What are some characteristics of Strategic Groups and what are some ways to map Strategic Groups.
Strategic groups are a distinct set of subgroups within an industry. What is interesting about these strategic groups is that, although they operate within the industry, their resources, capabilities, and strategies are different from other groups. Strategic groups face different opportunities and threats than other groups in the industry (Carpenter & Sanders, 2008). Another intriguing fact Carpenter and Sanders (2008) mention, is that smaller groups are more likely to be mutual threats than are groups with significantly different characteristics (p. 113).
According to the text, the first step would be to identify the dimensions that clearly differentiate the firms. It is also pertinent to remember that these dimensions should only reveal the closest internal competition (Carpenter & Sanders, 2008). It is also suggested that market competitors are segmented into their central locations in business. I was still finding a bit challenging truly understanding the mapping process just from the text and found additional research to supplement. The research focused largely on the cognitive mapping of executives and how it contributes to their decision-making process or strategical process. Meyer (2007), used a few key measures in understanding strategic thinking and behavior: identify cognitive similarities and differences, provide independent variables for strategic decision-making research, and detail dependent variable for strategy perspective. He further talks about quantifying strategic perspectives and researching personal attributes that influence decision-making (Meyer, 2007).
How can one use Porter’s four-step approach to make predictions about competitors
So far, we have studied quite a bit on strategy formulation and implementation, as well as different tools and analysis to help us identify what our internal and external strengths and weaknesses are. However, Porter’s four-step approach does something a bit different. Also dubbed Porter’s four corners model, it is a tool that helps determine a competitor’s action and calls for an understanding of what motivates the competitor (Porter’s Four Corners Model, n.d.).
The four corners seen below, include: drivers, assumptions, strategies and capabilities (Cole, 2015). This is such a great way of looking at things in depth, in my opinion, because it’s taking a holistic view on strategy. Asking questions like: what would my competitor do? How will they react to my next move? Preparing for all possible outcomes and situations will help a firm to understand and develop strategies that are better suited for real-world scenarios and possibilities.
How can one use scenario planning to predict the future structure of the external context
Scenario planning is a helpful tool in that it allows firms to develop detailed and internally consistent pictures of a range of plausible outcomes as an industry evolves (Carpenter & Sanders, 2008). Scenarios are similar to forecasting in that, firms are planning for the future. The better prepared firms are for all possible outcomes, the better they are at minimizing risks, more effective in using resources and capabilities, and more efficient at capitalizing on strengths. Another benefit to scenario planning is that is exposes vulnerability and environmental factors that impact change and makes these things possible to test and compare (Carpenter & Sanders, 2008). Unlike forecasting however, scenarios offer a kind of insurance for important decisions that would be hard to obtain through traditional forecasting (Schoemaker, 1991). In addition, Schoemaker (1991) states, “to guard against various risks, one might actively consider circumstances where one’s current decisions can be the cause of subsequent failure (p. 561).
The need to understand the dynamic characteristics of the external context.
As Porter mentions in his video, each industry may be different in how we use the components of the five competitive forces (Harvard Business Review, 2008). What will be a challenge for me moving forward with any business venture, is applying these tools to what we want to do and what our specific goals are in terms of profit and expansion. Understanding the various dynamic characteristics, such as Porter’s four corners model, will help aid in my understanding of strategy and my approach to formulating strategies that work best for my business.
References
Cole, J. (2015). Classic strategy tools: Porter’s Four Corners Model. Retrieved from https://about.eloquens.com/classic-strategy-tools-…
Harvard Business Review (2008, June 30). The five competitive forces that shape strategy[Video podcast]. Retrieved from
Meyer, R.J.H. (2007). Mapping the mind of the strategist: A quantitative methodology for measuring the strategic beliefs of executives. Retrieved from https://repub.eur.nl/pub/10182/EPS2007106ORG905892…
Porter’s Four Corners Model. (n.d.). In World heritage encyclopedia. Retrieved from http://worldjournals.org/article/whebn0026254667/p…
Schoemaker, P. (1991). When and how to use scenario planning: A heuristic approach with illustration. Journal of Forecasting 10, 549-564. Doi: 10.1002/for.3980100602. Retrieved from https://www.researchgate.net/publication/220040372…
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