Strategic Group Mapping

Strategic group mapping is used for the purpose of displaying the competitive positions that rival
firms occupy in the industry. In every industry there are some companies which enjoy stronger
market position than other. Therefore it becomes important to analyze the industry’s competitive
structure and identify the strategic group (cluster of industry rivals that have similar competitive
approaches and market position). Each industry contains one or more than one strategic group
depending upon the strategies and market positions of industry members.

Purpose of strategic group maps:

1. Identification of close and distant rivals. This is important to know because close
strategic groups have stronger cross-group competitive rivalry.
2. Identification of attractive and unattractive positions of the firms in industry. This
attractiveness depends upon the industry driving forces, prevailing competitive pressures
and profit potentials of different strategic groups.
3. Strategic group mapping helps in identifying the strategic group a firm should consider
entering.
4. It helps in analyzing the type and level of entry barriers the firm will face.
5. It also examines the number and type of entry barriers the firm will face.

Guidelines for constructing strategic group maps:

1. There should be no correlation between the variables selected as axes for the map.
2. There should be a big difference between the variables selected. This will help to easily
identify the rival’s position in the market place.
3. The variables selected should be discrete rather than quantitative or continuous.
4. A relative size of each strategic group depends upon the combined sales of the firms in
each strategic group.
5. Different competitive variables should be used as axes for the map because there is not
necessary one best map.
Steps in the construction of strategic group maps:

1. Analyzing the overall industry and identifying those competitive characteristics that
differentiate firms in the industry. Variables selected as axes for the map could be
identified during the process of industry analysis.
2. Variables selected as axes for the map could be product-line breadth (wide, narrow),
price (high, medium, low), quality (high, medium, low), geographic coverage (local,
regional, national, global) etc. Using two-variable map, have to plot all the firms in the
industry. For example price (high, medium, low) can be taken on x axis whereas
product-line breadth (wide, narrow) on Y axis and all the firms can be plotted
accordingly.
3. All the firms that fall in the same strategy space should be allocated to the same strategic
group.
4. Finally, sketch circles around each strategic group. The size of the circles depends upon
the share of a strategic group in the total industry sales revenue.
There are always competitive pressures and driving forces which adversely affect the firms in
strategic groups. Therefore, some firms may try to shift to a more favorably situated group. This
shifting is however difficult if the entry barriers of the target strategic group are high. An arrow
can be attached to the circles showing the targeted direction of the firms which are trying to
change their competitive positions on the map.