Business Strategy

Business strategy can be understood as the course of action or set of decisions which assist the entrepreneurs in achieving specific business objectives.

It is nothing but a master plan that the management of a company implements to secure a competitive position in the market, carry on its operations, please customers and achieve the desired ends of the business.

In business, it is the long-range sketch of the desired image, direction and destination of the organisation. It is a scheme of corporate intent and action, which is carefully planned and flexibly designed with the purpose of:

  • Achieving effectiveness,
  • Perceiving and utilising opportunities,
  • Mobilising resources,
  • Securing an advantageous position,
  • Meeting challenges and threats,
  • Directing efforts and behaviour and
  • Gaining command over the situation.

A business strategy is a set of competitive moves and actions that a business uses to attract customers, compete successfully, strengthening performance, and achieve organisational goals.

Levels of Business Strategy

Corporate level strategy

Corporate level strategy is long-range, action-oriented, integrated and comprehensive plan formulated by the top management. It is used to ascertain business lines, expansion and growth, takeovers and mergers, diversification, integration, new areas for investment and divestment and so forth.

Business level strategy

The strategies that relate to a particular business are known as business level strategies. It is developed by the general managers, who convert mission and vision into concrete strategies. It is like a blueprint of the entire business.

Functional level strategy

Developed by the first line managers or supervisors, functional level strategy involves decision making at the operational level concerning particular functional areas like marketing, production, human resource, research and development, finance and so on.

Nature of Business Strategy

A business strategy is a combination of proactive actions on the part of management, for the purpose of enhancing the company’s market position and overall performance and reactions to unexpected developments and new market conditions.

The maximum part of the company’s present strategy is a result of formerly initiated actions and business approaches, but when market conditions take an unanticipated turn, the company requires a strategic reaction to cope with contingencies. Hence, for unforeseen development, a part of the business strategy is formulated as a reasoned response.

Growth Strategy of New Products or Features

A growth strategy entails introducing new products or adding new features to existing products. Sometimes, a small company may be forced to modify or increase its product line to keep up with competitors. Otherwise, customers may start using the new technology of a competitive company.

For example, cell phone companies are constantly adding new features or discovering new technology. Cell phone companies that do not keep up with consumer demand will not stay in business very long.

Finding New Markets for Products

A small company may also adopt a growth strategy by finding a new market for its products. Sometimes, companies find new markets for their products by accident. For example, a small consumer soap manufacturer may discover through marketing research that industrial workers like its products. Hence, in addition to selling soap in retail stores, the company could package the soap in larger containers for factory and plant workers.

Product Differentiation Strategy

Small companies will often use a product differentiation strategy when they have a competitive advantage, such as superior quality or service. For example, a small manufacturer or air purifiers may set themselves apart from competitors with their superior engineering design. Obviously, companies use a product differentiation strategy to set themselves apart from key competitors. However, a product differentiation strategy can also help a company build brand loyalty.

Price-Skimming Strategy

A price-skimming strategy involves charging high prices for a product, particularly during the introductory phase. A small company will use a price-skimming strategy to quickly recover its production and advertising costs. However, there must be something special about the product for consumers to pay the exorbitant price. An example would be the introduction of a new technology.

A small company may be the first to introduce a new type of solar panel. Because the company is the only one selling the product, customers that really want the solar panels may pay the higher price. One disadvantage of a price-skimming is that it tends to attract competition relatively quickly. Enterprising individuals may see the profits the company is reaping and produce their own products, provided they have the technological know-how.

Acquisition Strategy to Gain Competitive Advantage

A small company with extra capital may use an acquisition strategy to gain a competitive advantage. An acquisition strategy entails purchasing another company, or one or more of its product lines. For example, a small grocery retailer on the east coast may purchase a comparable grocery chain in the Midwest to expand its operations.

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