STRATEGIC GROUP IN THE INDUSTRY

BY-ANKITA SRIVASTAVA RITIKA SRIVASTAVA

Definition: A strategic group is a group of firms in an industry following the same or similar strategy. EXAMPLE - For example restaurant industry.

STRATEGIC GROUP MAPPING

Firms in same strategic group have two or more competitive characteristics in common. Have comparable product line breadth Sell in same price/quality range Emphasize same distribution channels Use same product attributes to appeal to similar types of buyers Use identical technological approaches Offer buyers similar services Cover same geographic areas

Procedure for Constructing a Strategic Group Map

STEP 1: Identify competitive characteristics that differentiate firms in an industry from one another STEP 2: Plot firms on a two-variable map using pairs of these differentiating characteristics STEP 3: Assign firms that fall in about the same strategy space to same strategic group STEP 4: Draw circles around each group, making circles proportional to size of groups respective share of total industry sales.

Competitor analysis
Sizing up strategies and competitive strengths and weaknesses of rivals involves assessing. Which rival has the best strategy? Which rivals appear to have weak strategies? Which firms are poised to gain market share, and which ones seen destined to lose ground? Which rivals are likely to rank among the industry leaders five years from now? Do any up-and-coming rivals have strategies and the resources to overtake the current industry leader?

Identifying strategic groups:

Identify principal strategic variables which distinguish firms. For example , single product Vs product family, private labeling Vs branded products, push Vs pull marketing, etc. Choose variables that produces the greatest contrast between firms, usually the CSFs. Do not use correlated variable. Sometimes it is useful to being grouping firms before selecting strategic variables. Position each firm in relation to these variables Analyzing the attractiveness of each group by performing a five force on each group Identify the mobility barriers that inhibit movement of firms between strategic groups

Value of strategic groups as an analytical tool

Identify barriers to mobility that protect a group from attacks by other groups. For instance if the Identify groups whose competitive position may be marginal or tenuous Chart the future direction of firms strategies Thinking through the implications of each industry trend for the strategic group as a whole

LIMITATIONS:

Industries or landscapes are neither created equal nor stay equal. The concept of extended competition provides a comprehensive framework for assessing structural attractiveness A firms strategy can increase or decrease its exposure to competitive forces Other things being equal, a firm should seek to trigger actions that improve structural attractiveness But it isnt enough to look at just structural attractiveness: competitive position must also be considered

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