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Definition: Strategic Groups
Strategic Groups refers to a group of companies who follow the same strategy within a particular industry. A company which operates in an industry can have different business segments catering to different markets. For each of these segments, there will be a unique market characteristic, operating environment, threats and opportunities. So companies that operate under this segment will all have same strategies and therefore are called strategic groups.
The term was coined by Michael S. Hunt, a Harvard Professor in his 1972 Doctoral Thesis report. He was studying the appliances industry and discovered ‘sub-groups’ within the industry that showed high competition.
Let us take the example of aviation industry. There are different segments within the industry like luxury class, economy class, business class etc. The characteristic of luxury class segment will be different from that of an economy class segment. Companies that operate under luxury class segment face the same kind of competition in the market. Hence their strategic behaviour and performance will be similar.
Analysing the strategic groups within an industry can be of use in 3 ways:
(1) Help in making strategic moves by watching those of the rivals
(2) Provides with various options by taking ideas from other strategic groups