The SPACE Matrix complements SWOT and PEST

How the SPACE Matrix complements SWOT and PEST to identify the right strategic posture for your organisation. 

We are all familiar with SWOT and PEST as strategic analysis tools. Many planners, however, are less familiar with the Strategic Position & ACtion Evaluation Matrix, more commonly referred to as the SPACE Matrix.

While SWOT and PEST both help teams understand the internal and external environment, the SPACE Matrix goes one step further by suggesting the type of strategy an organisation is best positioned to pursue.

PEST and SWOT: Reviewing the Strategic Environment

PEST Analysis explores the external environment in which an organisation operates.
The four factors—Political, Economic, Social, and Technological—all influence the strategic planning horizon. A well-structured PEST analysis helps the planning team reach clarity and consensus on the external forces likely to impact future success.

SWOT Analysis evaluates Strengths, Weaknesses, Opportunities, and Threats. It clarifies the organisation’s internal capabilities and limitations, while highlighting external opportunities and risks. SWOT is particularly effective when used after a PEST analysis, ensuring that opportunities and threats are grounded in real-world external conditions.

SWOT and PEST analysis templates in Excel, Word, and PowerPoint are available at The Business Tools Store, and the Strategic Planning Workbook provides a structured way to facilitate and record the outputs.

Introducing the SPACE Matrix

The SPACE Matrix takes a different approach. Rather than merely describing the environment, it focuses on strategy formulation and the organisation’s strategic posture within its industry.

The matrix is divided into four quadrants, each representing a recommended strategy type:

• Aggressive
• Conservative
• Defensive
• Competitive

After scoring a set of strategic dimensions, the results are plotted on the matrix. The quadrant in which the point lies suggests the most appropriate strategic direction.

The Four Dimensions of the SPACE Matrix

The SPACE Matrix incorporates two internal and two external strategic dimensions:

Internal Strategic Dimensions

Financial Strength (FS)
May include indicators such as ROI, liquidity, leverage, working capital, and overall risk.

Competitive Advantage (CA)
Could include market share, brand strength, product quality, price competitiveness, and product lifecycle position.

External Strategic Dimensions

Industry Strength (IS)
Factors may include market growth, profit potential, technological capability, and industry stability.

Environmental Stability (ES)
Examples include technological change, inflation, competitive pressure, demand variability, and regulatory uncertainty.

Once each factor is scored, the combined values determine the organisation’s strategic profile and guide the recommended approach.

When Should You Use the SPACE Matrix?

The SPACE Matrix can be useful:

• As an initial high-level assessment to identify the organisation’s overall strategic stance.
• As a validation tool when assessing strategic options emerging from SWOT or PEST analysis.
• When you want to clearly illustrate whether the organisation is positioned for growth, caution, defence, or competitive realignment.

A fully customisable SPACE Matrix template for Excel is available at The Business Tools Store.