what are the three aspects of mapping strategic groups

Breiz Heurope

3 min read

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10-03-2025

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Strategic group mapping is a valuable tool for analyzing competitive landscapes. It helps businesses understand their position relative to competitors, identify opportunities, and develop effective strategies. This article will explore the three key aspects of creating a robust strategic group map: Identifying Key Strategic Variables, Plotting the Strategic Groups, and Analyzing the Map for Insights.

1. Identifying Key Strategic Variables

This foundational step is critical to the accuracy and usefulness of your strategic group map. The variables you choose will define the dimensions of your map and determine how effectively it reveals competitive dynamics. These variables should be:

• Significant: They should meaningfully differentiate firms within the industry. Minor differences won't provide valuable insights.
• Measurable: You need quantifiable data to accurately plot firms on the map. Qualitative variables are difficult to represent visually.
• Relevant: The variables should directly impact competitive positioning and strategic choices. Irrelevant factors will clutter the map and obscure important relationships.

Examples of Key Strategic Variables:

• Market Breadth: This measures the range of product or service offerings a firm provides. A broad market breadth indicates a diverse portfolio, while a narrow breadth focuses on a specific niche.
• Vertical Integration: This indicates the degree to which a firm controls its supply chain, from raw materials to distribution. High vertical integration often suggests greater control over costs and quality.
• Product Differentiation: This assesses the uniqueness and perceived value of a firm's offerings. High differentiation allows for premium pricing but requires significant investment in branding and innovation.
• Technological Sophistication: This examines a firm's level of technological advancement and its ability to innovate. Technological leaders can often command higher margins and maintain competitive advantages.
• Customer Service: This evaluates the quality and responsiveness of a firm's customer service operations. Superior customer service can foster loyalty and increase customer lifetime value.

Choosing the right variables is crucial. Consider factors such as industry structure, competitive intensity, and your company's specific strategic goals.

2. Plotting the Strategic Groups

Once you've selected your key strategic variables, you need to gather data on each competitor. This data will allow you to plot each firm on a two-dimensional map. While more variables could be used, a two-dimensional map is typically easier to interpret.

Creating the Map:

1. Choose Two Key Variables: Select two of the most important and differentiating variables identified in the previous step. These will form the axes of your map.
2. Gather Data: Collect data for each competitor on the selected variables. This data could come from industry reports, company websites, financial statements, or other sources.
3. Plot the Competitors: Plot each competitor on the map according to its values for the two chosen variables. This creates a visual representation of the competitive landscape.
4. Identify Clusters: Look for clusters of competitors with similar positions on the map. These clusters represent strategic groups.

Example: A map might use "Market Breadth" on the x-axis and "Product Differentiation" on the y-axis. Competitors offering a broad range of undifferentiated products would cluster in one area, while those with a narrow range of highly differentiated products would cluster in another.

3. Analyzing the Map for Insights

The final step involves interpreting the strategic group map to derive actionable insights. This analysis helps identify:

• Competitive Rivalry: Analyze the proximity of strategic groups. Close proximity suggests intense rivalry, while distant groups may experience less direct competition.
• Attractiveness of Strategic Groups: Assess the profitability and growth potential of different strategic groups. Some groups may be more attractive than others due to factors like barriers to entry or market demand.
• Strategic Opportunities: Identify potential opportunities for your firm, such as entering underserved markets or differentiating your offerings to create a new strategic group.
• Mobility Barriers: Analyze the factors that make it difficult for firms to move between strategic groups. Understanding these barriers helps in choosing strategic moves.

By carefully considering these three aspects – identifying key variables, plotting the groups, and analyzing the map's implications – you can effectively leverage strategic group mapping to gain a deeper understanding of your competitive landscape and inform strategic decision-making. Remember that this is an ongoing process; regularly reassessing your strategic group map will ensure its continued relevance and usefulness in a dynamic market.