Steps in the construction of CPM

Here we will be using weighted rating system for the construction of competitive
profile matrix. Some of the important steps involved in the construction of com
petitive profile matrix are given below:
In the first column, lists down all the key success factors of Industry (usually
from 6 to 10).
In the second column, assign weights to each factor ranging from 0.0 (not import
ant to 1 (most important). Greater weights should be given to those factors whic
h have grater influence on the organizational performance. The sum of all weight
s must equal 1.
Now rate each factor ranging from 1 to 4 for all the firms in analysis. Here, ra
ting 1 represents major weakness, rating 2 shows minor weakness. Similarly, rati
ng 3 indicates minor strength whereas rating 4 shows major strength. It means th
at weakness must receive 1 or 2 rating while strength must get 3 or 4 rating.
Calculate weighted score by multiplying each factor s score by its rating.
Find the total weighted score of all the firms by adding the weighted scores for
each variable.
The competitiveness of a company can be assessed on the basis of its general str
ength rating. If the dissimilarity among firm s overall rating and the points of l
ower-rated rivals is greater then the firm has greater net competitive advantage
. Alternatively, if the dissimilarity among a firm s overall rating and the points
of higher-rated rivals is larger then the company has net competitive disadvant
age. In the above example, CPM Matrix demonstrates that Coca-Cola is the market
leader and dominates its rivals with highest points of 3.74. Pepsi is the runner
up with 3.42 points and Cadbury Schweppes is the weakest rival among these thre
e with the score of 2.80. This Matrix also shows that Coca-Cola is strong in all
the aspects of rivalry and has strong position in the market place.
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