IAP Strategic Group Mapping

Objectives

-An appraisal of a rival's objectives should include not only its financial performance objectives, but strategic ones as well (such as those concerning mar- ket share). -Rivals with good financial performance are likely to continue their present strategy with only minor fine-tuning. Poorly performing rivals are virtually certain to make fresh strategic moves.

The Value of Strategic Group Maps?

-Strategic group maps reveal which companies are close competitors and which are distant competitors. -Some strategic groups are more favorably positioned than others because they confront weaker competitive forces and/or because they are more favorably impacted by industry driving forces.

How to construct a strategic group mapping

1)"Identify the competitive characteristics that delineate strategic approaches used in the industry. -variables used: price/ quality range (high, medium, low), geographic coverage (local, regional, national, global), product-line breadth (wide, narrow), degree of service offered (no frills, limited, full), use of distribution channels (retail, wholesale, Internet, multiple), degree of vertical integration (none, partial, full), and degree of diversification into other industries (none, some, considerable) 2)Plot the firms on a two-variable map using pairs of these variables. 3)Assign firms occupying about the same map location to the same strategic group. 4)Draw circles around each strategic group, making the circles proportional to the size of the group's share of total industry sales revenues.

Capabilities

A rival's strategic moves and countermoves are both enabled and constrained by the set of capabilities they have at hand. Thus a rival's capabilities (and efforts to acquire new capabilities) serve as a strong signal of future strategic actions (and reactions to your company's moves)

Current Strategy

To succeed in predicting a competitor's next moves, company strategists need to have a good understanding of each rival's current strategy, as an indicator of its pattern of behavior and best strategic options.

strategic group

a cluster of industry rivals that have similar competitive approaches and market positions - eg. product range, geographical breadth, choice of distribution channels, level of product quality, degree of vertical integration, choice of technology -By selecting the most important strategic dimensions and locating each firm in the industry along them, it is possible to identify groups of companies that have adopted more or less similar approaches to competing within the industry.

Framework for Competitor Analysis

points to four indicators of a rival's likely strategic moves and countermoves. These include a rival's current strategy, objectives, capabilities, and assumptions about itself and the industry

4 Identify the segment's key success factors (KSFs) :

Differences in competitive structure and in customer preferences between segments result in different KSFs. By analyzing buyers ' purchasing criteria and the basis of competition within individual segments, we can identify KSFs for individual segments.

5 Select segment scope :

Finally, a firm needs to decide whether it wishes to be a segment specialist or to compete across multiple segments.

Assumptions

How a rival's top managers think about their strategic situation can have a big impact on how they behave. -Assessing a rival's assumptions entails considering their assumptions about itself as well as the industry it participates in.

2 Construct a Segmentation Matrix :

Once the segmentation variables have been selected and discrete categories determined for each, the individual segments may be identified using a two- or three-dimensional matrix.

1 Identify key segmentation variables :

Our starting point is to determine the basis of segmentation. Segmentation decisions are essentially choices about which customers to serve and what to offer them: hence segmentation variables relate to the characteristics of customers and the product

3 Analyze segment attractiveness :

Profitability within an industry segment is determined by the same structural forces that determine profitability within an industry as a whole. As a result, Porter 's five forces of competition framework is equally effective in relation to a segment as to an entire industry.

Define segmentation

Segmentation is particularly important if competition varies across the different submarkets within an industry such that some are more attractive than others.

Vertical Segmentation: Profit Pool Mapping

Segmentation is usually horizontal: markets are dis- aggregated according to products, geography, and customer groups. we can also segment an industry vertically by identifying different value chain activities. -1) estimating the industry 's total profit by applying the average margin earned by a sample of companies in the industry to an estimate of the industry 's total revenues and 2) estimating the profit at each stage of the value chain.

What strategic moves are rivals likely to make next?

Studying competitors' past behavior and preferences provides a valuable assist in anticipating what moves rivals are likely to make next and outmaneuvering them in the marketplace.

Purpose of segmentation

The purpose of segmentation analysis is to identify attractive segments, to select strategies for different segments, and to determine how many segments to serve.