5 different business strategies
A business strategy is a plan of action to achieve the goals set by the business. This strategy is implemented to guide the decision-making process in order to achieve the objectives and to be able to follow a step-by-step guide.
A structuralist strategy is based on the environment. So, by taking a structuralist approach towards your business strategy, you will be building a strategy based on the current environment and market that your business is in. With this strategy, your business can have a better understanding of the environment and will naturally perform better as the runnings match up with the market in that current time.
Businesses will use a cost leadership strategy to improve efficiency, so a business will project itself as the least expensive manufacturer of a product to beat the competition. If you have a unique strategy to make yourselves stand out against your competitors by reducing costs but not reducing the quality of your product, that is a great way to stand out in the industry. Cost leadership will only be successful if you can lower your production costs enough but still make a profit
Cost leadership does come with risks, such as the constant need to keep costs low, ensuring that quality is always at the same standard regardless of how low the price is and how dependent cost leaders are on high sales to ensure high profitability. The benefits of cost leadership are:
- Competitive advantage
- Flexible with pricing
- Cost leaders can experience recessions better as they have a greater understanding of appealing to customers who have smaller budgets.
You can stand out in the market by offering a unique product or service completely different from the competition. A differentiation strategy allows businesses to take a premium approach and charge premium prices for their products or services. Product differentiation can provide a huge competitive advantage in the market, and this allows for smaller businesses to be seen; otherwise, the larger companies would constantly dominate.
Some advantages to differentiation are:
- Higher profit margin
- Brand loyalty
- Competitive advantage,
- Minimum substitutions.
There are also risks with differentiation, such as:
- Changes in customer taste
- Takes a lot of time, energy and resources to make your product unique
- Competitors can copy you
A growth business strategy is exactly what it sounds like it is, it’s an approach towards growing your business. A growth strategy can be based on bringing new products into the market or expanding into new markets, all of which lead to growth in customers.
Growth strategies come with advantages for businesses who implement them such as:
- Reach new customers or markets
- An increase in profits
- Gain a competitive advantage
Risks to growth strategy can be:
- Competitors can try and take a hold of your market share
- Can become costly
Pricing is a great thing to base your business strategies on as this can come with many benefits. Businesses can alter their pricing to reach specific goals, if you are trying to gain more customers, you can lower your prices or offer a particular deal to attract them, or if you are trying to beat your competitor, you can put your prices a lot lower than theirs, leaning their customer base more towards what you offer. If you plan to keep your prices low, a higher volume of products will need to be sold to maintain a high-profit margin.
On the other hand, businesses can price their products very high to attract a different type of audience and place their products as exclusive or luxury. If you are planning to keep your prices high, you can maintain that exclusive audience whilst also keeping a high-profit margin.
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