The SPACE Matrix is an analytical business research device that focuses on strategy formulation. SPACE stands for Strategic Position & Action Evaluation. The SPACE Matrix characterizes a strategy as being aggressive, conservative, defensive or competitive in nature. Additionally, the SPACE Matrix analysis functions upon two internal strategic dimensions: financial strength and competitive advantage. The SPACE factors under financial strength which analyze a business’ internal strategic posture are: return on investment, leverage, liquidity, working capital and cash flows. In contrast, the SPACE factors which determine a business’ external strategic posture are: technology, inflation rates, demand, industry price fluctuations, barriers to entry, competitive pressures, price elasticity, and risk.
The SPACE Matrix methodology also examines strategic factors within two external dimensions: environmental stability and industry strength. The factors considered under competitive advantage are market share, quality, life cycle, customer loyalty, and supplier influence while the factors under industry strength are growth potential, profit potential, financial stability and resource utilization, among others. The SPACE Matrix methodology factors each of these dimensions and places them on a Cartesian graph with X and Y coordinates.