Each business has a unique culture and distinctive characteristics. Its approach to marketing, sales, customer acquisition and other key aspects will reflect its values. Basic business strategies, such as product differentiation, cost leadership and market expansion, can be adjusted to suit your company’s resources and individual needs.
Understanding these strategies will give you a competitive edge and help you make smarter business decisions. Choosing one or more depends on your short-and-long-term goals, target market, industry and competition.
For example, a growth strategy for a startup company will be different than one for a multinational corporation. Even though both have similar goals, such as increasing revenue and customer acquisition, they are in different stages in their business development.
Companies that implement a business-level strategy focus on delivering value to customers while positioning themselves within the industry. They aim to acquire and engage customers, gain a competitive edge and increase profits. This approach encompasses several business strategy types, such as:
- Cost leadership
- Integrated low-cost differentiation
- Focused differentiation
- Focused low cost
Cost leadership, for instance, uses pricing as a competing factor. A good example is Walmart, which purchases massive quantities of goods from suppliers so it can attract more customers and keep prices low. Companies that implement a focused low-cost strategy will target a smaller audience with unique needs.
An integrated low-cost differentiation strategy allows organizations to quickly learn new skills and technologies while adapting to environmental changes. This hybrid approach has emerged in response to the global competition.
Differentiation strategies enable companies to position themselves as industry-leading providers of unique products and services. This approach emphasizes quality over cost. Nordstrom, for example, offers designer goods and excellent customer service, which gives it a competitive advantage.
Other brands use a focused differentiation strategy, meaning they focus on a smaller specific audience. Their goal is to fulfill the demands of a narrow market. For example, customers who buy organic produce are willing to pay a higher price for food that makes them feel good about their choices.
An organization may acquire another company or one of its product lines to expand and drive profitable growth. Some businesses that use this strategy seek increased synergy or higher market share. Others want to enter foreign markets or provide new products to their customers. Since the purchased company will already have a brand name and customer base, the acquiring company will reap these benefits.
If your goal is to increase profits, consider using a price-skimming strategy. It involves adjusting the cost of goods or services over time. For example, you can set a relatively high initial price for a new product in the first few months and then lower it.
This strategy allows you to target multiple customer segments and generate as much revenue as possible. It's typically used when launching new goods or product lines.
The high price is perceived as a sign of quality, which attracts wealthier customers. When the price drops, your products become accessible to budget-conscious customers as well. This helps increase brand awareness and ensures steady revenue.
There are many other types of business strategies you can use. It all comes down to your goals and resources. To make an informed decision, consider your objectives, values, mission, opportunities and constraints.