The firm must assess its relative competitive position by identifying the key success factors. These can be derived using the list of economic and technological factors listed in the previous section.
It must be remembered that the purpose of the exercise is to identify the key factors/forces affecting the firm’s competitive position and not to become bogged down in numbers. The most important part of the process is to identify the most important key success factors in the industry and the firm’s relative position with respect to them.
Most industries have a limited number of success factors that have a substantial impact on competitive position and it is far better to get a good weighting distribution of five major factors than to try to get a list of a lot of factors and the try to give them all a weighting.
Each factor is given an importance weighting. This rating should reflect the factor’s relative impacts on overall profitability, market share, and other measures of competitive position of the various firms in the industry involved.
This weighting exercise is difficult to do, as managers within a firm always tend to overestimate or underestimate their relative strengths and weaknesses. It is a good idea to involve a representative from each of the functional areas in a group workshop to assign the weightings to the critical success factors.
The total weightings of the sub-factors must add up to 100 (for simplicity sake) and then normalised to add up to 1.00. (Divide each factor weighting by 100)