Business strategies are essential for any company to ensure success in the competitive market. Companies must have a plan to gain an edge over their competitors, and there are five main types of business strategies that can be used to do this. These include cost leadership, differentiation, focused differentiation, functional strategy, and creating an undisputed market space. Let's take a closer look at each of these strategies.
Cost Leadership- Cost leadership is a strategy that involves offering the best price for products.
This is especially important in today's globalized markets, where price is a major factor when selling to customers. Big box stores use generic models to keep costs lower than most other stores, while digital marketplaces don't require the large retail expenses that physical stores require. Companies that use this strategy must consider the cost of manufacturing the products, transporting them, and delivering them to customers. Amazon is an example of a company that uses a cost leadership strategy.
Differentiation- Differentiation is a strategy that involves making a product stand out from its competitors.
Apple is an example of a company that applies this strategy to sell its laptops to a wide market. Their unique design and engineering allow them to stand out in the market. Companies that use this strategy can defend themselves against Porter's 5 forces in the same way as companies that use a broad differentiation strategy.
Focused Differentiation- Focused differentiation is similar to differentiation, except it focuses on a very small segment of the market. Rolls Royce Cars is an example of a company that uses this strategy.
Their cars are synonymous with prestige, quality and engineering excellence, and they are higher-priced and focused on a small subset of the global car market.
Functional Strategy- A functional strategy refers to how a functional division of a company will achieve its objectives. It focuses on developing competition in search of competitive advantage. The main functional areas include marketing, accounting, finance, operations, research and development, and human resources. An operational strategy refers to the way in which the components (operational divisions) of an organization effectively apply corporate, business, and functional strategies in terms of resources, processes, and people.
Creating an Undisputed Market Space- This is a strategy formulated at the level of a particular business unit that guides the overall objectives of the unit.
It involves seeking differentiation and cost leadership in order to create an undisputed market space. With more than 15 years as a small business owner, Kimberlee understands first-hand the needs of business owners. Business strategies are essential for any company looking to succeed in today's competitive market. Cost leadership, differentiation, focused differentiation, functional strategy, and creating an undisputed market space are all strategies that can be used to gain an edge over competitors. Companies must consider their own unique needs when deciding which strategy is best for them.