The more that one firm's strategy resembles another firm's strategy, the more the firms compete. In most industries, the competitors sort into groups that pursue different strategies. A strategic group is a group of firms in an industry following the same or a similar strategy in a given target market. For example, in the major appliance industry, Eleetrolux, Ilotpoint and Zanussi all belong to the same strategic group. Each produces a full line of medium-price appliances supported by good service. Quality-oriented Bosch and stylish AJessi, on the other hand, belong to a different strategic group. They both produce a narrow line of appliances and charge a premium price.
Some important insights emerge from strategic group identification. For example, if a company enters one of die groups, the members of that group strategic group
A group affirms in an industryfollowing the same or a similar strategy.
become its key competitors. Thus, if the company enters the first group against Electrolux, Ilotpoint and Zanussi, it can succeed only it' it develops some strategic advantages over these large competitors.
Although competition is most intense within a strategic group, there is also rivalry among groups. First, some of the strategic groups may appeal to overlapping customer segments. For example, no matter what their strategy, all major appliance manufacturers will go after the apartment and home builders segment. Second, the customers may not see much difference in the offers of different groups - they may see little difference in quality between Electrolux and Bosch. Finally, members of one strategic group might expand into new strategy segments, as Ilotpoint has done by extending its washing machine range to approach Bosch's prices.
The company needs to look at all the dimensions that identify strategic groups within the industry. It needs to know each competitor's product quality, features ami mix; customer services; pricing policy; distribution coverage; sales force strategy; and advertising and sales promotion programmes. It must study the details of each competitor's R & D, manufacturing, buying, financial and other strategies.
The process of comparing the company's products and processes to those of competitors or leading firms in other industries to find ways to improve quality and performance.
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