What is business level strategy? Here’s an easy way to look at it: coming up with a big goal or mission is easy, but the steps from today’s here to tomorrow’s there are more tricky?
This is where business level strategy is vital. We’ll explain why.
Companies are very good at coming up with a big goal or mission. The problems start to happen when they have to figure out the actual steps to get from today’s here to tomorrow’s there. That’s where the details can come under criticism, cost more than expected, or trigger new surprises nobody was expecting.
A business level strategy is a key step in laying out the actual phases and steps a business will take to regularly achieve its goals, and without such a strategy a lot of frustration can be created. Understanding ‘What is business level strategy’ and why is it important avoids this angst and keeps company energy directed on positive, progress-producing action.
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What is Business Level Strategy? Strategy Levels
It’s easy to get a business level strategy mixed up with an overall company strategy. That’s because they both deal with similar exercises in planning, and they seem to be chasing after the same results. In fact, many businesses are regularly implementing a business level strategy every day and wrongly labeling it as the company strategy, which ends up confusing the employees entirely regarding what they are supposed to be doing at any given time.
Specifically, where a company strategy may involve the overall organisational direction in how the company meets its mission, the business level strategy is focused on key elements associated with revenue generation. These include:
- How to attain and meet the needs of customers
- What goods or services are the ideal choices that meet customer needs
- How to generate a profit
- How to grow operating profits once they are being obtained regularly
- Improving your position against competitors
- How to leverage the latest technology and market behavior for an advantage
If you’re thinking the above sounds a lot like a marketing plan, you would be correct. In fact, two of the key types of business level strategy (cost positioning and differentiation) are heavily dealt with by Economist Michael Porter, the same Porter of the 5 Ps of Marketing.
What is Business Level Strategy? Examples of Different Strategies
If your company was to develop a business level strategy entirely on cost leadership, your operating movements would be about maximising unit pricing and reducing your operating costs as much as possible. This is a common position for a business where commodity pricing is about low cost volume movement based on the attraction of discounting.
On the other hand, differentiation may take considerable investment, but it could pay handsomely in both higher sales as well as long-term customer retention. Both Mercedes and BMW focus their business on differentiation in the luxury/premium end of the market.
No, they don’t necessarily move as many units as – for example – some American brands in the US market, but these German car companies have customers who come back to them for new sales decade after decade. And that amounts up to significant sales.
Third, a company may decide growing its market isn’t simply doable on a large scale. Any growth is going to be small and incremental from year to year. So the business level strategy used instead insists on finding ways to reduce existing operating expenses and move products and service faster to clients.
Grocery stores are a key example of this kind of approach, constantly looking for ways to eke out a slightly larger profit margin maybe through different store displays or reducing a position or two here and there from payroll. The company success is realized on the thousands of transactions that happen monthly with a slightly higher percentage of profit after changes.
What is Business Level Strategy? Some Timeless advice
Businesses are not limited to the tried-and-true. Whether it’s a model developed by Porter, or a strategy that comes from one’s own ingenuity, the point is that it makes sense for the operations at hand, and the business is finding a way to implement the plan. Otherwise, it’s just another idea on the board for a concept.
Reality dictates at some point someone has to take action on a plan to make it a working strategy, and for business-level planning that means pulling the trigger at some point to make things happen as expected. And when they don’t, feedback becomes critical for making changes to improve the results even further.
So if you still have them, dust off your marketing class textbooks from business courses and take another look.
Business level strategy has a lot in common with traditional marketing lessons on how to run a business better.
It may go by another name today, but the best practices are still the same. Good luck!
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