Strategic groups exist within most industries. A strategic group is a set of firms within an industry that employ similar practices in order to achieve comparable goals. An example of a strategic group within the food service industry would be fast-food chains. The fast-food chains differentiate themselves from other restaurants by offering quick-service, popular foods, and relatively low prices. Within the same industry we can find a number of other strategic groups such as family restaurants, vegetarian restaurants, and coffee houses. Although fast-food chains and vegetarian restaurants both accomplish the same purpose, i.e. providing a prepared meal, their target audience, their methods of marketing, and other methods of doing business are decidedly different. Competition between firms within a strategic group is more direct than competition between firms located in different strategic groups.
Competitive rivalry amongst firms in the same strategic group can be very intense, especially since they are usually competing for the same customers. Consider Pepsi and Coca-Cola versus fruit juice. Pepsi and Coca-Cola are competing for cola drinkers, and they market their products competitively against each other. Although the customer could just as easily have a glass of fruit juice, Pepsi and Coca-Cola are not aggressively marketing against the juice industry. The fruit juice customer has different wants and needs than the cola customer, so the two strategic groups do not compete directly for the same clientele.