A development of the strategic group theory - A proposal on the three strategic group categories and introducing the concept of distance into the analysis-

In this paper, it proposes three strategic group categories that are "resource group", "execution group" and "market group", and proposes the concept of distance for the analysis. It is a critical development of the strategic group theory by M.E.Porter(1980). He used the term “Strategic Group” as the group of firms in an industry following the same or a similar strategy along the strategic dimensions. He tries to explain why some firms are persistently more profitable than others and how this relates to their strategic postures mainly through the concept of mobility barriers. In order to see how industry changes or how trends might affect it, he proposed the strategic group map as an analytical tool to display competition in an industry. It can be said that it is useful when a firm decide whether it goes into a certain industry or not, but it needs its competitive strategy not only when determining entry but also to cope with the competitors after the entry. To build up the latter strategy, it should take into account the rivals' strategies and the customer’s selection viewpoints. In other words, the result of the competition is concluded consequently by the market’s choice. Therefore it is important for a firm to know how the market considers the firms as a same group. This group membership might not be the same as the firm considers. Thus, it is not good enough to identify strategic group only by the mobility barrier for a firm to draw up an effective competitive strategy, though it seems natural way. Once the competition within the industry begins, these three categories affect their state of affairs each other. Hence, to categorize firms within the industry into three strategic groups described above is effective for the strategy analysis. The concept of distance can be also useful to express the changing relation among the firms in the changing situation. As the competition is intensified, the relative relation between them changes swiftly. In this situation, firms need to decide their own strategies that go along with them and to execute effective initiatives one after another in accordance with their recognition. Therefore, under the dynamic competitive circumstance, it is effective introducing the concept of distance.Rivalry among the firms is continuous interaction between fully exploit of their own resources, strategic initiative execution and customer’s selection. Under the fierce rivalry circumstance, firms are required ceaseless repositioning toward the changing situation. To analyze this changing state of affaires, the concept of distance can be rather useful because it can display the change as a metric variable, while the strategic group map only shows the situation if a firm belongs to a certain group statically. In this paper, it takes up Japan’s Internet Service Provider industry (ISP) as a case of study