Strategic Group Mapping
Introduction to Strategic Group Mapping
This section introduces the concept of strategic group mapping and its purpose in identifying competition within an industry.
Definition of Strategic Group
- A strategic group is a cluster of firms with similar competitive and strategic approaches.
- Example: Coke and Pepsi are in the same strategic group.
Common Characteristics of Strategic Groups
- Firms within a strategic group share at least two common competitive characteristics.
- Examples include comparable product lines, similar pricing and quality ranges, targeting the same type of buyers, and covering similar geographic areas.
Example of Strategic Group Mapping in the Restaurant Chain Industry
This section provides an example of how to create a strategic group map for the restaurant chain industry in the United States.
Steps for Creating a Strategic Group Map
- Identify two competitive characteristics that differentiate firms from each other (e.g., menu breadth and price).
- Plot all firms on an XY graph based on these characteristics.
- Assign firms into similar spaces on the graph to determine their strategic groups.
- Draw circles around each group proportionate to their market share.
Interpretation of Strategic Group Maps
- Closer proximity between strategic groups indicates stronger cross-group competitive rivalry.
- Firms within the same strategic group are direct competitors.
- Gaps in the map may indicate new business opportunities.
Importance of Analyzing Strategic Group Maps
This section highlights the importance of analyzing strategic group maps for understanding competition and identifying potential business opportunities.
Cross-Group Competitive Rivalry
- The closer two strategic groups are on the map, the stronger their cross-group competitive rivalry will be.
- Example: McDonald's would be more concerned with Kentucky Fried Chicken (KFC) strategically than with Outback Steakhouse.
Identifying New Business Opportunities
- Gaps in the strategic group map may indicate potential market segments for new business ventures.
- Creative analysis of the map can help identify suitable locations for new restaurants.
Conclusion
Strategic group mapping is a valuable technique for understanding competition within an industry. By analyzing common characteristics and plotting firms on a graph, strategic group maps provide insights into cross-group rivalry and potential business opportunities.