Strategic Group Mapping

Summary

Strategic group mapping is a technique to identify and analyze the competitive positions of firms within an industry. It involves clustering firms with similar competitive and strategic approaches, such as product lines, pricing, and target buyers. The script illustrates this concept using the examples of the soft drink industry with Coke and Pepsi, and the US restaurant chain industry. It explains the steps to construct a strategic group map, interpret rivalry intensity, and identify potential market opportunities by examining gaps in the map.

Takeaways

• 📊 Strategic Group Mapping is a technique to visualize the competitive positions of firms within an industry.
• 🔍 It helps to identify who the competition is by analyzing similar competitive and strategic approaches among firms.
• 👥 A strategic group is defined as a cluster of firms with very similar competitive characteristics.
• 🥤 Companies within the same strategic group, like Coke and Pepsi, often have comparable product lines and price ranges.
• 🛒 Firms in a strategic group typically target the same type of buyer with similar product attributes.
• 📍 Strategic groups can also be identified by geographic areas, as seen with global companies like Coke and Pepsi.
• 🍽️ The US restaurant chain industry example illustrates how to construct a strategic group map using menu breadth and price as differentiators.
• 📈 The strategic group map is plotted on an XY graph, categorizing firms based on full to limited menu offerings and low to high price ranges.
• 🔄 Assigning firms to strategic groups involves placing them in similar spaces on the graph, indicating their competitive positioning.
• 🌐 The size of the circles on the strategic group map represents the market share of each group within the industry.
• 🤝 Proximity of strategic groups on the map indicates the strength of cross-group competitive rivalry.
• 💡 Gaps in the strategic group map can reveal new opportunities for business, suggesting unfilled market segments.

Q & A

What is the main purpose of strategic group mapping?

The main purpose of strategic group mapping is to identify who the competition is and to reveal the different competitive positions that all rivals within an industry are taking.

What is a strategic group defined as?

A strategic group is defined as a cluster of firms with very similar competitive and strategic approaches.

What are the two common competitive characteristics that firms within the same strategic group should have?

Firms within the same strategic group should have at least two common competitive characteristics, such as comparable product lines and similar product line breadth, price, and quality range.

How do firms within a strategic group typically approach their target market?

Firms within a strategic group usually go after the same type of buyer with similar product attributes, which is evident in their marketing and advertising campaigns.

What is the first step in creating a strategic group map for an industry?

The first step is to identify two competitive characteristics that differentiate firms from one another within the industry.

How is the strategic group map constructed in terms of the graph?

The strategic group map is constructed by plotting an XY graph where one axis represents the breadth of menu from full to limited, and the other axis represents the price offerings from the low end to the high end.

What is the significance of assigning firms into similar spaces on the strategic group map?

Assigning firms into similar spaces helps to identify similar strategic groups, which can then be analyzed for competitive rivalry and market share.

How are the strategic groups represented visually on the strategic group map?

The strategic groups are represented by drawing circles around them, with the size of the circles being proportionate to the approximate size of the group's market share in the total industry.

What does the proximity of strategic groups on the map indicate?

The proximity of strategic groups on the map indicates the strength of cross-group competitive rivalry. Firms that are closer to each other are more likely to be direct competitors.

How can strategic group maps be used to identify new business opportunities?

Strategic group maps can be used to identify gaps or unfilled segments, which may represent new opportunities for business, allowing for the creation of a product or service that caters to a currently unserved market segment.

Why is it important for a firm like McDonald's to be concerned with the strategies of KFC rather than Outback Steakhouse?

It is important because KFC and McDonald's are in closer strategic groups, indicating that they are more direct competitors with similar market positioning, whereas Outback Steakhouse operates in a different strategic group with a different market focus.