Competitor Analysis: Strategic Group Analysis and Mapping

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Munadil Shafat
Student (MBA), Bangladesh

Competitor Analysis: Strategic Group Analysis and Mapping

A Strategic Group is in competitor analysis a particular view towards a collection/group of companies in an industry having similar business models or similar strategies. Typically 2 key dimensions of that particular industry are used in order to distinguish direct rivals (those with similar strategies or business models) from indirect rivals. The term was coined by Hunt in 1972 while he conducted an analysis of the appliance industry.

STRATEGIC GROUP MAP
A Strategic Group Map (SGM) is a visualization or diagram of the existing strategic groups in some industry as observed from 2 chosen dimensions. In other words it is one type of visualization of the competitive environment.

STRATEGIC GROUP ANALYSIS
Strategic Group Analysis (SGA) is the process aimed at identifying (groups of) firms with similar strategic characteristics, following similar strategies or competing on similar bases. The results of the SGA can be summarized visually in one or more SGMs.

HOW TO CREATE A STRATEGIC GROUP MAP
These are the approximate steps of strategic group analysis which can be taken to construct a strategic group map:
  1. Identify key competitive characteristics/dimensions that differentiate firms in an industry. For example: Product or Service Diversity, Pricing, Quality, Geographic Coverage etc.
  2. Take two of such dimensions and draw a two-variable map. For example: Price and Product Variety.
  3. Plot existing competing firms in the diagram according to the chosen characteristics. Certain groups may appear, falling in the same approximate strategic space, forming a strategic group.
  4. Draw circles around the groups. You can use a circle size proportional to the respective group's share of total industry sales.
Below a sample strategic group map of car manufacturers based on the dimensions "Price" and "Breadth of Product Line".



ADVANTAGES OF STRATEGIC GROUP MAPPING. BENEFITS
Strategic group mapping includes following key advantages:
  • Helps to identity direct competitors. In a SGM, the firms in one's own circle are direct competitors. For example, in our map Hyundai and Kia are direct competitors.
  • Helps to find out cross-group rivalry. The closer a group is with the other, the higher the cross group rivalry between the groups. In our example, the Ferrari-Porsche-Lamborghini group's cross group rivalry is relatively stronger with the Mercedes-BMW group.
  • Helps to find strategic business opportunities. In particular any (large) blank spaces in between groups might indicate a strategic business opportunity.
ASSUMPTIONS AND PRECAUTIONS
  • The composition and number of the groups within an industry depends on the dimensions used to define the groups.
  • The diagrams are just a visual model. The reality is more complex and has more than 2 dimensions.
  • There are at least four levels of competition.
  • Do not mix up strategic groups with the similar perceptual maps which are positioning tools.
  • Do not mix up strategic groups with Porter's clusters which are geographic concentrations of interconnected companies.
See also this video on strategic group mapping.

Sources:
Hunt, M. (1972) "Competition in the Major Home Appliance Industry", doctoral dissertation, Harvard University, 1972.
Meilich, O. (2019), "Strategic Groups Maps: Review, synthesis, and guidelines", Journal of Strategy and Management, Vol. 12 No. 4, pp. 447-463

  Warren Miller, CPA, CFA
Strategy Consultant, United States
 

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