A New Competitive Analysis Tool: The Relative Profitability and Growth Matrix
Strategy & Leadership, Vol. 35, No. 2, pp. 30-38, 2007
Posted: 29 Mar 2007
Purpose: The purpose of this paper is to introduce the Relative Profitability and Growth matrix and to demonstrate its use as a competitive analysis tool.
Design/methodology/approach: Two well-known drivers of value are profitability and growth. After a study of 2x2 matrices we applied these drivers on a relative or industry comparative basis to a 2x2 matrix, and then we applied that matrix to competitive analyses of two industries to assess its strategic utility.
Findings: Our findings suggest that the Relative Profitability and Growth matrix could be a useful competitive analysis screening and communications tool.
Practical and research implications: The Relative Profitability and Growth matrix assesses a firm's profitability and growth relative to its industry and by so doing helps to identify and classify performance in a succinct format that facilitates further analysis. After such analysis has been completed the matrix can also serve as a convenient tool to communicate the analytical findings.
Originality/value: The Relative Profitability and Growth matrix is a value-driver based 2x2 matrix, the strategic utility of which is demonstrated and explained in two examples.
Keywords: Strategy, Competitive Analysis, Profitability, Growth
JEL Classification: L21, M20
Suggested Citation: Suggested Citation