Why consider the types of business strategies available to you? A key part of setting up any business is clarifying the strategies that help you reach your goals.

Of course, the types of business strategies available for your company depend on the type of business you set up and the long-term goals of your company. By clarifying the options, you’ll have a clear direction to help inform many of your business decisions.

In the dynamic business world, companies face a constant challenge: to stay ahead of the competition and achieve sustainable success. This is where business strategies come into play. Business strategies are roadmaps that guide companies in deciding how to allocate resources, compete in the market, and achieve their long-term goals.

Read on to find out more….

What Is Business Level Strategy? Strategy Levels

What is a Business Strategy?

Your business strategy is your overarching framework for how you’re going to achieve your key aims, whether this is related to profitability or growth. Typically this means one of two things:

Types of business strategies featured image
  • Increasing revenue,
  • Reducing costs.

In fact, pretty much every business decision relates to one of these core goals. Some of the key levers you can pull to do so include the following:

  • Finding new customers,
  • Increasing customer retention,
  • Making processes more efficient,
  • Improving productivity,
  • Market positioning.

Different business strategies require you to develop a specific framework for improving one or more of these areas of your business, whether this means moving into new markets, changing suppliers, or tidying up your brand image.

Let’s look in more detail at some of the more specific types of business strategies you’re likely to implement.

Types of Business Strategies: Online Strategies

Types of online business strategies differ because of your marketing approach. An eBusiness is an online business. That means you reach a global market using social media, a website and other online tools.

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Almost half of businesses don’t have a clear online strategy. Image credit: MediaValet

The key strategy to focus on with an online business is your content. Create content that helps your customers!

Focus on helpful information on a company blog or set up a store with a clear questions and answers page to help your customers navigate your products.

Search engine optimization is a critical digital marketing strategy. It focuses on driving traffic to your website and business through search engines. It also helps your products or your content stand out by getting to the first or second page when customers look for information.

With an online business, you also want to focus on a social media marketing strategy.

Social media marketing means you use different tools to connect to your customers. You want a high level of engagement to keep up with the changing goals and interests of potential customers.

Business Acquisition Strategies

Acquisition strategies are different methods to achieve growth. The way business growth strategies help with your company is the continued expansion into new areas. In an acquisition strategy, your company strives to acquire, or purchase, a smaller business.

You merge the businesses by purchasing the company and move into a new area.

The advantage of an acquisition strategy is the competitive advantage over the competition. You expand your business or obtain a useful product that helps your customers. The downside?

Initial costs. Acquiring a company or part of a company means you pay for the business.

That can, of course, add up to a high initial investment.

Business acquisition strategy outline
Business acquisition is a fairly complex process. Image credit: SketchBubble.com

Types of Business Strategies: Price Skimming Strategies

Price skimming strategies work well when you innovate and create new products. This type of business strategy allows you to set a high price for your product when you first introduce it to your customers. Since the product is new, you do not have any competitors bringing down the prices.

That means you can set a price that helps you recoup any research, building costs and the costs of the materials.

The downside of price skimming strategies is the potential disinterest of your customers. A potential customer might hesitate to use a new product if they have an option that works well for their current needs.

This strategy works best when you have something completely new and innovative that catches the attention of potential customers.

If your product is an improvement on existing products, then you want to consider setting a slightly lower price to stay competitive.

Types of Business Strategies: International Strategies

The types of international strategy in business that fit your company goals depend on your situation. Taking a company global requires a strong domestic market and a certain level of brand awareness.

An international strategy focuses on the global market. You want a company to stand out on a large scale. That means your business must focus on the interests of multiple countries.

Focus on building up your brand name in your domestic market.

When you have a strong domestic brand, branch out to countries with strong ties to your country.

By focusing on a gradual approach that builds on your brand, you encourage people to gain interest in your company before you move into a new country.

You also want to focus on quality products that stand out from the crowd. A brand does well when it focuses on a specific target demographic. If you want to build an international company, you need a product that appeals to a global market.

The Four Pillars of Business Strategies

Business strategies can be broadly categorized into four main types:

1. Cost Leadership Strategy

As the name suggests, a cost leadership strategy focuses on achieving the lowest production costs in the industry. This is often achieved through economies of scale, operational efficiency, and strategic partnerships with suppliers. Companies that pursue a cost leadership strategy aim to undercut their competitors on price, making their products or services more attractive to price-sensitive consumers.

Real-World Example: Walmart

Walmart is a prime example of a company that has successfully implemented a cost leadership strategy. The company’s focus on minimizing expenses, from optimizing supply chains to negotiating lower prices from suppliers, has allowed it to offer consistently low prices to its customers. This strategy has been instrumental in Walmart’s rise to become one of the world’s largest retailers.

2. Differentiation Strategy

In contrast to a cost leadership strategy, a differentiation strategy emphasizes creating unique and distinctive products or services that stand out from the competition. This strategy appeals to consumers who are willing to pay a premium for superior quality, innovation, or brand recognition.

Real-World Example: Apple

Apple is a renowned example of a company that has mastered differentiation strategy. The company’s products, such as iPhones and iPads, are known for their sleek design, user-friendly interface, and innovative technologies. Apple has consistently pushed the boundaries of innovation, creating products that are coveted by consumers worldwide.

3. Focus (Niche) Strategy

A focus strategy involves targeting a specific segment of the market rather than trying to appeal to everyone. By focusing on a niche market, companies can tailor their products or services to the specific needs and preferences of that segment. This strategy allows companies to become experts in their chosen niche, building strong customer loyalty and gaining a competitive edge.

Real-World Example: Warby Parker

Warby Parker has revolutionized the eyewear industry with its focus strategy. The company targets a niche market of young, fashion-conscious consumers by offering stylish and affordable eyeglasses. Warby Parker’s online-first approach and direct-to-consumer model have disrupted the traditional eyewear industry, making high-quality glasses accessible to a wider audience.

4. Integration Strategy

An integration strategy involves gaining control over different stages of the production or distribution process. This can involve acquiring suppliers, distributors, or even competitors. The goal of an integration strategy is to increase efficiency, reduce costs, and gain greater control over the supply chain.

Real-World Example: Amazon

Amazon is a textbook example of a company that has successfully implemented an integration strategy. The company has expanded its operations beyond its core e-commerce business to include logistics, cloud computing, and media streaming. This integrated approach has allowed Amazon to control its supply chain, optimize its operations, and offer a wide range of products and services to its customers.

Review Your Business Strategy | Business Plan | Business Strategy Model | Business Development

Choosing the Right Strategy

The choice of business strategy depends on various factors, including the company’s strengths, weaknesses, market conditions, and competitive landscape. There is no one-size-fits-all approach, and companies may even adopt a hybrid strategy that combines elements of different approaches.

The Importance of Implementation

Developing a sound business strategy is crucial, but it is equally important to implement it effectively. This requires careful planning, clear communication, and the commitment of all stakeholders within the company. Without effective implementation, even the best-laid strategies may fall short of their goals.

The difference between cost focus and differentiation focus, along with concrete examples of companies using each strategy:

Cost Focus Strategy

A cost-focused strategy involves targeting a specific market segment and achieving a competitive advantage by becoming the low-cost provider in that segment. This strategy is particularly effective in markets where price is a significant factor for consumers and where there are opportunities to achieve economies of scale or operational efficiencies.

Key Characteristics of a Cost Focus Strategy:

  • Narrow market focus
  • Emphasis on low-cost operations
  • Efficient supply chain management
  • Standardized products or services
  • Limited marketing and branding investments

Real-World Examples of Companies Using Cost Focus Strategy:

  • Southwest Airlines: Southwest Airlines has established itself as the low-cost airline carrier in the United States by focusing on a limited network of routes, using high-utilization aircraft, and maintaining a no-frills approach to customer service.
  • Generic Drug Manufacturers: Generic drug manufacturers compete on price by replicating existing drugs without the research and development costs associated with original formulations. They typically have streamlined operations and focus on producing high volumes of generic drugs at low costs.
  • Retail Discount Stores: Retail discount stores like Dollar Tree and Family Dollar target price-sensitive consumers by offering a wide range of products at extremely low prices. They often emphasize closeout deals, bulk purchases, and limited-time offers to attract customers.

Differentiation Focus Strategy

A differentiation-focused strategy involves targeting a specific market segment and achieving a competitive advantage by offering unique or superior products or services that cater to the specific needs and preferences of that segment. This strategy is particularly effective in markets where consumers are willing to pay a premium for quality, innovation, or brand recognition.

Key Characteristics of a Differentiation Focus Strategy:

  • Narrow market focus
  • Emphasis on product or service uniqueness
  • Strong brand identity
  • Investment in innovation and research
  • Premium pricing strategy

Real-World Examples of Companies Using Differentiation Focus Strategy:

  • Apple: Apple has consistently differentiated itself in the technology industry by creating innovative and user-friendly products like iPhones, iPads, and Macs. The company’s focus on design, quality, and customer experience has attracted a loyal following and allowed it to command premium pricing.
  • Nike: Nike has established a dominant position in the athletic apparel and footwear market through its unwavering commitment to innovation and performance. The company invests heavily in research and development to create cutting-edge technologies and designs, setting it apart from competitors.
  • Starbucks: Starbucks has differentiated itself in the coffee industry by creating a unique and premium coffee experience. The company’s focus on quality coffee beans, personalized customer service, and a comfortable atmosphere has attracted a devoted customer base and allowed it to charge premium prices for its products.

In summary, cost focus and differentiation focus strategies are two distinct approaches to achieving competitive advantage in a specific market segment. Cost focus strategies emphasize low-cost operations and standardized offerings, while differentiation focus strategies prioritize unique products or services and premium pricing. The choice of strategy depends on the company’s strengths, the market conditions, and the preferences of the target consumers.

Business strategies FAQ

Q: What factors influence a company’s choice between a cost focus strategy and a differentiation focus strategy?

A: The choice between a cost focus strategy and a differentiation focus strategy depends on a careful assessment of the company’s strengths, the market conditions, and the target consumers. Key considerations include the company’s operational capabilities, the price sensitivity of the market, the degree of product differentiation among competitors, and the preferences and willingness to pay of the target consumers.

Q: What are the tradeoffs associated with each strategy?

A: A cost focus strategy offers the advantage of price competitiveness and potential market share gains, but it may limit product differentiation and make the company vulnerable to cost fluctuations. A differentiation focus strategy allows for premium pricing and brand loyalty, but it requires higher investments in innovation and brand building and carries the risk of imitation by competitors.

Q: How can companies ensure successful implementation of their chosen strategy?

A: The success of either strategy hinges on the company’s ability to execute effectively. A cost focus strategy requires unwavering commitment to operational efficiency and cost control, while a differentiation focus strategy demands continuous innovation, strong brand management, and a customer-centric approach.

Q: What are some real-world examples of companies that have successfully implemented cost focus and differentiation focus strategies?

A: Companies that have successfully implemented cost focus strategies include Southwest Airlines, generic drug manufacturers, and retail discount stores like Dollar Tree and Family Dollar. Companies that have successfully implemented differentiation focus strategies include Apple, Nike, and Starbucks.

Business strategies: Summary

Choosing between a cost focus strategy and a differentiation focus strategy is a critical decision for companies seeking to achieve competitive advantage in a specific market segment. Each strategy offers distinct advantages and disadvantages, and the choice depends on a careful assessment of the company’s strengths, the market conditions, and the target consumers. Successful implementation of either strategy requires a company to align its resources, capabilities, and culture with the chosen approach. By carefully evaluating the tradeoffs and considerations, companies can make an informed decision that aligns with their strategic goals and positions them for long-term success.

Once you’ve identified your business strategy, the types of marketing strategy for your business – again – depend on the company. The service industry for example differs significantly from the manufacturing industry, so you must focus on a strategy that works for your business.

The first consideration is what you sell to the public. Are you selling a product? You want to showcase the way your product works and improves your customer’s lives.

Are you selling a service? You must understand the service before you reach out to customers. In the service industry, you want to describe your business and your services in a way that appeals to customers and shows that they need your help.

After you have a clear idea of your business, a marketing strategy focuses on building up on that idea. Use advertisements, social media and online tools to pass on your message.

Building up your business requires an effective strategy. When you want your company to grow and develop, you want to start with clarifying the strategies that work for your business. Use a strategy that fits your budget and helps you gain interest from potential customers.

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