BUS4098 Week 3

Emerging Strategic Groups

To understand how patterns of rivalry exist in an industry, let's take an example of restaurants. Fast food restaurants compete closely against one another.

They offer similar food to similar customers at similar prices. Therefore, it is not surprising that they are rivals. We can say that fast food represents a

strategic group within the restaurant industry. Within a strategic group, rivalry is particularly strong because these �rms target the same customers by

using similar methods.

But consider other restaurants in town. Olive Garden, Applebee's, and T.G.I. Friday's also make up a strategic group. They also compete for similar

customers by using similar strategies, but these strategies are meaningfully different from the strategies with which fast food restaurants compete.

Finally, consider the "white tablecloth" restaurants in town; the places you visit on special occasions. They also form a strategic group. But ask yourself, "Do

these restaurants really care if McDonalds adds new salads to its menu?" Of course not. Although they are in the same industry, they are not rivals.

Conversely, Burger King is extremely interested in any menu changes that McDonalds makes.

In restaurants, footwear, and all other industries, it is critical that managers identify strategic groups in order to identify their rivals—who the managers have to beat to win customers.

Additional Materials

Why Do Firms Cluster in Strategic Groups 

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