
on strategy and competitiveness. Journal of Management Inquiry, 16(3), 256-273.

Wilson, R. M. S. (1994). Competitor analysis. Management Accounting-London, 72, 24-24.

Zimmerer, T., Scarborough, N. M., & Wilson, D. (2008). Essentials of entrepreneurship
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-Shanewaz Mahmood Sohel

Assistant Professor
Department of Management Studies
University of Chittagong, Bangladesh
Email: [email protected]
-Abu Mohammad Atiqur Rahman
Associate Professor
Department of Management Studies
University of Chittagong
Chittagong, Bangladesh.
Email: [email protected]
-Md. Aftab Uddin (Corresponding Author)
Assistant Professor
Department of Management Studies
University of Chittagong, Bangladesh
Email: [email protected]
Mr. Shanewaz Mahmood Sohel1, Assistant Professor, Department of
Management Studies, University of Chittagong, Bangladesh 4331, has completed
BBA and MBA (Major in Management) both from the University of Chittagong,
Bangladesh. Currently, he has been pursuing MBA (Major in International Business) in the University of Chester, UK.
Mr. Abu Mohammad Atiqur Rahman2, Associate professor, Department of Management Studies, University of Chittagong, Bangladesh, 4331, has
been graduated B.Com.(Hons), and M.Com. both from University of Dhaka, Bangladesh.
Later on, he has been awarded another Master degree (Master in Project Evaluation and Management) from the University of Antwerp, Belgium.
Mr. Md. Aftab Uddin3, Assistant Professor, Department of Management
Studies, University of Chittagong, Bangladesh 4331, has completed BBA (Major in
Management) and MBA (Major in International Management) both from the
University of Chittagong, Bangladesh. Currently, he has been awarded Chinese
Government Scholarship for completing MBA (Major in Human Resource
Management) in the Wuhan University of Technology, China.

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