MECOM Matrix: A Strategic Planning Tool that can be used to help guide a company’s decisions regarding its strategic direction. And overall market penetration and share optimization. It is a 4 x 4 matrix that classifies four types of market positions as either Leader (L), Challengers (C), Niche Players (N) or Stars (S). The position within each quadrant defines the competitive strength and attractiveness of a market position within that particular market space:
Strategic Options Within the Matrix
Market Leaders are companies that dominate their markets with a strong customer base and high margins. They usually enjoy large profit margins because they are the only ones who can meet customer demand within the industry, and they set industry standards for quality and price.
However, there are two drawbacks for leaders; firstly, their size makes them vulnerable to new entrants who could outperform them in both price and quality; secondly, they must avoid becoming complacent or resting on their laurels. Since this can lead to underperformance in the market space. And thus decline into a Challenger position or worse yet Stars or Niche Player positions within the matrix.
A Leader’s best option is to find ways to avoid becoming complacent. And find innovative ways to outdo their competitors (i.e., maintaining an innovative mindset).
Challengers are companies that have good potential for growth but are not yet established as leaders in their industries. They typically have lower profit margins than Leaders because they must offer lower prices in order to compete with them. However, Challengers also have much less competition from other Challengers and Stars. So they have a greater chance of gaining market share at the expense of the other players in the industry.
Challengers should be willing to resort to aggressive marketing tactics. Such as discount pricing and loss-leaders, in order to gain customers and increase their market share. In the long run, however, Challenger companies should focus on improving their quality. And service levels in order to compete with Leaders while still offering lower prices.
Leaders must avoid watching their market share being eroded by Challengers who attempt to take advantage of a leader’s complacency. There are three options for maintaining a Leader position: (1) investing in new product development that would provide customer value beyond what is currently available; (2) improving quality control so as to maintain existing customer loyalty; and (3) increasing advertising efforts and product promotion in order to increase the awareness of the brand among customers.
The Developmental Process
The first step of this process is known as “Strategic Analysis” which encompasses the identification of strengths, weaknesses, opportunities and threats (SWOT) for an organization. During this process there are usually several SWOT analysis charts that are developed for each individual business unit or operation within a company.
The information that is collected during this stage should be used to identify the “core competencies” of the company’s various businesses which will be used later in defining its strategy. This information is also used during the next step which is known as “strategy formulation”. The strategy formulation process entails defining a set of strategies that will be used by the organization to achieve its mission or corporate goals.
These strategies will then be used in conjunction with other operational decisions such as resource allocations or capital investment decisions in order to achieve success within a chosen market space.
Lastly, “strategy implementation” is where all strategies that were developed throughout the previous two steps are brought together in order to help manage daily operations within a company’s business units or operations. It is during this stage that information from the strategic analysis is actually applied towards making day-to-day decisions that will affect an organization’s success or failure within its chosen market space.