SPACE Matrix

Sapphire Textiles Limited
Strategic Position and Action Evaluation Matrix
A Strategic Position and Action Evaluation Matrix or a SPACE Matrix is a strategic management tool that
focusses on strategy formulation especially, as related to the competitive position of an organization.
The SPACE Matrix (The Strategic Position and Action Evaluation Matrix), contains a total of four
dimensions that are referred to as;
 The Financial Position – The Positive ‘y’ Axis

 The Competitive Position – The Negative ‘x’ axis
 The Industrial Position - The Positive ‘x’ Axis
 The Stability/Economic Position – The Negative ‘y’ axis
For Sapphire Textiles Limited, in each of the dimensions, 5 factors are considered and evaluated as
follows;
1. The Financial Position;

In order to consider where Sapphire Textiles stands in terms of its financial position, we compare
the following factors with other competitors that consist of Nishat Textiles and Gul Ahmed. The
factors are elaborated as follows;
1
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 Earnings per Share
Company PKR
Sapphire Textiles 135.52
Nishat Textiles 21.57
Gul Ahmed 3.84
 Debt to Equity Ratio
Company Debt to Equity Ratio

Nishat Textiles 0.1
Gul Ahmed 0.65
 Inventory Turnover Ratio
Company Turnover Ratio

Gul Ahmed 2.50
 Price to earnings Ratio
Company Ratio
Gul Ahmed 2.50
 Return On Equity
Company Return on Equity

Sapphire Textiles 3.52%
Nishat Textiles 4.99%
Gul Ahmed 8.34%
Financial Position Comparison;
Factors Score
Earnings Per Share +6
Debt to Equity Ratio +5
Inventory Turnover Ratio +4
Price Earnings Ratio +6
Return on Equity +3
x = +24
Total Financial Position Score; (Average) = x/n
2
= + 24/5
= + 4.8
2. The Competitive Position

In comparison to the other two competitors of sapphire Textiles Limited, that are strong enough to
compete in the market place, the factors that can determine the competitive position for Sapphire
textiles can be rated in the following manner
 Market Share
Sapphire’s Market Share Rating – -3
 Brand Image
Sapphire’s Brand Image Rating – -2
 Product Quality
Sapphire’s Product Quality Rating – -1
 Management
Sapphire’s Management Rating – -5
 Use Of Technology
Sapphire’s Use of Technology Rating - -2
Total Competitive Position Score; (Average) = x/n
= - 13/5
= - 2.6
3. The Industrial Position

Sapphire Textiles, being related to the textile industry as a whole, can determine its industrial
position by considering and comparing these factors with other industries and determining the
effect on the textile industry as a whole;
 Ease of Entry Into Market – +2
Explanation; The ease of entry in the textile industry is not as easy as it seems because due to a
strong competition, entry into the textile industry requires a strong financial backup and
considerable funds as compared to other industries of telecommunication or food etc.
 Growth Potential – +4
Explanation; The growth potential in the textile industry is average because Pakistan’s textile
industry is not fully modernized to support the growth rate at the fullest in comparison to other
industries that include the food industry, that has a higher growth potential.
 Profit Potential – +5
Explanation; The profit potential in the textile industry sector is sufficient enough so that ity can
be given a score of 5 because it deals with a basic necessity of life, that are clothes. Whereas, the
telecommunication industry works on the minimum possible profit.
 Resource Utilization – +5
3
Explanation; The resource utilization in the textile industry sector is considerable as well
because as many resources that are provided by the government to the industry are utilized to the
fullest and the production of quality fabrics are made possible.
 Productivity – +4
Explanation; The productivity of the textile industry is considered to be average as compared to
other industries mainly because the textile industry is not fully provided with the necessary tools
and equipment that is used to drive the productivity to a higher level.
Total Industrial Position Score; (Average) = x/n
= +20 / 5
=+4
4. The Stability/Economic Position

The stability/economic position is determined with respect to the comparison of one industry
relative to the other industries. In terms of Sapphire textiles Limited, that is actually a part of the
textile industry, the economic position is determined by comparing the textile industry with other
industries that might include food or automobile industries and the results are compiled and the
factors are rated as follows
 Rate of Inflation – -2
Explanation; The rate of inflation of an economy has a strong impact on the textile industry as
compared to other industries because inflated prices somehow affect the cotton prices that
ultimately result in the increase of the product’s overall value.
 Demand variability – -3
Explanation; The demand variability in terms of textile industry is considered to be average
because textiles or clothing is a basic necessity of life and it’s demand somehow remains constant
as compared to other industries.
 Competitive pressure – -1
Explanation; The competitive pressure I the textile industry is strong and considerable enough,
because the competitors in the industry are already very strong and competitive enough to give a
tough time to each other.
 Ease of Exit from market – -5
4
Explanation; The ease of exit from the textile industry is considered to be poor because of the
presence of countable competitors, a s compared to the telecommunication industry or the food
industry where the number of competitors are quite considerable and the exit of one competitor
does not affect the industry at all.
 Gross Domestic Product – -2
Explanation; The contribution of the textile industry to the Gross Domestic Product of Pakistan
is quite large because most of the exports of Pakistan comprise of cotton, that is considered to be
Pakistan’s best product. Thus, the absence of textile industry would definitely pose a threat to the
GDP of Pakistan which makes the textile industry a significant contributor to the GDP of the
country, unlike the rest that are important somehow but do not carry equal weight.
Total Economic Position Score; (Average) = x/n
= -13 / 5
= - 2.6
Rating Scale;
Scale
Negative Positive Interpretation
-1 +6 Very strong
-2 +5 Strong
-3 +4 Above average
-4 +3
-5 +2 Poor
-6 +1 Very Poor
Calculations;
Total x axis score;
Dimensions Score
Competitive Position - 2.6
Industry Position +4
x= +1.4
Total x axis score to be plotted; +1.4
Total y axis score;
Dimensions Score
Financial Position +4.8
5
Stability/Economic Position -2.6
y= +2.2
Total y axis score to be plotted; + 2.2
GRAPHICAL PLOTTING;
+6
+2.2
-6 +1.4
+6
-6
Favorable Quadrant;
6
As the direction vector lies in the Aggressive quadrant, the available strategies for Sapphire Textiles
Limited that can be pursued by the management according to the favorable conditions are;
1. Integration (Horizontal or Vertical)
2. Product Development
3. Market Development
4. Market Penetration
5. Diversification (Related or Unrelated)
Adaptation to Strategies;
Considering the current standings of Sapphire Textiles Limited, out of the strategies that have been put
forward by the favorable quadrant, the organization should go for the following strategies;
1. Market Development Strategy

Sapphire Textiles Limited should ho for the market development strategy, which is one of the
strategies from the aggressive quadrant, with one of the reasons being that the organization is
financially backed up and stable enough to develop and make itself a new market. Since they
already have a total of three divisions, they are catering to almost every segment, but developing
their markets both demographically and geographically would help them make their market grow.
This can only be possible if they open up new stores in other geographical areas and also develop
new products with respect to the markets that are not yet being served by Sapphire. This would
ultimately lead them to develop a new market segment.
2. Product Development Strategy

Sapphire can also opt a product development strategy whereby developing new products ranges
or modifying the existing ones so that they can develop a new customer base or serve the existing
ones even more appropriately. Since they are strongly backed up with financial resources,
developing a new product strategy would take Sapphire at a more considerable position in the
market, so that they can give a tough time to their most strong competitor i.e. Nishat Textiles
Limited.
3. Horizontal Integration Strategy

Since according to the SPACE Matrix, the vector lies in the aggressive quadrant, the third strategy
that can be pursued by Sapphire Textiles is the horizontal Integration strategy. The acquisition of
competitors like So Kamal, Cross Stitch, Kapray etc. would not only expand the portfolio of
sapphire Textiles but would also make their position in the textile industry higher, that would lead
to a better scope of the industry in years to come.
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Sapphire Textiles Limited

Strategic Position and Action Evaluation Matrix

 The Financial Position – The Positive ‘y’ Axis

1. The Financial Position;

Company Debt to Equity Ratio

 Inventory Turnover Ratio

Company Turnover Ratio

 Price to earnings Ratio

Company Return on Equity

Financial Position Comparison;

Total Financial Position Score; (Average) = x/n

2. The Competitive Position

Total Competitive Position Score; (Average) = x/n

3. The Industrial Position

Total Industrial Position Score; (Average) = x/n

4. The Stability/Economic Position

 Ease of Exit from market – -5

Total Economic Position Score; (Average) = x/n

Total x axis score;

Total y axis score;

1. Integration (Horizontal or Vertical)

5. Diversification (Related or Unrelated)

1. Market Development Strategy

2. Product Development Strategy

3. Horizontal Integration Strategy

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