What is Strategic Group Mapping?
Strategic group mapping can be defined as the analysis of the competitive positions of firms in a particular industry. In other words, it is the analysis of the competitive positions of firms within strategic groups.
A strategic group can be defined as a group of firms in an industry that follows the same or similar strategy for competitive advantage. The competition between firms within the strategic group is greater than the competition between a member of a strategic group and companies outside that strategic group.
Intra-strategic group competition is more intense than inter-strategic group competition. Strategic groups of firms within an industry constitute a cluster and imply that the firms in the same industry may not be direct competitors for the firms.
The performance leaders within the group follow strategies similar to those of other firms in the group. However, they maintain some distinctiveness to gain and sustain a competitive advantage.
Thus, strategic group mapping helps us to understand which factor i.e. whether quality, price, service, or anything else a company differs from others in a strategic group.
As so, the firms in a strategic group may be treated similarly on the ground of technological leadership, product quality, pricing policies, distribution, and customer service. The concept is useful for analyzing a competitive structure which is helpful in diagnosing competition, positioning, and the profitability of firms within an industry.
Implications of strategic groups.
- First, because firms within a strategic group offer similar products to the same customers, the competitive rivalry among them can be intense. The more intense the rivalry, the greater threat to each firm’s profitability.
- Second, the strength of the five industry forces differs across strategic groups.
- Third, the closer the strategic groups are in terms of their strategies, the greater the likelihood of rivalry between groups.