## Strategic Group Mapping

### What Is a Strategic Group?

A strategic group consists of those rival firms in an industry that have similar competitive approaches and market positions. Firms in the same strategic group resemble each other more than they resemble firms in other groups.

### Why Use Strategic Group Maps?

When an industry has many competitors (say 13–15 firms), it becomes unwieldy to analyse each firm individually. A strategic group map clusters firms visually so managers can:

Spot the most direct competitors (same group).
Identify gaps or under-served positions.
Assess which groups face the strongest/weakest competitive forces.

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### Step-by-Step Procedure

Step 1 – Identify differentiating variables

Choose competitive characteristics that meaningfully separate firms. Common variables:

Price / quality range (high / medium / low)
Geographic coverage (local / regional / national / global)
Degree of vertical integration (none / partial / full)
Product-line breadth (wide / narrow)
Distribution channels used (one / some / all)
Level of service offered (no-frills / limited / full)

Step 2 – Plot the firms on a two-variable map

Select a pair of the differentiating variables as the X-axis and Y-axis. Place each firm at the coordinates that reflect its strategy.

Step 3 – Assign firms to strategic groups

Firms that cluster in roughly the same region of the map belong to the same strategic group.

Step 4 – Draw proportional circles

Draw a circle around each group. Make the circle's area proportional to that group's share of total industry revenue — this immediately shows which groups dominate the industry.

Worked example

### Example 1

Scenario (MTP1 May 2018 / PYQ July 2021 / MTP1 Sep 2024): A manufacturing company competes with 15 national rivals. The head of marketing wants to study competitors' market positions by grouping them into like positions. Which tool should be used, and how?

Answer: The tool is Strategic Group Mapping.

1. Identify differentiating variables (e.g., price/quality range, geographic coverage, product breadth, service level).

2. Plot all 16 firms on a two-variable map.

3. Assign firms occupying the same strategy space to the same strategic group.

4. Draw circles proportional to each group's share of industry sales.

This allows the marketing head to instantly see who the closest rivals are, where competitive pressure is highest, and where strategic white-spaces exist.

### Example 2

Scenario (MTP1 May 2024): A beverage company launching health-focused energy drinks wants to map rival energy-drink companies.

Approach: Use price/quality (X-axis) vs. geographic coverage (Y-axis) as the two variables. Plot all rivals, circle clusters, and size circles by revenue share. The company's planned position (premium / national) immediately reveals which existing firms it will compete against most directly.

⚠️ Common exam mistakes

Choosing variables that are correlated (e.g., 'price' and 'quality' often move together) — this produces a meaningless diagonal scatter rather than clear clusters. Choose variables that are truly independent.
Forgetting to size the circles by market share — without this, the map shows positions but not the competitive weight of each group.
Treating firms in different strategic groups as equally direct competitors — firms in different groups compete less intensely than firms within the same group.

Reference:

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