There are three broad types of business strategies that most strategic management courses in India talk about: Cost Differentiation Strategy. A business strategy, in most cases, doesn't follow a linear path, and execution will help shape it along the way. Many different approaches are possible, but all are meant to bring improvements in these areas. Porter identifies three generic strategies for competitive advantage: Usually, the firm to implement this strategy would choose the target market with low or no competitors and with the aim to achieve competitive advantage. This also involves high cost of production per unit but it can be easily recovered from the above average pricing of the product. Often novice entrepreneurs do not understand the significance of the business models. One way to achieve this is to reduce Operating costs which will reduce the production cost while retaining profits, another way is achieving economies of scale, wherein the firm will do a mass production by overusing the assets and third way would be maintaining a control over value chain like bulk buying to reduce procurement costs. The five types of business level strategies are as follows. Combination strategies. The main types of integration are: Backward vertical integration. Ex: Chrysler vehicles has cars for regular people as well as for handicapped audience tailor-made according to their needs. Acquisition, cost leadership and differentiation are just a few to mention. Organizations of all types, military and nonprofit, educational and governmental, use e-business strategies. The four strategies to choose from are: What are the Types of Business Strategy? This is particularly the case if the company is contending in markets overflowing with alternatives for consumers. A business strategy is a plan for the future of a business. Start with word-of-mouth In our country, a diversified company is known as a group of companies, such as Bashundhara, Partex, Beximco, and Square Group. Check out 50 different types of business models, along with examples of companies for better insight. Strategy is about how a company picks which activities it engages in. With so many branding strategies to choose from, it may be difficult to pinpoint which branding types work well for your business. October 23, 2020 By Hitesh Bhasin Tagged With: Marketing strategy articles. Some companies like to invest in research and development in order to constantly innovate, even with your most successful products. TYPES OF STRATEGIES: INTENSIVE STRATEGIES Product development is a strategy that seeks increased sales by improving or modifying present products or services. Michael Porter, a professor at Harvard Business School, is widely regarded as the Father of Corporate Strategy. A functional strategy is, in reality, the departmental/division strategy designed for each organizational function. Heres how to identify which style works best for you, and why its important for your career development. The business strategy also includes a way to track the company's output, evaluating how it is performing in relation to the targets that were set prior to launching the strategy. A strategy where the firm prices its products at the lowest possible cost, in order to penetrate and/or sustain its position of leadership is Cost Leadership Strategy. What Are the Different Types of Strategies in Business?. Strategy mapping is a major part of the Balanced Scorecard (though it isnt exclusive to the BSC) and offers an excellent way to communicate the high-level information across your organization in an easily-digestible format. In planning new strategies for a business, it is essential to define its current (implicit or explicit) strategies for the business as a whole and its main functional areas - finance, marketing, sales, management, operations etc. A strategy map is a visual tool designed to clearly communicate a strategic plan and achieve high-level business goals. In case the business has multiple growth strategies, each strategy must respond to all of the above mentioned dimensions. This can be a good business strategy if your business has had a problem delivering quality customer service. It's generally far easier to retain a customer than spend money to attract a new one, which is why this is a great strategy if you see opportunities for improvement in customer retention. Here are 10 examples of great business strategies. The way business growth strategies help with your company is the continued expansion into new areas. Acquiring a new company allows a larger company to compete in a market where it didn't previously have a strong presence while retaining the users of the product or service. They come in many varieties including product, pricing, promotion, distribution, technology and management strategies. Defensive . Michael Porter divided competitive strategy in four different types of strategies.. This strategy emphasizes the strengthening of a companys competitive position of products or services. Business Strategy is a business plan devised to beat competitors. A business strategy includes where you will find the required resources to complete the plan, how the resources will be allocated and who is responsible for doing so. The examples of business strategies application in the economy are also discussed below. Those who heed, obviously over period of time thank me but the other breed is far clever by half, who will learn only when they approach doom! When the product is differentiated with its unique feature or unique selling point (USP) in order to compete and win effectively, that is known as the differentiation strategy. In cost focused, the prices are tailored for the particular need to cater specific group of people. It was developed back in 1980 by Michael Porter and it was classified under Generic Strategies. Three Kinds of Business Strategy. The Best Types Of Marketing Strategies For Small Businesses. Procuring in bulk from a known vendor or unique access to raw materials, achieving high-efficiency inventory management (FIFO, LIFO), Just-in-time purchasing would be few ways to achieve this. The transnational business strategy is one of the most intricate methods that businesses can employ when expanding internationally, and can be seen as a combination of the global and multi-domestic strategies. Now here, the means, as well as the ends of this, would be to keep the costs low so that the final product is priced accordingly while keeping the profit margins undisturbed. Even outsourcing in few cases can be considered as reducing the costs. It is seen less often as it represents the wholesale transformation of an entire business or organization. Acquisition strategies are a type of business growth strategy. Cost leadership strategy is difficult to implement for small scale businesses as it involves making long term commitment for offering products and services at lower prices in the market. A big business can afford the traditional methods of advertising, so those types of marketing strategies can sometimes work well for them. It is a business-unit level strategy, formulated by the senior managers of the unit. Let's stay in touch :). The best strategy for your business will be marketing techniques which bring measurable, profitable, and consistent results. Conglomerate integration. There are a number of different growth strategies, but the most common are: Horizontal integration The merger or acquisition of new business operations. Several strategies have proven successful to drive revenue and promote a company both online and off. The risk in applying this strategy is customer retention if a competitor launches product priced even lower, the possibility of customer retention nullifies. Many businesses begin as sole proprietorships, as this type of business is great for many new, small businesses. Strategy is about how a company picks which activities it engages in. For many industries, this is a means as well as the end result to achieve a low cost of production and in turn, achieving cost differentiation. It is one of the types of Business strategies used by top firms such as Walmart and Amazon, who sell products on the promise of low costs. A business strategy is a long-term plan that is used to achieve a desired business goal. A business objective without a strategy is just a dream. Together these two factors generate four types of strategies that internationally operating businesses can pursue: Multidomestic, Global, Transnational and International strategies. When the small business suffers from limited opportunities in its current line of business or product line, it may choose to diversify into areas that are not related, or are so far removed, from its current operations. Types of Business Level Strategies Top 3 Types: Cost Leadership, Differentiation, Focus and Niche Strategies A strategy is a pattern or a plan which integrates an organisations major policies, goals and actions, sequences in a coherent linear of decision. You may have built yourself a great business, but there will come a time when you no longer want to continue doing it, either due to personal reasons or to adapt to changing economic conditions. This article discusses the following topics 1) what is a competitive strategy?, 2) types of competitive strategies, 3) how to develop a competitive strategy, and 4) case studies. Facebooks buy the competition strategyhas been successful ever since the company was launched. The Types of Business strategies being used will depend on goals short and long, target market, industry and competition of the firm. There are business strategies that are industry proven and are also applicable in real life situations when starting or running a business. Differentiate your product or service, whatever it may cost and offer to customers on a higher price (usually niche market). You might need more than one business marketing strategy to keep your business growing. In case of Focused differentiation strategy, firms that compete based on uniqueness and target a narrow market are following a focused differentiation strategy. Besides vital decisions like Marketing, budgeting, Sales forecasting, and business expansions are based on the choice and implementation of the strategy. Michael Porter uses 4 strategies that an organisation can choose from. This strategy requires you to identify key tactics and projects to retain your customers. Market types and needs 10. Theory by Everett Rogers, Pepsis Brand Report Card by Kevin Lane keller, 2 Main Types Of Variables used in Strategies, Difference between Strategy and Planning - Strategy versus Planning, Green Business strategies - SWOT of green business, Ansoff Matrix Theory Examples of Business Strategies for Future Growth, Role of strategic planning in an organization. Each strategy involves a different approach to trying to build efficiency across nations while remaining responsive to variations in The following four main strategies you can implement in your business. With the increase in the competition, the importance of business strategy is becoming apparent and theres a huge increase in the types of business strategies used by the businesses. Size/growth goals 7. A firm using a global strategy sacrifices responsiveness to local requirements within each of its markets in favor of emphasizing efficiency. If companies plan to keep their prices low, they will need to sell a much higher volume of products, as the profit margins are usually very low. In spite of being almost identical, product and services can be differentiated with the help of promotions and advertising, however, the advertising for these niche products should be unique and appealing. An example of horizontal integration would be Apple entering the search-engine market or a new industry related to laptops and smartphones. There are three main international strategies available: (1) multidomestic, (2) global, and (3) transnational (Figure 7.23 International Strategy). Thinking from a companys point of view, suppose a firm wants to manufacture cheap mobile phones. The cost leadership strategy can be utilized by large firms and market leaders but not by new firms which are small or medium scale. This doesnt mean the prices are lower, on the contrary, the prices may be higher. For example, you might structure the way you order products or Acquisition strategies are a type of business growth strategy. In other words, the price-sensitive class of customers is the target segment of the firm and all the business activities are planned accordingly, right from procurement of raw materials to distribution and marketing. This involves the combination of firms that are involved in unrelated business activities. Precisely, a business model is a holistic framework to define, understand, and design your entire business in the industry. This is one of the elements that can make or break a good company, so you must be careful about that. Overuse of assets will cause the fixed costs to spread over the products, thus reducing per unit cost and achieving Economies of Scale. This kind of strategy is concerned with making improvements to business functions that support business and corporate strategy.Functional strategy include IT strategy, marketing strategy, IT strategy, human resources strategy, and operations. You could launch an entire business strategy aimed at increasing the sustainability of your business. It is one of the strongest Types of Business strategies because it has a definite demand in the market. The business strategy is intended to help you reach your business objectives. Types of Business Strategies: 2, Acquisition Strategies. So far there have been many notable acquisitions by Facebook like Instagram, Whatsapp, Ocul TYPES OF STRATEGIES Vertical integration. In the case of a service industry, a major player would be Air Asia, a low-cost Asian flight operator which operates only in Asia at a very low cost. It also makes the company aware of any weaknesses or threats. A business strategy helps different departments work together, ensuring departmental decisions support the overall direction of the company. It is very important for an organisation to grow with time and hence, growth strategy is one of many types of business strategies. Intensive. A business strategy is a long-term plan that is used to achieve a desired business goal. Success is when that strategy generates a sustainable, above industry average profit. Three Types of Competitive Advantage. When it comes to pricing, businesses can either keep their prices low to attract more customers or give their products aspirational value by pricing them beyond what most ordinary customers could afford. 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