The next stage of the study of the structure of competition in the industry is the analysis of the position of competitors in the market. One of the methods of comparing the competitive positions of companies is the development of a map of strategic groups [44 p.7]. This analytical technique allows you to compare the market positions of companies and combine them into homogeneous groups if there are so many competitors in the industry that it is difficult to comprehensively study each of them.
The strategic group includes competing companies with approximately the same competitive strategies and market position [44 pp.129-130] or united by other common features: assortment, price/quality ratio, distribution channels, target audiences and methods of their attraction, technologies used, level of service and technical support [29 pp.213-233]. If all companies in the industry have identical strategies and similar market positions, such an industry consists of one strategic group. If each company has its own methods of competition and a separate position in the market, then there are as many strategic groups as competing companies.
From the maps of strategic groups: First, it is possible to establish what influence the driving forces and competitive pressures in the industry have and on which strategic groups. Second, it is possible to establish what factors determine the differences in the potential profitability of different strategic groups.
In general, the closer strategic groups are located on the map, the stronger the competition between their member companies. The strongest competitors are companies of one strategic group, and their second most important competitors are members of the nearest groups. Strategic group maps can also be used to predict the development of competition in the industry. Members of strategy groups that are far removed from each other on the map usually do not compete with each other at all.
For example, Tiffany & Co. and Wal-Mart sell gold and silver jewelry, but the prices and quality of their products are so different that competition between them is almost impossible. For the same reason, timex watches can not seriously compete with Rolex, and Subaru cars – with Lincoln or Mercedes-Benz.