What are the business level strategy?
Goal-setting is one thing but making a plan or a layout to achieve those goals is another thing. In fact, ambitions without a strategy are just like music without rhythm. The same is the case with business; you simply cannot “win” without a solid plan-of-action- a business-level strategy. Show
Yes, you may have heard this term before, but today, we are going to discuss it in detail. We will go through different types of business-level strategy, and how corporations apply them to achieve their organizational goals. As usual, let’s start with the basics!
What is a Business Level Strategy?Business-level strategy, in simple words, is a layout, plan, or roadmap that helps a business to provide value to the customers and gain a competitive advantage by making the best use of its core competencies. The business-level strategy you choose will have a decisive role in establishing your position in the market. In fact, it is the foundation of your ultimate organizational goals. A business-level strategy may be of different types, but it must always consider three integral elements;
The business-level strategy may vary for the same organization’s different business units (strategic business units). In such a situation, every strategic business unit (SBU) will have its own business-level strategy. Now, every business unit may not follow the same strategy as other units. That is because every SBU serves a different audience and even may belong to a different industry. Keeping that in mind, every SBU may follow a different type of business-level strategy. Our next section is all about the various types of business-level strategies. Types Of Business-Level StrategiesAs we mentioned earlier, a business-level strategy mainly focuses on developing a competitive advantage. Now, there are different ways to do that, and we are going to discuss them one by one. Cost Leadership StrategyThis one is probably the most common type of business-level strategy. There are no simple words to say that but price is one of the most important factors in a consumer’s purchase decision. Following a cost leadership strategy, a business tries to manufacture its product(s) or service(s) at a lower cost than its competitors. Cost leadership strategy works better when you are targeting a mass market, and your customers are price-sensitive. The firm (practicing this strategy) will focus on reducing costs at all levels, including procurement, production, packaging, storing, distributing, etc. Tips On How to Achieve Cost Leadership
Differentiation StrategyAs the name clearly suggests, differentiation strategy, in a sense, is the opposite of cost leadership. Differentiation strategy mainly focuses on creating a competitive advantage by offering a unique product or service. This uniqueness can be due to the design, features, specifications, or anything that differentiates the product from rivals’ products in the market. Differentiation strategy is suitable for both mass markets as well as a narrow market. The “motto” of differentiation strategy is “quality over cost,” but it doesn’t mean a business cannot sell a unique product at a lower cost. In fact, this would be a perfect combination of cost leadership and differentiation strategy. Although differentiation strategy can help a business to become the industry leader, it is only effective as long as a firm keeps offering something unique and unprecedented. How To Achieve Differentiate Your Brand/Product
Integrated Low-Cost/DifferentiationAs we discussed in the previous section, a firm can integrate two strategies (integrated low-cost/differentiation) according to its business needs. This strategy focuses on developing a competitive advantage by offering something unique and reducing the overall manufacturing/operational costs as well. As a matter of fact, integrated low-cost/differentiation is the need of the hour because of changing global consumer trends. Now, this can be confusing for many of us, so we are going to explain it with the help of a real-world example- Southwest Airlines. This is how the company operates and achieves its goals.
Tips On How to Implement Low-Cost/Differentiation Strategy
Focus StrategyFocus strategy, as the name suggests, is helpful for businesses that want to target a specific (and smaller) segment of the market. The company following this approach mainly considers three things while selecting a niche;
Focus strategy can be further classified into two categories;
Focused DifferentiationA firm following this strategy works on a very specific niche/subset of the market that has enough potential for profitability. The main focus is to create a competitive advantage by offering a product that is difficult to substitute/replace. Most importantly, the firm concentrates on “unattended” or vacant market areas and builds a competitive advantage. Focus Low-CostFocus Low-cost is just like the focused differentiation approach. That is, this approach also targets a particular niche, but the firm also focuses on achieving economies of scale. Generally, smaller firms (those who cannot offer multiple products simultaneously) opt for this option. The idea is to provide maximum value to the customer but reduce the overall costs at all levels. Tips To Implement Focus Strategy
Examples of Business Level StrategiesAmazonAmazon is an ideal example of a cost leadership strategy. This global giant has literally wiped out any competition or hurdle in its way. Here is how;
AppleA global industry leader and a member of the “Big Five” (tech companies), Apple Inc is a perfect example of product differentiation. Apple has earned unprecedented fame and respect in the tech industry with its products such as iPad, iPod, Macintosh line computers, and the iconic iPhone. The company differentiated itself because of;
Happy SocksThe Swedish-based eCommerce company, Happy Socks has expanded its services to 90 different countries. The company focuses on a differentiation strategy (product differentiation) by offering unique features in their products. In fact, every clothing item they launch turns into a fashion trend. Apart from that, their exquisite packaging is another differentiating factor. IKEARegarding the integrated low-cost/differentiation strategy, IKEA would be the perfect example of this business practice. The company invests a lot in automation, logistics, and its designers. IKEA offers Products that you won’t get anywhere else and that too at low cost. How to Implement business Level StrategyImplementation of a business-level strategy needs a lot of homework and consists of different steps, which are;
What are the 5 business level strategies?Summary : There are only five business strategies: cost, quality, distribution, technology, and intellectual property (IP). All business strategies break down into these five, or some combination of them. As a general principle, focusing your organization on one is the easiest to execute.
What is business level strategy with examples?Business level strategies are more focused than corporate level strategies, but not nearly as focused as functional level strategies. If, for example, your corporate level strategy was to increase market share, your business level strategy might be: Broaden exposure. Increase marketing budget. Improve quality.
What is business level strategy and its types?Types of Business Level Strategies – Top 3 Types: Cost Leadership, Differentiation, Focus and Niche Strategies. A strategy is a pattern or a plan which integrates an organisation's major policies, goals and actions, sequences in a coherent linear of decision.
What is business strategic level?Business level strategy is concerned with designing ways for a business to gain a competitive advantage in a specific market. “Business strategy is how a firm creates value for a defined activity on its market. It shows the way a firm competes, positions, and masters its rivalry interactions and industrial structure.
|