Using Porters Five-force analysis described earlier, define the industry attractiveness factors (the five forces) as well as any sub-factors within these five areas. As with many of these portfolio analyses, the purpose for the vertical axis is to differentiate between more and less attractive industries. Porter’s Five Forces are used to estimate the profit potential of a segment and consequently its attractiveness
Weight and score the attractiveness for the relevant products or services (weighting out of 100 and score out of 10 for example)
Define the competitive advantages from the examples given above. – These factors are usually a combination of the methods described above. (Strengths and weaknesses and competitive strategy dimensions)
Weight and score the competitive advantages (this is a relative assessment of competitive advantage). – Weights of the factors should equal 100. Score the factor out of 10 and multiply the score by the weighting. Divide this score by 100 and add it to the other factor scores to obtain an overall score for the unit being analysed. Divide each score into the score of the biggest competitor to obtain a relative score. The biggest competitor position is taken as 1 and the other units are plotted accordingly.
Producing the Porter matrix - These x-co-ordinates along with their corresponding industry attractiveness co-ordinates must now be positioned on the matrix
Forecasting as with the some of the other matrices described is an optional step. The factors are re-scored for the products /services in three years time (for example) Circles are plotted on the same matrix as the originals and demonstrate the movement that will have to take place to achieve forecast.
Porter’s Diagnostic Matrix
Once the firm/product and its competitors are plotted onto the matrix, strategies are devised to maintain the strengths and rectify the weaknesses when compared to the competitors in order to gain position in the industry.