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Strategic group analysis examines firms with similar products or services to the same segment of the population, helping companies identify competitors and determine how to compete within the group. It is often discussed in conjunction with market focus, and can help with product positioning and differentiation.
Companies that sell similar products or services to the same segment of the population are part of a strategic group. For example, a fine-dining restaurant and a fast food restaurant are both restaurants, but the businesses would be in different strategic groups because they typically don’t have the same customers. Similarly, a fashion boutique and a fine-dining restaurant serve the same clientele but are part of different strategic groups because the companies offer different products. Examining firms that operate within the same strategic group is called strategic group analysis.
This type of analysis is often discussed in conjunction with market focus. Market focus divides the consumer population into market segments that share characteristics such as education level, income, age, and gender. Companies research the general preferences of market segments and then use those preferences to orient products and services towards specific market segments served by strategic groups.
The goals of strategic group analysis vary based on several characteristics of the strategic group, including the size of the market, the diversity of products offered, the geographic proximity of competing companies, and where the products are sold. Branding, marketing, quality and price are also factors that need to be considered. For example, a company that serves consumers who value low prices might conduct an analysis to determine where competitor products fall on the low price scale relative to quality. The results of this group analysis could help the company determine how to evaluate products and set up quality control.
A company could use this analytical tool to identify competitors and determine how companies compete within the group. Companies launching a new product might conduct an analysis to determine how to compete when entering the market. Creating a map of which companies serve each market segment helps analysts uncover all markets that are underserved or not served at all by existing strategic groups.
Product positioning and differentiation are two strategic marketing techniques that benefit from group strategic analysis. Positioning means ensuring that a product occupies a unique place in the consumer’s mind, and differentiation means making a product appear different from competing products. Either way, having a competitive framework can help make a product look dramatically better than other products in the same strategic group.
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