Map of strategic groups
Strategic group is a collection of companies of the sector, which carry a similar competitive strategy. This strategy can be determined by key factors of success. These factors are common to a particular industry (such as specialization, brand, distribution channels, product quality, technical leadership, vertical integration, service, price, etc.) although they occur in individual enterprises in a different form. Strategic group map is a tool for the analysis of competition in the sector, and thus allows to observe the relationships that occur in groups and between them [A.Stabryła 2000, p. 158].
Stages of design
Creating a map managers should perform following steps:
- Choose determinants (strategic dimensions) that are essential for particular sector, and in the same time can be used for differentiation.
- Choose a pair of such factors that best differentiate the analyzed companies in the industry.
- Apply selected features on the coordinate axes X and Y.
- Place the businesses in the matrix using chosen characteristics.
- Mark the circles showing the company closest to each other. These points are the strategic groups.
To be more precise analysis can use plotted logos (square, rectangle), which illustrates the most competitive area, an area where used a combination of strategies is most effective. You should also plot the lines representing the mobility barrier that determines firms located close to the most efficient combination of strategy and those that must modify their strategies if they want to increase their competitiveness.
Rules of preparing
In order to effectively study the sector managers must follow a few rules during the construction of maps:
- Strategic dimensions should not be closely correlated.
- Strategic dimensions should set obstacles to mobility within the industry.
- Dimensions should be measurable.
Besides, it is also recommended to make several maps based on various factors, as well as periodical repetition of plotting maps based on the same factors, in order to observe the dynamics of change in the industry.
See also:
Examples of Map of strategic groups
- A common example of a strategic group map can be seen in the retail industry. Companies are organized into different strategic groups, depending on their pricing strategy, product range, target market and other factors. For example, the discount retail group may include stores such as Walmart and Target, while the luxury retail group may include stores such as Nordstrom and Saks Fifth Avenue. This type of map can be used to illustrate the competitive landscape and show how different companies are positioned relative to each other.
- In the automotive industry, strategic group maps can be used to show how different car manufacturers are positioned in terms of technology, quality, price, and other factors. For example, a strategic group map may show that luxury car manufacturers such as BMW and Mercedes-Benz are positioned differently than mass-market car manufacturers such as Ford and Toyota. The map can also be used to illustrate how companies within the same strategic group may differ in terms of product offerings and pricing.
- In the technology sector, strategic group maps can be used to show the different strategies employed by technology companies. For example, a map may show software companies such as Microsoft, Oracle, and Adobe clustered together, while hardware companies such as Apple, Dell, and HP are clustered in a different area. The map can also be used to illustrate how different companies are positioned in terms of innovation, product offerings, and pricing.
Advantages of Map of strategic groups
One of the main advantages of a map of strategic groups is that it allows for a detailed analysis of competition within a sector. This tool enables the identification of different groups of competitors, and the analysis of their respective strategies. The following are some of the advantages of a map of strategic groups:
- It allows for an understanding of the competitive environment in a sector, by providing a visual representation of the various groups of competitors and the strategies they employ.
- It can help to identify key differences between groups and opportunities for differentiation.
- It can provide insight into the strengths and weaknesses of competitors in the sector, making it easier to craft a competitive strategy.
- It can identify areas of potential cooperation, such as shared production facilities or other resources that can be used to gain a competitive advantage.
- It can provide a basis for further research and analysis, such as developing a more detailed understanding of the competitive environment.
Limitations of Map of strategic groups
- The map of strategic groups does not provide a comprehensive view of the competitive landscape, as it does not take into account other factors such as customer preferences, market trends, and technological advancements.
- Strategic group maps are limited to providing a snapshot of current competition and cannot predict future competitive scenarios.
- Strategic group maps also do not take into account any potential new entrants into the market, which can disrupt existing competitive dynamics.
- The map of strategic groups is also limited by its reliance on the data provided by the company, which may not be completely accurate or up-to-date.
- The map of strategic groups may not accurately represent the dynamics of the group due to the limited data that is used to create the map.
- Finally, strategic group maps may not be able to capture the differences in strategy between companies within a group, which can be important for understanding the competitive landscape.
- Diversification: Diversification is a strategy that involves expanding the company's portfolio of products or services, with the aim of entering new markets and reducing risk.
- Cost Leadership: Cost leadership is a strategy that involves a company producing and selling goods at a lower cost than its competitors.
- Product Differentiation: Product differentiation is a strategy that involves creating a unique product or service that is perceived as superior to that of competitors.
- Focus Strategy: Focus strategy is a strategy that involves targeting a narrow market or customer segment with a differentiated product or service offering.
In summary, other approaches related to Map of strategic groups include diversification, cost leadership, product differentiation, and focus strategies. These strategies involve expanding the company's portfolio of products or services, producing and selling at a lower cost than competitors, creating a unique product or service, and targeting a narrow market or customer segment.
| Map of strategic groups — recommended articles |
| Strategic group — Market mapping — Competitor — Ansoff strategy model — Market attractiveness — Hofer matrix — Evaluation of sector's attractiveness — Product competitors — Potential market |
References
- Reger, R. K., & Huff, A. S. (1993). Strategic groups: A cognitive perspective. Strategic Management Journal, 14(2), 103-123.
