Strategic Groups: What is? - Part 1

Reposting from my excerpt in my postgraduate thesis & research in 2008, titled: Indonesia Banking Strategic Groups

What is Strategic Group?

Strategic group analysis is one of the popular analytical tools used to analyze industry structure and competition. However, this analysis is still not widely used by academics nor practitioners in Indonesia, as it is less popular than Porter's competitive forces analysis. Outside the country, as in the United States, the research on strategic groups is highly visible and has many academic enthusiasts, especially for academics in the field of Industrial Organization (Porter, 1983).

Strategic group analysis attracts me to pour it into research because qualitatively this analysis has a major impact in the strategic planning framework (Thomas and Pollock, 1999). The strategic group analysis provides a precise picture of the position and dynamics of competition within an industry subgroup, so companies can devise the right strategy to achieve the desired position within the group (Tang and Thomas, 1992).

Strategic Group Definition

Strategic groups are groups of companies that share similar strategies and characteristics or are in the same strategic dimensions (Porter, 1980).

In other words, the strategic group convenes the companies which share a common strategy characteristic (homogeneous) into a group, but between groups having different strategic intention heterogeneous). A similar concept with Segmentation. The following are excerpts from academic definitions of the strategic group:

• "A set of firms emphasizing similar strategic dimensions to use a similar strategy" (Hitt, et al, 2005: 6)
• "A group of companies in an industry that have similar strategies and that consider their respective primary competitors" (Abraham, 2006).
• "A cluster of industry rivals that have similar competitive approaches and market positions "(Thompson, et al, 2007: 82)

Strategic group analysis is generally depicted in the form of two dimensions, or on a map (Thompson, et al, 2007: 82-84). In this map, each company with similar strategic characteristics is grouped into one group and distinguished from other groups having different strategic characteristics.

To be continued to 2nd article: The development of Strategic Group