Category Strategy for Firm Advantage

Abstract

The decision of where to position in a market is crucial to firm success. Most strategy research focuses on either choosing an attractive industry or firm-level differences that lead to sustained advantage. In both approaches, how the industry or submarket is defined is typically taken as an exogenous constraint. But firms also can shape market categories in ways that advantage the firm. In this article, I draw on research in strategy, sociology, and cognitive science to show category strategy is foundational to strategic decisions around competitive positioning. Cognitively, the market categories people use define the playing field for firms, as they partially determine competitive sets and evaluation standards. Sociologically, definitions of market categories are subject to social influence. This means strategic decisions about how to position within the market affect how market categories are defined and evolve, which firms can (and should) use to achieve long-term value.