Strategic Group Analysis

Strategic group analysis partitions the firms in an industry into clusters that pursue similar strategies along key competitive dimensions, and explains why these clusters persist and why their members earn different returns. The concept originates with Michael Hunt's 1972 dissertation on the U.S. home-appliance industry and was given its theoretical engine by Caves and Porter's 1977 reconceptualization of entry barriers as mobility barriers — structural impediments that protect not just the industry from outsiders but each strategic group from incursion by firms in other groups. McGee and Thomas's 1986 review consolidated the construct, clarifying which variables legitimately define groups and how groups, mobility barriers, and isolating mechanisms relate to performance. The method bridges industrial-organization economics and strategic management by treating intra-industry structure, not just industry-level structure, as the relevant unit of competitive analysis.