Making a plan or a layout to achieve those goals is one thing, but creating a project or a structure to meet those goals is another. Ambitions without a strategy are analogous to music without a beat. The same is true for companies. You cannot “win” unless you have a solid plan of action—a business level strategy.
Yes, you might have heard of this term before, but we will discuss it today. As is customary, let us begin with the fundamentals! We will discuss various business-level strategies and how corporations use them to achieve organizational goals.
Business level strategy types
Efficient Business Strategies entail developing distinct competencies and putting them into action to gain an advantage over competitors.
Michael Porter proposed three business-level strategies in 1998, which are discussed below:
1. Strategy for Cost Leadership
This strategy emphasizes standardized products at a low cost for price-sensitive consumers.
The broad mass market is typically the focus of the cost leadership strategy. And to that end, the company strives for cost savings in various areas, including procurement, manufacturing, wrapping, storage, and distribution of products, all while achieving overhead savings. Firms frequently pursue forward, backward, and horizontal integration to achieve cost leadership.
Methods for Achieving Cost Leadership
- Forecasting the product or service’s demand promptly.
- To avoid waste, the firm’s resources must be used effectively.
- Achieving economies of scale, resulting in lower per-unit costs.
- Investing in cutting-edge technology to enable smarter working.
- Standardization of products for mass manufacturing, resulting in economies of scale.
Cost Leadership Example
Amazon is an example of a company that employs a cost-cutting strategy. Its primary goal is to attract a large number of customers. It leads to lower prices by utilizing its massive purchasing power to obtain low-cost products. This is then merged with no physical shops and cutting-edge distribution facilities to save customers while maintaining high margins.
Risks
- Because you are so focused on cutting costs, you may overlook how much your consumers want.
- Competitors may successfully imitate your strategy.
- Modern tech can lead to significant cost reductions that eliminate your competitive advantage.
2. Differentiation Strategy
As the name implies, the differentiation strategy aims to produce and provide customers with industry-wide products and services to target price-insensitive clients.
This strategy is also aimed at the broad mass market and includes creating a one-of-a-kind product. Unique means are distinct in design, brand image, specifications, customer support, new tech used, etc. Furthermore, this strategy may or may not result in a competitive advantage. Because standard products meet the customer’s needs or competitors quickly imitate the product or service.
As a result, the strategy should be implemented following thorough market research and buyer research. It is used to determine their needs and preferences and distinguish product features.
How to get Differentiation Techniques
- Providing the functionality to clients that correspond to their tastes and preferences.
- Boosting product performance.
- Product development
- Setting product prices based on differentiated features of a product and customer accessibility.
Example of a Differentiation Strategy
Apple is an example of an organization that uses differentiation to sell its laptop computers to a broad market. Their distinct design and engineering set them apart in the marketplace. This allows them not only to start charging a price premium but also to compete.
Risks
- Your customers may decide that your distinctiveness isn’t worth the extra cost.
- Competitors may imitate some of your distinguishing features and lose some distinctiveness.
3. Focus Strategy
Firms use this strategy to create products and services that meet the needs of small consumer groups. The plan is based on a segment of the industry that is significant in size and has high growth potential. It has no bearing on the success of competitors.
Small and medium-sized businesses frequently use this. This strategy works only when consumers have diverse tastes. The competitors do not attempt to specialize in that specific segment.
Methods for Increasing Focus
- Choosing a specific niche is frequently avoided by price competitiveness and points of difference.
- Exemplify your ability to cater to a particular niche.
- To serve those niches, high-efficiency generation is used.
- Developing new approaches to value chain management.
Exemplification of Cost Leadership
Checkers is a drive-in-only fast-food restaurant chain based in the United States. It saves money over its competing companies. Because it does not provide customers with a place to sit, and its buildings are less expensive to build. Checkers caters to the lower end of the scale. Despite this, Checkers can still reach high margins due to lower overheads.
Risks
- Larger market firms could target your niche with more significant economies of scale.
- Your competitors may divide one’s niche into sub-niches.
How to Put a Business Level Strategy in Place
To implement an effective business level strategy that will help your business, goals must be identified and implemented in each business area. You must have a detailed plan in place to accomplish this. The following are the seven steps you can take to develop a profitable business-level strategic plan within your organisation:
1. Draw parallels between your strategy and the strategies of your competitors.
Examine how your competitors plan to keep costs low while still making a profit and retaining customer loyalty. Based on your comparisons, determine which areas you can improve.
2. Think about how you can meet their needs.
Once you’ve decided Who and What you’re going to serve, it’s time to figure out how you will do it. This step requires you to make choices about your vendors, resellers, distributors, logistic support, etc.
3. Determine their requirements.
Firstly, identify the target market, competitor pricing, and ideal customer base for that industry. And then you can start researching the customer base’s needs.
4. Tasks should be assigned to the appropriate department.
Any corporation can only succeed if its departments work well together. Senior management must integrate various departments and allocate tasks with deadlines. Yes, setting individual goals for each department is essential. But it is also critical that all organisational departments collaborate.
5. Establish distinct departmental objectives.
Setting respective department goals aids in the segmentation of responsibilities that can affect the overall performance of your company. This step necessitates clear communication between the company level and workers to translate the company’s specific tasks.
Conclusion
Business Level Strategy depicts the decisions made by the firm regarding how it intends to compete for customers.
The firm’s core competencies should focus on the customers’ needs and desires to achieve extraordinary returns. And to accomplish this, business-level strategies are critical.
Corporate level strategies aim to gain a competitive edge and ascertain responses to changing market trends. It allocates resources within the SBU(strategic business unit).
