Firms that compete within the same strategic group generally experience
Multiple Choice
A less competitive rivalry than firms outside their strategic group.
B the same competitive rivalry than firms outside their strategic group.
C more competitive rivalry than firms outside their strategic group.
D no competitive rivalry because they are substitutes.
The correct answer and explanation is :
The correct answer is:
C. More competitive rivalry than firms outside their strategic group.
Explanation:
In strategic management, a strategic group refers to a set of firms within an industry that pursue similar strategies or share similar characteristics. These firms often target the same customer segments, use similar technologies, or adopt comparable business models. Strategic groups are important because they help to segment the competitive landscape of an industry.
Firms within the same strategic group typically experience more competitive rivalry with each other than they do with firms outside their group. This occurs because these companies are directly competing for the same market share, using similar approaches to differentiate themselves in the market. For instance, if two companies in the same strategic group are both targeting high-income consumers with luxury products, they are likely to engage in direct competition, attempting to capture the same target audience.
There are several reasons for the heightened rivalry within strategic groups:
- Direct Competition for Market Share: Since the firms within a strategic group have similar product offerings, their customer bases overlap significantly. This overlap leads to direct competition, with firms trying to outdo each other in terms of product features, price, or customer service.
- Similar Business Models and Goals: Companies within the same strategic group generally have comparable goals, such as increasing market share, improving profitability, and strengthening brand recognition. As they work toward similar objectives, they directly challenge each other’s progress.
- Increased Performance Pressures: Due to the similarity in their strategies, firms within the same group often push each other to innovate and perform at higher levels, which can lead to heightened rivalry.
On the other hand, firms outside the strategic group may compete in different market segments, use different technologies, or offer distinct products and services, resulting in less direct competition. Thus, firms outside a strategic group are less likely to impact each other in the same way firms within a strategic group do.