POAM MATRIX: FACTORS, HOW TO DO IT, EXAMPLES - DUDAS - 2025

The POAM matrix (Profile of Opportunities and Threats of the Environment) is the methodology that allows to assess and also identify potential opportunities and threats of a company.

Depending on its importance and impact, a strategy group can establish whether a factor constitutes an opportunity or a threat to the business.

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Companies can be considered as ecological entities, that is, they can be seen as organisms that maintain mutual relationships with their environment. The environment of a company is the source of its threats and opportunities.

A strategic management team finds "niches" in the organization's environment that are particularly well suited to the services, products, and capabilities it offers.

In the same way, you must identify the elements that could be harmful and even destructive for your companies. Therefore, successful planning demands a kind of guide that directs towards the favorable areas, avoiding the pitfalls.

The strategic manager must understand the nature of the environment in which the company operates. This is a permanent and continuous task for the top management of a company, mainly in an environment that is changing in a turbulent and constant way.

Factors

It is important to maintain a permanent review on the external factors that condition or affect the success of a company.

This is a requirement to effectively execute the management and strategic planning of an organization.

Political, economic, geographic, competitive, technological and social factors can have a telling negative or positive impact on a company.

These factors include both threats and opportunities and have to be considered in the business planning and management process. The analysis of the environment will empower the organization to react in a timely manner to external factors.

In the strategic process, the medium refers to the factors that lie outside the company. This includes the events, trends, and forces with which the organization interacts.

In general, the factors in the middle are considered "given" or "fixed." However, these can be influenced by the chosen strategy and have a profound impact on the business and its potential success.

Thus, it is necessary to identify the important factors of the environment, evaluate them and follow them up so that the strategic management of the company can take an effective course of action. The analysis of the environment can be subdivided into the following key areas:

Political factors

They are the factors that refer to the allocation or use of power, related to local, departmental, and national governments. Also in decision-making and political representation bodies (regulations, laws, norms), government systems, etc.

Economic factors

They are related to the flow of money, services and goods, the conduct of the economy, both internationally and nationally.

Technological factors

They are the factors related to the development of tools, machines, materials, processes, etc.

Social factors

They are the factors that disturb people's way of life, including their values ​​(health, education, security, employment, culture, beliefs).

Geographic factors

They are related to space, location, climate, topography, animals, plants and natural resources.

Competitive factors

These factors are determined by the market, products, quality, competition, and service.

Although generally the forces of the environment and factors are taken for granted and are not under the control of the company, once understood and located it is possible to deploy a strategy that allows a reaction in advance to these factors.

How do you make a POAM matrix?

The methodology used to prepare the POAM matrix involves performing the following steps:

Get information on factors

Both primary and secondary information must be obtained on each of the factors that are the object of the analysis.

Identify threats and opportunities

The company carries out this part of the analysis by forming strategic groups. These groups usually belong to the levels with sufficient access to the information of the environment and with a representation of the different areas of the company.

Each organization has up to what level of the company should expand participation in this exercise of the environment, as well as the methodology to form the strategic groups.

Selection of factors

The strategic group selects the factors to be analyzed (political, economic, technological, social, etc.) and performs a careful analysis on each one.

Prioritize and rank factors

The group rates based on their fair knowledge of threats and opportunities. The “Low” rating is a minor threat or opportunity, and “High” refers to a significant threat or opportunity.

Then an average of the qualifications made is made to obtain the POAM matrix.

Impact rating

Following the same procedure as above, the group identifies the current business impact of each threat or opportunity. This qualification is done in the same way in: high, medium and low.

Preparation of the POAM matrix

The POAM profile prepared in this way will allow processing the business environment analysis. In turn, this will show the position of the company compared to the environment where it operates, both in the impact and in the degree that each factor has on the company.

Examples

The global watch industry

Japan's heyday as the largest watch producer and the decline of the Swiss watch industry can only be explained by the ability of the Japanese to benefit from the opportunities of their environment and the inability of the Swiss to adapt and react to the threats of their environment. environment.

Walmart

The following could be the external threats and opportunities for the multi-billion dollar grocery and grocery company Walmart.

Opportunities

- Contribute to corporate social responsibility.

- Improve people's perception through different programs.

- The association or acquisition of one or more suppliers would further reduce the cost of the products.

Threats

- The economic slowdown in the United States reduces Walmart's income.

- Government regulation in different countries.

The process of identifying, monitoring and evaluating opportunities and external threats is important for an organization to formulate strategies to take advantage of available opportunities and also defend against threats.

POAM matrix model

Below is a POAM matrix model that was made for a typical company.

The corresponding tables are presented for each of the external factors that are sought to be analyzed through the different opportunities and threats that are broken down for each one of them.

Both opportunities and threats can be rated according to this defined scale: High – 3, Medium – 2, and Low – 1.

These values ​​are averaged independently for each factor, finally obtaining a consolidated average for the company's global opportunities and threats, which is 2.09 and 2.00 respectively.

References

1. Strategic Management (2019). POAM analysis. Taken from: gerest.es.tl.
2. Management Indicators (2010). POAM Analysis or External Analysis. Taken from: indicatorsdegestioniush.blogspot.com.
3. Pradeep Loganathan (2013). External Environment, Opportunities, Threats, Industry Competition and Competitor Analysis. Taken from: pradeeploganathan.com.
4. MBA Tutorials (2019). External Opportunities and Threats. Taken from: mba-tutorials.com.
5. Tricia Jessee (2019). How To Identify External Factors That May Affect Your Strategic Plan. Clearpoint Strategy. Taken from: clearpointstrategy.com.