Today’s business environment is extremely competitive. In this scenario, merely existing isn’t enough. Any venture has to decide what types of business-level strategy will help it thrive. It’s only when an organization chooses a good business unit-level strategy that it can succeed.
Business-level strategies relate specifically to an organization’s plan of action. A business-level strategy in strategic management is essentially a method using which a business intends to gain or maintain an edge in the market and deal with competition.
Types Of Business Level Strategy
To decide which business-level strategy will fit your organization best, it’s important to understand the different types of business-level strategy. Let’s look at a few:
1. Unique Products
Having unique products (product differentiation) is an important business-level strategy in strategic management. In this case, ventures set themselves apart from their competitors because of product quality. They carry out extensive research to find gaps in the market or demands that haven’t yet been met. Then, they experiment and innovate to come up with a product or service that plugs this gap.
If you want to use this strategy, the key is to understand your customers and think about what their unfulfilled demands might be. What could they be looking for and have not received from your competitors?
This business-unit–level strategy, like any other, has its advantages and disadvantages.
Some benefits are:
- Customer loyalty: If consumers like the quality of a product, they often become loyal, leading to recurring sales and greater demand
- Price flexibility: If a product is in demand, it gives you the leeway to increase the price without compromising sales
- Marketing: If a product is unique, marketing is likely to be more eye-catching and successful
Some drawbacks are:
- High prices: Focusing on quality might mean using better raw materials or more skilled labor, which can lead to rising costs
- Customer alienation: If a product is too different or too specific, it can alienate the customer base and lead to a lack of understanding
2. Low Costs
We must remember that business-level strategies relate specifically to what an organization wants to achieve. Usually, this is profit. Sometimes, the business-unit–level strategy that a firm will use to appeal to customers won’t be based on the product itself. Instead, it will be based on the cost at which they can supply the product. This business-level strategy in strategic management lowers a firm’s manufacturing cost so that it can supply at lower costs. This comes from manufacturing larger quantities, taking advantage of economies of scale and using other cost-cutting mechanisms.
Consumers are becoming increasingly aware. They prefer to buy at the lowest price they can get, and this is the behavior the low-cost strategy will target. The idea here isn’t to have a low cost in absolute terms but a cost lower than competitors. When consumers realize this is the cheapest available product, it will mean rising sales. An important one among the types of business-level strategy, this too has its pros and cons.
Some pros are:
- Greater stability: In situations of economic unrest, organizations with lower costs come out on top
- More profit: If prices are low, people buy more, which leads to more profit
Some cons are:
Needs greater quantities of sale: Profitability is best maintained when there’s a large amount of sale, or the organization could face losses
Requires large amounts of capital: Because this business-unit–level strategy is based on harnessing economies of scale, it needs a lot of capital, which may not always be available
3. Focus And Niche
Among the types of business-level strategy, this one is particularly different, since it’s about selecting a particular segment or portion of the market and catering to that only. The key is to choose a segment that’s differentiated from other market segments. There could be buyers with unusual needs (supplying to the government, for example) or a unique production mechanism.
The idea is to find a narrow section of the market that has a particular need and to concentrate on fulfilling that need, even though it might exclude other portions of the same market. This business-level strategy in strategic management focuses on getting an advantage over the competition in a specific niche rather than the overall market.
There are two ways of doing this:
- Focused low costs: In this case, a business focuses on lowering costs in the market segment it has targeted
- Focused unique products: Here too there is differentiation, but only in a narrow segment of the market
As we can see, this business-level strategy in strategic management stems from the other types of business-level strategy, albeit with a different approach to the market. This, too, has its advantages and disadvantages.
Some benefits are:
- Customer loyalty: This targets specific individuals who need that product or price, resulting in loyalty
- Limited competitors: In a narrow market segment, there’s unlikely to be much competition
Some drawbacks are:
- Too specific: If the niche is too specific, it could result in a lack of demand
- Limited growth: A narrow segment could limit opportunities for future expansion
The different types of business-level strategy are diverse and have their own pros and cons. Once you know what’s right for you, the next step is to put it into action.
Business-level strategies relate specifically to the planning stage. After understanding the types of business-level strategy, it’s important to implement them. Sign up for Harappa’s Executing Solutions course to find the business-level strategy in strategic management that’s best for you and to take it from ideation to the execution stage. The BLAST approach you learn will help you develop a mindset that takes responsibility for solutions being implemented, while the bifocal approach will show you how to balance long-term and short-term goals. Making the strategy is only the first step; it needs to be executed as well, and this course will help you do just that. Sign up today!
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