Ficha de inventario de atractivo cultural

A first issue that merits attention is what defines strategic groups. Hunt (1972: 8), who coined the term in his PhD dissertation, defines strategic group as “a group within an industry that are highly symmetric ... with respect to cost structure, degree of product diversification ... formal organisation, control systems, and management rewards and punishments ... (and) the personal views and preferences for various possible outcomes.” Hunt’s dissertation was never published and its definition has rarely been used in research. In the following years, neither researchers at Harvard or Purdue gave a definition to the concept of strategic groups. What researchers meant by strategic groups has to be deduced from the content of their articles. However, in the 1980s, a number of definitions with varying foci were advanced.

The first published definition of strategic groups is given by Porter (1980: 129) who affirms that a strategic group is “the group of firms in an industry following the same or similar strategy along strategic dimensions”3.

Porter’s definition is the most popular in strategic groups research. At first, it may give the impression of referring to firms’ strategic investments rather than to firms’

strategies. The difference between the two terms is a subtle but important one. It is

possible to think of a firm’s strategy as referring to a firm’s position at one point in time in an industry; position illustrated by its asset endowments, resulting from past investments. Firms’ strategic investments can be seen as the dynamic part of firms’ 1

1 We invite researchers interested in some methodological and technical issues to refer to these articles. 1 The dimensions to use in order to identify strategic groups are: specialisation; brand identification; push versus pull: channel selection; product quality; technological leadership; vertical integration; cost position; service; price quality; leverage; relationship with parent company; and relationship to home and host government.

Chapter 4 - The Development o f Strategic Groups Research: a Critical Review - page 64

strategies. It can be regarded as indicating the current firms’ investments or firms’ approaches to their asset structures. Cool et al. make a similar distinction, by distinguishing between stocks (identifying the strategy) and flows (identifying investment): “ “stocks” ... are accumulated over time through a history of investments or “flows”. ... Asset stocks are “state” variables, which describe a firm’s competitive position. Flows are the policy instruments which the firm directly controls and as such represents “current strategy” ” (Cool et al. 1994: 222-223). However, Porter refers to firms’ strategies rather than firms’ strategic investments. This is clear when we examine the context in which the definition is located. Porter talks about strategic groups being helpful in structural analysis of an industry: “The first step in structural analysis within industries is to characterise the strategies of all significant competitors.” (1980, p. 129). The dimensions indicated as useful to identify groups mostly concern past, long-term, firms’ commitment, which confirms that Porter refers to firms’ strategies. It also has to be remembered that Porter’s (1980) book stems from the theory of strategic groups developed with Caves in the 1977 paper (analysed in chapter 2), where the concept of strategic groups clearly refers to the analysis of groups structures.

Cool and Schendel (1987: 1106) defines strategic group as “a set of firms competing within an industry on the basis of similar combinations of scope and resource commitments.” Where the scope commitment relates to:

• the range of market segments targeted by the firm;

• the type of products and/or services offered in the market selected; and • the geographic reach of strategy.

Chapter 4 - The Development o f Strategic Groups Research: a Critical Review - page 65

In addition, the resource commitment relates to:

• the business-level deployments of resources (both material and immaterial).

Cool and Schendel (1987) emphasise that past research has not always been attentive to the concept and the definition of strategy. They stress that their definition of strategic groups is still general, but specifies the components that must receive minimum attention. They argue that scope and resource commitments are industry specific and that the determination of the variables used to identify strategic groups is contingent to the industry studied.

Cool and Schendel clearly refer to firms’ stocks rather than firms’ flows. Nevertheless, their definition may lead to confusion between strategic groups and competitive groups.

An industry is supposed to be formed by firms in competition for the same customers.

However, it is often the case that an industry comprehends firms focusing on different market segments. Consequently, competition within an industry is not for a homogeneous market, but for a market linked by the elasticity of demand to price variations for the goods offered. From this paper, it is clear that the criterion used to cluster firms together is not one leading to groups characterised by maximal internal and minimal external competition. It seems, rather, that ‘competing within an industry’ has a broader meaning, incorporating direct and indirect competitive relationships. Therefore, in a heterogeneous, geographically-dispersed market, where not all firms are in direct geographic competition, firms in direct competition may be clustered in different strategic groups and firms which are similar but do not compete in the same geographical area will be clustered in the same groups.

Mascarenhas and Aaker (1989: 475) take a different view of what strategic groups identify, affirming that a strategic group is “a grouping of businesses within an industry that is separated from other groupings of businesses by mobility barriers, barriers to entry and exit.” In their view, mobility barriers represent the theoretical core of strategic groups and consequently they should be used to study strategic groups. In Chapter 2, we saw that Caves and Porter created the concept of mobility barriers to address the common financial advantages or disadvantage of firms of the same strategic groups. Mascarenhas and Aaker argue that, because mobility barriers deter movement between groups, a definition based on mobility barriers is better for judging the attractiveness of each group and about the assets and skills needed to compete successfully within each group. In their view, a strategy can be supported by a set of assets and skills but such a linkage does not always exist. If the strategy is not supported by a unique set of assets and skills, then it can be easily duplicated because mobility barriers do not exist.

Mascarenhas and Aaker’s view had already been advanced by McGee and Thomas (1986)4, who similarly argue for the importance of the analysis of mobility barriers. “A firm within a group makes strategic decisions which cannot be imitated by firms outside the group without substantial costs, significant elapsed time, or uncertainty about the outcome of those decisions. These barriers to causal imitation by firms outside the group, and the definition of group, require the existence of such barriers.” (ibid. 1986: 150). However, McGee and Thomas do not see the necessity of defining strategic groups using a definition of mobility barriers. For them, it is obvious that the strategic variables that are used to identify groups are linked to mobility barriers: “recognising Chapter 4 - The Development o f Strategic Groups Research: a Critical Review - page 66

* “Classification of groups by their mobility barriers (or through similar notions of idiosyncratic capital and isolating mechanisms) is an appealing idea which stresses the cost advantages enjoyed by group members and emphasizes the elapsed time as well as the investment expenditures required of would-be

Chapter 4 - The Development o f Strategic Groups Research: a Critical Review - page 67

that these mobility barriers (or group-specific entry barriers) afford protection to group members, it is natural to envisage the key strategic variables as those which affect the height of mobility barriers.” (ibid. 1986: 150).

Having analysed these three definitions of strategic groups, what can we conclude? Using Dierickx and Cool’s (1989) terminology, we can say that the concept of strategic groups and some of the definitions analysed here may give the impression of a shift of focus from the analysis of firms’ stocks to firms’ flows. However, the shift is illusionary. Some researchers have identified strategic groups based on similarities in firms’ strategic investments [Oster (1982) used ‘advertising to sales’ ratio to cluster firms], but most researchers have favoured an analysis based on similarities in firms’ asset endowments, said to represent firms’ strategies.

However, the fundamental question is “what is the concept of strategic groups supposed to identify?” Cool el al. (1994: 223) state that “if strategic groups are conceived as elements of industry “structure”, then they should be identified on the basis of structural or stable firm attributes, i.e. stocks. In contrast, if strategic groups are conceptualised as a mapping of industry “conduct”, then it is appropriate to use control or flow variables to define strategic groups.”

We believe that the issue of definition of strategic groups is complex and needs to be linked to the theoretical foundations of the concept of strategic groups.

Thomas and Carroll (1994) have distinguished between a strong definition of strategic groups and a weak one. A strong definition arises from the way the concept of strategic

Chapter 4 - The Development o f Strategic Groups Research: a Critical Review - page 68

groups was developed at Harvard. Firms are similar in all relevant aspects, and because of these similarities, they recognise interdependence and copy each other’s moves. Firms of the same strategic groups are also expected to achieve a similar performance. From a typical neo-classical perspective, there is an identification of theory of decision­ making with the theory of the firm, so the difference between strategy flows and strategy stocks is not at issue. However, the attention is on structural elements. Therefore, strategic groups should identify strategy “stocks”.

A weak definition derives from the view of strategic groups as developed at Purdue. Strategic groups therefore identify firms taking similar independently strategic decisions. The emphasis is on strategy formulation or choice and little attention is given to the relation between strategy formulation and realised strategy or to that between strategy formulation and asset configurations. Therefore, it is not clear whether stocks or flows should be used to identify strategic groups.

Hence, what emerges is that early researchers of strategic groups did not think of differentiating between strategy stocks and strategy flows. The most appropriate explanation seems to be the simplistic view research has taken about the relationship between asset structures and firms’ decisions about strategic investments (as well as between strategy and competition). However, because of the popularity of Porter’s (1980) book and his definition, as well as Caves and Porter’s (1977) paper, we believe that strategic groups should identify firms’ strategic positions in their industry (i.e., their asset endowments). Nevertheless, researchers studying strategic groups should clearly state the type of strategic groups they are investigating.

Chapter 4 - The Development o f Strategic Groups Research: a Critical Review - page 69

4.1.2 Strategic Groups and the View of Firms’ Strategies and Industry Structure