A new competitive analysis tool: the relative profitability and growth matrix

Abstract

Purpose The purpose of this paper is to introduce the relative profitability and growth matrix and to demonstrate its use as a competitive analysis tool. Design/methodology/approach Two well‐known drivers of value are profitability and growth. After a study of 2 × 2 matrices we applied these drivers on a relative or industry comparative basis to a 2 × 2 matrix, and then we applied that matrix to competitive analyses of two industries to assess its strategic utility. Findings Our findings suggest that the relative profitability and growth matrix could be a useful competitive analysis screening and communications tool. Practical and research implications The relative profitability and growth matrix assesses a firm's profitability and growth relative to its industry and by so doing helps to identify and classify performance in a succinct format that facilitates further analysis. After such analysis has been completed the matrix can also serve as a convenient tool to communicate the analytical findings. Originality/value The relative profitability and growth matrix is a value‐driver based 2 × 2 matrix, the strategic utility of which is demonstrated and explained in two examples.