Strategic Group Mapping

Purpose

Definition: A technique to reveal the different competitive positions that all rivals within an industry are taking.
Objective: To identify competition by mapping out strategic groups within an industry.
Strategic Group: A cluster of firms with similar competitive and strategic approaches.
- Example: Coke and Pepsi.

Firms in the same group have at least two common competitive characteristics:
- Comparable product lines (e.g., Coke and Pepsi have similar product line breadth).
- Similar price and quality range.
- Target the same type of buyer with similar product attributes.
- Cover the same geographic areas.

Identify Competitive Characteristics
- Choose two differentiating characteristics (e.g., breadth of menu and price).
- Plot these on an XY axis:
  - Menu: Full to Limited
  - Price: Low to High
Plot Firms on the Graph
- Major firms in the industry are plotted based on the identified characteristics.
Assign Firms to Strategic Groups
- Group firms within similar spaces on the graph.
- Example: Olive Garden, Red Lobster, and Outback are grouped together in the full menu, higher price category.
Draw Circles Around Groups
- Circles represent market share, proportionate to size.
- Example: Largest circle in fast food, indicating significant market share.

Cross-Group Rivalry:
- Closer groups indicate stronger competitive rivalry.
- Example: McDonald's and KFC are close, indicating stronger rivalry.
- Direct competitors within the same group (e.g., McDonald's and Burger King).

Look for gaps in the map for possible new market segments.
Unfilled segments could represent opportunities for new business ventures.
Creative exploration of these gaps can lead to identifying unserved target markets.