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stattegic grououp analysis


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Discuss the concept of strategic groups highlighting the value of strategic grouping as an analytic tool STRATEGIC GROUPING!!!!!


Definition A strategic group is a group of firms in an industry following the same or similar strategy. Eg the coming up of two big firms making an oligopoly over similar suppliers For example two pharmaceuticals come together in order to go against a monopoly medical supplier.

Strategic Group Mapping:

Strategic Group Mapping Firms in same strategic group have two or more competitive characteristics in common Have comparable product line breadth Sell in same price/quality range Emphasize same distribution channels Use same product attributes to appeal to similar types of buyers Use identical technological approaches Offer buyers similar services Cover same geographic areas

Procedure for Constructing a Strategic Group Map:

STEP 1: Identify competitive characteristics that differentiate firms in an industry from one another STEP 2: Plot firms on a two-variable map using pairs of these differentiating characteristics STEP 3: Assign firms that fall in about the same strategy space to same strategic group STEP 4: Draw circles around each group, making circles proportional to size of group’s respective share of total industry sales Procedure for Constructing a Strategic Group Map

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Variables selected as axes should not be highly correlated Variables chosen as axes should expose big differences in how rivals compete Variables do not have to be either quantitative or continuous Drawing sizes of circles proportional to combined sales of firms in each strategic group allows map to reflect relative sizes of each strategic group If more than two good competitive variables can be used, several maps can be drawn

Interpreting Strategic Group Maps:

The closer strategic groups are on the map, the stronger the cross-group competitive rivalry tends to be Not all positions on the map are equally attractive Driving forces and competitive pressures often favor some strategic groups and hurt others Profit potential of different strategic groups varies due to strengths and weaknesses in each group’s market position Interpreting Strategic Group Maps

Strategic Moves Are Rivals Likely to Make Next:

Strategic Moves Are Rivals Likely to Make Next A firm’s best strategic moves are affected by Current strategies of competitors Future actions of competitors Profiling key rivals involves gathering competitive intelligence about Current strategies Most recent actions and public announcements Resource strengths and weaknesses Efforts being made to improve their situation Thinking and leadership styles of top executives

Competitor analysis:

Competitor analysis Sizing up strategies and competitive strengths and weaknesses of rivals involves assessing Which rival has the best strategy? Which rivals appear to have weak strategies? Which firms are poised to gain market share, and which ones seen destined to lose ground? Which rivals are likely to rank among the industry leaders five years from now? Do any up-and-coming rivals have strategies and the resources to overtake the current industry leader?

Identifying strategic groups: :

Identifying strategic groups: Identify principal strategic variables which distinguish firms. For example , single product Vs product family, private labeling Vs branded products, push Vs pull marketing, etc. Choose variables that produces the greatest contrast between firms, usually the CSFs. Do not use correlated variable. Sometimes it is useful to being grouping firms before selecting strategic variables Position each firm in relation to these variables Analyzing the attractiveness of each group by performing a five force on each group Identify the mobility barriers that inhibit movement of firms between strategic groups


Assumptions Two unassailable assumptions in industry analysis No two firms are totally different No two firms are exactly the same Strategic groups Cluster of firms that share similar strategies

Value of strategic groups as an analytical tool :

Value of strategic groups as an analytical tool Identify barriers to mobility that protect a group from attacks by other groups. For instance if the Identify groups whose competitive position may be marginal or tenuous Chart the future direction of firms’ strategies Thinking through the implications of each industry trend for the strategic group as a whole


LIMITATIONS Industries or landscapes are neither created equal nor stay equal The concept of “extended competition” provides a comprehensive framework for assessing structural attractiveness A firm’s strategy can increase or decrease its exposure to competitive forces Other things being equal, a firm should seek to trigger actions that improve structural attractiveness But it isn’t enough to look at just structural attractiveness: competitive position must also be considered

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