Business Strategy
Definition: 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. It outlines how business should be carried out to reach the desired ends.business strategyBusiness strategy equips the top management with an integrated framework, to discover, analyse and exploit beneficial opportunities, to sense and meet potential threats, to make optimum use of resources and strengths, to counterbalance weakness.
Levels of Business Strategy
Corporate level strategy: Corporate level strategy is a 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. In business, there is always a need for multiple strategies at various levels as a single strategy is not only inadequate but improper too. Therefore, a typical business structure always possesses three levels.
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.
Business-Level Strategy
Definition: Business level strategies refer to the combined set of moves and actions taken with an aim of offering value to the customers and developing a competitive advantage, by using the firm’s core competencies, in the individual product or service market. It determines the market position of the enterprise, in relation to its rivals. Business-Level Strategies are mainly concerned with the firms having multiple businesses and each business is considered as Strategic Business Unit (SBU). It determines how the firm is going to compete in the market within each Line of Business, i.e. SBU. Further, it focuses on how the firm will compete successfully in each line of business and how to effectively manage the interest and operations of a specific unit. So, these strategies are the course of action selected by a firm for each line of business or SBU individually and intend to attain competitive advantage, in separate lines of business, which the firm is having in its portfolio currently.
Business level strategies deal with the following issues:
- Satisfying the needs of the customers.
- Achieving an edge over its rivals.
- Avoiding a competitive disadvantage.
- Strategies at this level are concerned with meeting competition, defending market share while making a profit.
A firm is said to have a competitive advantage if it can attract the target customers, as well as survive the competitive forces better, as compared to the rivals.
Business Level Strategies
Effective Business-Level Strategies entails developing distinctive competencies and implementing them in order to have an upper hand over its rivals. Michael Porter has propounded three business-level strategies in the year 1998, which are discussed as under:business-level-strategy
Cost Leadership
This strategy stresses on manufacturing standardized products, at a low cost for the price-sensitive consumers. Cost leadership strategy tends to focus on the broad mass market. And for this, the firm continuously and rigorously strives for cost reduction in different areas, whether it is procurement, production, packaging, storage, distribution of the product while achieving economies in overheads. To gain cost leadership, firms often follow forward, backward and horizontal integration.
Ways to achieve Cost leadership
- Quick demand forecasting for the product or service.
- Effective utilization of the firm’s resources to avoid wastage.
- Attaining economies of scale which results in lower per-unit cost.
- Investing in high-end technology for smart working.
- Product standardization for mass production, which leads to economies of scale.
Differentiation
As the name suggests, differentiation strategy aims at producing and offering industry-wide distinctive products and services to the customers, so as to target price-insensitive customers. This strategy is also directed for the broad mass market, which encompasses the development of a unique product. Unique means uniqueness with respect to design, brand image, specifications, customer service, technology used, etc. Further, this strategy may or may not lead to competitive advantage, mainly because the customer’s needs are satisfied by standard products or if the rivals imitate the product or service quickly. Hence, the strategy should be followed after proper market research and study of the buyers to ascertain their needs and preferences and adding differentiating features to the product.
Ways to achieve Differentiation
- Providing utility to the customers that match their taste and preference.
- Increasing product performance.
- Product innovation
Setting up product prices on the basis of differentiated features of the product and affordability of the customers.
Focus
This strategy is used by the firms to produce products and services, which fulfils the need of small consumer groups. The strategy relies on the segment of the industry which is considerable in size, higher growth potential and not important to the success of the rivals. This is commonly used by small or medium-sized enterprises. This strategy works only when consumers have varied tastes and competitors does not try to specialize in that particular segment.
Courtesy: best logistics company in Karachi
Comments
Post a Comment