Strategic Group A strategic group is a concept used in strategic management that groups companies within an industry that have

similar business models or similar combinations of strategies. For example, the restaurant industry can be divided into several strategic groups including fast-food and finedining based on variables such as preparation time, pricing, and presentation. The number of groups within an industry and their composition depends on the dimensions used to define the groups. Strategic management professors and consultants often make use of a two dimensional grid to position firms along an industry's two most important dimensions in order to distinguish direct rivals (those with similar strategies or business models) from indirect rivals. Strategy is the direction and scope of an organization over the long term which achieves advantages for the organization while business model refers to how the firm will generate revenues or make money. Hunt (1972) coined the term strategic group while conducting an analysis of the appliance industry after he discovered a higher degree of competitive rivalry than suggested by industry concentration ratios. He attributed this to the existence of subgroups within the industry that competed along different dimensions making tacit collusion more difficult. These asymmetrical strategic groups caused the industry to have more rapid innovation, lower prices, higher quality and lower profitability than traditional economic models would predict. Michael Porter (1980) developed the concept and applied it within his overall system of strategic analysis. He explained strategic groups in terms of what he called "mobility barriers". These are similar to the entry barriers that exist in industries, except they apply to groups within an industry. Because of these mobility barriers a company can get drawn into one strategic group or another. Strategic groups are not to be confused with Porter's generic strategies which are internal strategies and do not reflect the diversity of strategic styles within an industry. Originally, the analysis of intra-industry variations in the competitive behaviour and performance of firms was based primarily on the use of secondary financial and accounting data. The study of strategic groups from a cognitive perspective, however, has gained prominence during the past years (Hodgkinson 1997).

Strategic Group Mapping Strategic group mapping is a technique for looking at your position in your sector, field or market. Hunt coined the term strategic group in 1972 when he noticed sub-groups of businesses with similar characteristics in the same market. Michael Porter then expanded the concept in the 1980s. There are a number of benefits to strategic group mapping:

It can help you identify who your direct and indirect competitors (or possible partners) are It can illustrate how easy it might be to move from one strategic group to another It may help identify future opportunities or strategic problems It ensures you take your customers or beneficiaries views into account when developing or assessing your strategy

Purpose The purpose of strategic group mapping is to make sure you take the needs or wants of your customers/beneficiaries into account. It encourages you to ask different questions about your future strategy, relationships with other businesses in your sector and your understanding of the people who ultimately benefit from your products or services. The Tool The tool helps you assess the top five other players working in your field or sector. You then map the results on a matrix. You can do it on your own or with a group. It is most suitable for SMEs and larger businesses but can be adapted. It will take several hours to complete a detailed map. Positioning Map Firms use perceptual or positioning maps to help them develop a market positioning strategy for their product or service. As the maps are based on the perception of the buyer they are sometimes called perceptual maps. Positioning maps show where existing products and services are positioned in the market so that the firm can decide where they would like to place (position) their product. Firms have two options they can either position their product so that it fills a gap in the market or if they would like to compete against their competitors they can position it where existing products have placed their product. Drawing a Perceptual (Positioning) Map Theoretically a perceptual map can have any number of lines, to keep things simple they usually have 2 lines the x and y axis.The x axis goes left to right and the y axis goes bottom to top. Any criteria can be used for the map for example price, quality, status, features, safety and reliability. Once the two lines have been drawn and labelled existing products will be placed onto the map. Example Perceptual Map In the example below two dimensions price and quality have been used. If we plot the UK chocolate market, we can identify where existing chocolate brands have been positioned by manufacturers. For example our fictional brand of Belgian chocolates called Belgium Chocolates are high quality and high price so they are placed in the top right hand box, whilst Twix is an affordable "every day" treat chocolate so it has been placed in the bottom left hand square, in the low quality low price brand box. Diagram: Perceptual Map of UK chocolate confectionery Brands

Perceptual maps can help identify where (in the market) an organisation could position a new brand. In our example this could be at the medium price and medium quality position, as there is a gap there. There is also a gap in high price low quality but consumers will not want to pay a lot of money for a low quality product. Similarly the low price high quality box is empty because manufacturers would find it difficult to make a high quality chocolate for a cheap price or make a profit from selling a high quality product at a low price. Summary We must remember that perceptual maps are based on the buyer's perception this is challenging: what may be viewed as a quality product by one buyer, may not be perceived as a quality product by another buyer. Perceptual maps help firms understand how customers view their products. However as perception is very subjective, firms need to ensure that the data they use to plot the map is accurate. If customer perception data is wrong, the map will be wrong and this will affect the success of any marketing strategy based on the perceptual (positioning) map.

Perceptual maps may help organisations identify gaps in the market. Before deciding to fill any gaps in the market firms need to ensure that there is likely to be a demand for a product positioned in that gap.