Strategic Group Analysis Framework
Analyze strategic groups
The Strategic Group Analysis Framework is a tool used to analyze the competitive landscape of an industry by identifying and examining strategic groups. A strategic group is a set of companies that pursue similar strategies and have similar characteristics. The framework involves assessing the relative bargaining power of each strategic group with its suppliers and buyers, as well as its vulnerability to substitute products and exposure to rivalry from other groups.
- Companies within an industry can be grouped into strategic groups based on their strategies and characteristics
- Each strategic group has its own unique characteristics and competitive dynamics
- The relative bargaining power of each strategic group with its suppliers and buyers is a key factor in determining its competitive position
- The vulnerability of each strategic group to substitute products is a key factor in determining its competitive position
- The exposure of each strategic group to rivalry from other groups is a key factor in determining its competitive position
- Identify Strategic GroupsIdentify the strategic groups within an industry based on their strategies and characteristicsPro tipUse industry reports and research studies to identify strategic groupsWarningBe careful not to overlook smaller or niche strategic groups
- Assess Bargaining PowerAssess the relative bargaining power of each strategic group with its suppliers and buyersPro tipUse tools such as the Five Forces Framework to analyze bargaining powerWarningBe careful not to underestimate the bargaining power of smaller strategic groups
- Assess Vulnerability to Substitute ProductsAssess the vulnerability of each strategic group to substitute productsPro tipUse tools such as the Product Life Cycle Framework to analyze vulnerability to substitute productsWarningBe careful not to overlook the potential for new technologies to create substitute products
- Assess Exposure to RivalryAssess the exposure of each strategic group to rivalry from other groupsPro tipUse tools such as the Competitive Rivalry Framework to analyze exposure to rivalryWarningBe careful not to underestimate the potential for new entrants to increase rivalry
The minicomputer industry can be divided into strategic groups based on their strategies and characteristics. For example, companies that focus on business customers and sell machines complete with software to perform a wide variety of functions can be grouped into one strategic group, while companies that focus on industrial buyers and sell machines for repetitive process-control applications can be grouped into another strategic group.
The Strategic Group Analysis Framework was developed by Michael E. Porter as part of his work on competitive strategy. It is based on the idea that companies within an industry can be grouped into categories based on their strategies and characteristics, and that these groups can be analyzed to understand the competitive dynamics of the industry.