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 fine-dining 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 (Wikipedia).

Strategic Group Analysis

Strategic Group Analysis (SGA) aims to identify organizations with similar strategic characteristics, following similar strategies or competing on similar bases.

Such groups can usually be identified using two or perhaps three sets of characteristics as the bases of competition.

Examples of the SGA:

• Extent of product (or service) diversity.
• Extent of geographic coverage.
• Number of market segments served.
• Distribution channels used.
• Extent of branding.
• Marketing effort.
• Degree of vertical integration.
• Product (or service) quality.
• Pricing policy.

Use of Strategic Group Analysis This analysis is useful in several ways:

• Helps identify who the most direct competitors are and on what basis they compete.
• Raises the question of how likely or possible it is for another organization to move from one strategic group to another.
• Strategic Group mapping might also be used to identify opportunities.
• Can also help identify strategic problems.