Strategic Groups, Strategic Choices, Generic Strategies and Hybrid Strategies

Topics: Strategic management, Marketing, Ecological model of competition Pages: 5 (1342 words) Published: December 3, 2012
Strategic Groups
* “the group of firms in an industry following the same strategy along the same strategic dimensions” (Porter, 1980) * “a set of firms competing within an industry on the basis of similar scope and resource commitments” (Cool & Schendel, 1968) Competitive strategy = a choice of which strategic group to compete in = the choice of the easiest group to ‘get into’ Strategic groups are organisations within an industry with similar strategic characteristics, following similar strategies or competition on a similar bases. It helps understand who are the most direct competitors of any given organisation, on what basis competitive rivalry is likely to take place within each group and how it is different from one group to another. Mobility between groups depends on the extent to which there are barriers to entry between one group and another. Just as a new market space often can be found by looking across substitute industries so it can be found by looking across strategic groups. The term refers to a group of companies within an industry that pursue a similar strategy. In most industries, all the fundamental strategic differences among industry players are captured by a small number of strategic groups. Strategic Groups can generally be ranked in a rough hierarchical order built on two dimension of performance. Most companies focus on improving their competitive position within a strategic group. The key to creating a new market space across existing strategic groups is to understand what factors determine buyers decisions to trade up or down from one group to another. Kim and Mauborgne(2004) Harvard Business Reviewon Innovation, p10 Carrying out a strategic group analysis

* Identify relevant competitors and their competitive behaviour/strategic dimensions * Identify opportunities and threats
* Better understanding of dynamics over time
* Centrality of mobility barriers
From the analysis
* Analyse attractiveness of each group by performing a five forces analysis * Identifiy mobility barriers that prevent movement between groups * Assess gaps that you or competitor can move into

Strategic Choices
* May be about position in the market
* Become the compass for corporate strategy
* Purpose of a business level strategy is to create differences between firm and competitors Outward Facing In Strategic options
Porters Generic Strategies
Porter’s generic strategies remain one of the most widely accepted typology of strategic options for businesses. According to Porter there are three generic strategies through which you can seek competitive advantage * Cost leadership

* Differentiation
* Focus (either Cost or Differentiation)

Cost leadership - This strategy involves the firm winning market share by appealing to cost-conscious or price-sensitive customers. This is achieved by having the lowest prices in the target market segment, or at least the lowest price to value ratio. To succeed at offering the lowest price while still achieving profitability and a high return on investment, the firm must be able to operate at a lower cost than its rivals. The cost leadership strategy usually targets a broad market and benefits from economies of scale

* Process efficiency and efficient manufacturing
* Production capabilities cause a high barrier to entry for competitors *

* Competitor can lower cost
* Advancements in technology competition may leapfrog in production capabilities * Sustainability is based on competitor not being able to match price or source lower cost materials * Effects of inflation on cost

Create a competitive advantage
* reducing production costs and therefore increasing the amount of profit made on each sale as the business believes that its brand can command a premium price or * by reducing production costs and passing on the cost saving to customers in the hope that it will...
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