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Business level strategies
Business level strategies aim to address the needs and preferences of the customers to achieve optimal returns for the organization. The strategies represent the trajectory the organization aims to use to ensure it remains economically viable or competitive to engage in a particular industry. The strategies include cost leadership, differentiation, low focused cost, focused differentiation and low-cost integrated differentiation.
Cost leadership strategy entails the products or services of an organization competing based on price. The price is a result of the internal efficiency of the organization that aims to result in a cost that is both profitable for the organization and is an amount that the customers can manage to pay. The strategy is best implementable when the service or product is standardized, offers the lowest price, and the generic versions of the product are acceptable to the customers. The strategy also requires a continuous effort in reducing the price relative to that of the competitors to ensure success as a cost leader. The measures to ensure leadership include having state of the art facilities, maintenance of tight control on the production and overhead costs and minimizing costs such as sales, research and development and service.
Based on Porter’s five forces model, a cost leadership strategy allows the company to remain profitable regardless of issues such as new entrants, rivalry, substitute products, supplier and buyer powers. Competitors are less likely to engage in a price war as the low cost of running the organization ensures profitability while it may not apply for the competition leading them to losses. Cost leaders are a position to absorb a high increase in the cost before forwarding the cost to the customers. The continuous focus on efficiency and cost reduction by the cost leaders result in the creation of barriers to entry into the market. Low-cost leaders combat substitutes by enticing the customers to stay with their product rather than investing in substitutes. Buyer power is lost as the low-cost leader develops to a monopoly through driving the competition to exit the market. A cost advantage is obtained by determining and controlling cost then reconfiguring the value chain depending on the needs. The main risks for the strategy include technology, tunnel vision and imitation.
Differentiation is a strategy that requires the organization to provide a unique feature in the product or service to compensate for the cost. The features may include high product quality, features, customer service or innovation, technological features or brand management. The value may be created by lowering the cost of buyers, increasing the buyer’s performance and sustainability of the product. A differentiation strategy may be inhibited by imitation, uniqueness and value loss. Based on Porte’s model, the strategy is in a position to adapt to rivalry, new entrants and supplier’s power.
Focused low cost entails the organization competing both on price while having a target market to work with. Focused differentiation entails the organization competing on differentiation while selecting a small market segment to operate in. The focus strategies target the needs of specific clients and tailor their products to meet them. The risks involved in such strategies include being out-focused by the competition and the market segment becoming of interest to firms with a broader interest.
An integrated low-cost differentiation strategy allows for global competition as the firms that use it improve their ability to adapt to environmental changes, learn and integrate new technologies and skills and effectively leverage competencies across business units and product lines. The result of the integrated strategy is the customer experiences value both in cost and product features. The organization opting for this approach should ensure striking a balance between competitive forces and strategic competitiveness. The organization will also be required to consistently decrease the cost while adding differentiated features (MBAS, 2016).
Corporate level strategies
The main corporate-level strategies are growth, stability and renewal. Growth is employed when an organization aims to expand its market reach or product range by either using the current business or generation of new business. The strategy may require the organization to increase revenue, labour, or market share. Growth may be achieved by vertical or horizontal integration, diversification or concentration. Stability as a strategy is adopted when the organization aims to continue in the current model. The strategy aims at maintaining the status of the company as it currently is by maintaining the product or service, market share or the business operations. The organization, therefore, does not lag or grow. Renewal as a strategy is adopted when an organization is in trouble and needs to do something. The managers develop renewal strategies to address declining performance. The renewal strategies are either retrenchment or turnaround strategies (Robbins & Coulter, 2013).
If the organization is a multinational corporation or operates across national borders operate under different strategies to ensure the organization is in a position to compete for both domestically in the different countries and as a corporation. The strategies that may be implemented for the organization are transnational, global and multi-domestic.
Multi-domestic strategy favours responsiveness at a local level as opposed to efficiency at a global level. The approach, therefore, promotes multiple domestic products in different countries based on the needs of particular markets. The multi-domestic approach entails a significant degree of customization o the products to suit the needs of the countries. The result of the customization is the company may offer the signature brand in the various markets, but the products will differ across the markets as they are meant only to serve the specific market.
Global strategy, on the other hand, favours efficiency over being responsive to local requirements. The product may have minor modifications based on the various markets, but the main focus is the economy of scale to be gained by the company as it offers the same product or service in all the markets. The minor adjustments may include changing the language or the packaging to conform to local standards but retaining the product. The other alternative is having new brands developed by the company in the different markets rather than introducing a product that is successful in a different region and customizing it for the market. Global strategies are effective for companies that provide products or services that are not presented directly to the customers but come as part of a product to be used by the customers.
The transnational strategy is a middle ground between global and multi-domestic strategies. The organization aims to create a balance between efficiency and local preferences in different countries. The organization may, therefore, present its signature brand to the various markets but allow for concessions based on the needs of the markets. The concessions made in most instances are due to the integral nature of the component to be added to the citizens of the particular country, thus making it economically viable for the company (Edwards, 2016).
Based on the above strategies, the organization may employ a growth strategy at a corporate level to allow the organization to increase its market reach as it expands to other nations. The global strategy to be employed would be a transnational strategy to allow the company to develop products in the different countries it expands to. The business strategy to be adopted would be differentiation to allow the organization to develop brands across the different countries to which the customers can develop a loyalty to.
- Edwards, J. (2016). Types of International Strategies. In J. Edwards, Types of International Strategies. Retrieved from https://opentextbc.ca/strategicmanagement/chapter/types-of-international-strategies/
- MBAS. (2016). Five Business Level Strategies. Retrieved from MBA Skool: https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/8539-five-business-level-strategies.html
- Robbins, S. P., & Coulter, M. (2013). Management (11 ed.).
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