Strategic group analysis

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1950’s Structure / Conduct & Performance paradigm
(Joe Bain)
Basic Conditions Of Cost And Demand
Market Structure
number of sellers, buyers, and suppliers
Market Conduct
pricing, advertising, R&D, etc.
Market Performance
profits, growth
Strategic Group Analysis
“No two species that depend on the same prey will think
differently” - Gause “Laws of natural competition”
A strategic group is a group of firms in an industry following the same
or similar strategy.
Identifying strategic groups:
• Identify principal strategic variables which distinguish
firms.
• Position each firm in relation to these variables.
• Identify clusters of common competing characteristic
Strategic Groups in the World Automobile Industry
Broad
GLOBAL, BROAD-LINE
PRODUCERS e.g., GM, Ford,
Toyota, Nissan, Honda, VW
REGIONALLY FOCUSED
BROAD-LINE
PRODUCERS e.g. Fiat,
PSA, Renault, Rover,
Chrysler
Product
Range
GLOBAL SUPPLIERS OF
NARROW MODEL RANGE
e.g., Volvo, Subaru, Isuzu,
Suzuki, Saab, Hyundai
NATIONALLY FOCUSED,
INTERMEDIATE LINE
PRODUCERS e.g. Tofas, Kia,
VAZ, Maruti
NATIONALLY- FOCUSED,
SMALL, SPECIALIST
PRODUCERS e.g., Bristol
(U.K.), Classic Roadsters
(U.S.), Morgan (U.K.)
Narrow
National
LUXURY CAR
MANUFACTURERS e.g.,
Jaguar, Rolls Royce,
Daimler-Benz, BMW
PERFORMANCE
CAR PRODUCERS
e.g., Porsche,
Maserati, Lotus
Geographical Scope
Global
A Framework for Competitor Analysis
OBJECTIVES
• What are competitors current
goals?
• Is performance meeting there goals?
• How are its goals likely to change?
STRATEGY
• How is the firm competing?
ASSUMPTIONS
• What assumptions does the competitor
hold about the industry and itself?
RESOURCES & CAPABILITIES
• What are the competitors’ key
strengths and weaknesses?
PREDICTIONS
• What strategy changes
will the competitor
initiate?
• How will the competitor
respond to our strategic
initiatives?
Tool: CCSI (Core Competency Strategic Intent matrix
Matrix)
• The CCSI matrix makes firm dynamics alive.
• Matrices are made at regular intervals
– Yearly or quarterly depending on how fast things are
changing
• The two dimensions of the matrix are:
– Core Competency: firms’ relative capacity -- as measured
by Tobin’s Q or market/book value or defect
rates(Customer switching) or as rated by industry
experts.
– Strategic Intent: firms’ relative aggressiveness -- as
measured by R&D expenditures or capital investments or
analysis of press releases.
Tool: CCSI Matrix
Average
Low
Core Capabilities
High
Each competitor is
mapped as a circle:
• the size of which
reflects sales or
capitalization or
assets
• and the pie slice
in which reflects
free cash or other
available
resources
Passiv
e
Average
Strategic Intent
Aggressiv
e
Case: CCSI Analysis of the early 90s Automobile
Industry
• Flip & Observe ;
–
–
–
–
The decline of Honda & Toyota
The ascendancy of Ford
General Motors unsuccessful run at leadership
Chrysler’s repositioning as an up and coming
star.
High
Automobile Industry 1990
1.5
illustrative
Toyot
a
Honda
.5
General
Motors
Chrysle
r
Ford
(.50
)
(1.0)
(1.5)
Low
Core Capabilities
1.0
.88
Passiv
e
.92
.96
1.04
Strategic Intent
1.08
1.12
Aggressiv
e
Automobile Industry 1991
illustrative
High
Toyot
a
1.5
Honda
.5
Chrysle
r
(.50
)
Ford
(1.0)
General
Motors
(1.5)
Low
Core Capabilities
1.0
.88
Passiv
e
.92
.96
1.04
Strategic Intent
1.08
1.12
Aggressiv
e
High
Automobile Industry 1992
illustrative
Toyot
Honda a
1.5
.5
Ford
General
Motors
(.50
)
Chrysle
r
(1.0)
(1.5)
Low
Core Capabilities
1.0
.88
Passiv
e
.92
.96
1.04
Strategic Intent
1.08
1.12
Aggressiv
e
End of Deck
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