Business Level Strategy: Know How To Implement Business Level Strategies

1. Corporate Level

It is the foremost of the business level strategy with an emphasis on achieving growth and maintaining stability. The strategy involves top-level executives of the company and representatives from the divisions of accounts and audit.

Other focus areas of corporate-level strategy include retrenchment and expansion through mergers and acquisitions, strategic investments and divestments, and diversification. It is the most complex yet comprehensive strategy directed at the long-term vision and mission of the company.

2. Business Level

The next step is to put the corporate level strategy into action and determine how to utilize business resources to the company’s advantage. By tapping new markets, enhancing product or service efficiency, rebranding, and setting targets for the entire business, business owners or general managers devise ways to forge ahead in the marketplace.

Since a particular business can have different operational segments, the company must implement a unique business level strategy for the respective departments.

3. Functional Level

It is the final and action-oriented phase, where the corporate and business level strategies are broken down into small objectives and allocated to concerning departments. The decisions made by operational managers and supervisors from marketing, finance, human resource, production, and R&D at this level ensure that the business strategy becomes a reality.

Under the functional level strategy, the executives track these strategies daily and make changes whenever needed to keep them working.

1. Cost Leadership

Lowering the product or service cost is the immediate response of most businesses to beat the market competition. This way, the company broadens its customer base with more exciting product prices. Contrary to popular belief, competitive pricing, reduced operating expenses, improved inventory control, and streamlined shipping help companies generate sales, maintain profit margins, and in some cases make above-average returns.

It is best suited for large organizations with strong purchasing power. Amazon.com is the best example of it that attracts customers with low-priced products. To do so, Amazon buys products at lower prices, does away with brick and mortar stores, and uses top-notch distribution facilities. The savings then translate into discounted prices.

2. Product or Service Differentiation

Cost leadership is the most commonly practiced business level strategy example, so being different and innovative could be seen as a means to acquire new customers and markets. Organizations usually shift focus on improving customer service, creating new designs, and standardizing the quality that causes a bit higher prices for their products.

It sets a company apart from its rivals, makes its products stand out from the rest, and develops brand loyalty. Target customers, on the other hand, find it interesting to buy new products. The uniqueness offsets the production cost without compromising the product quality. For example, Apple relies on the differentiation strategy by charging a higher price for its sophisticatedly engineered devices.

3. Focused Low Cost and Differentiation

In the focused low-cost strategy, an organization targets smaller or unexplored, or less competitive markets and offers specialized products or services at relatively low prices. Not only does it generate revenue, but it helps the company to develop a brand affinity.

With focused differentiation, businesses target specific and narrow market segments with a smaller customer base. After analyzing the competition level and demands in the market, the companies offer niche products with additional and unique features at generally higher prices.

4. Integrated or Hybrid

An integrated or hybrid example is the blend of cost leadership strategy and differentiation strategy. Businesses that can take risks and operate on the philosophy of providing target customers with one-of-a-kind product experience belong to this category. They choose to target the mid-priced product and segment of the market where affordability and quality get equal attention.

1. Applying Cost Leadership Strategy

Delivering value to customers at a reduced cost or a low cost while still being profitable is the biggest challenge before any business. Even though keeping the operating costs below the market average might seem the ideal solution, the company must adopt a pure cost leadership strategy.

Using this business strategy, a company can offer products or services at a low cost, attract new customers, and gain a competitive advantage. Although the price is kept well below that of the competitors, the company still makes returns above the industry average. It can be done in three possible ways:

• Drafting strict cost reduction policies
• Investing in and employing the latest methods of production
• Upping the quality standards for products and services

2. Applying Product or Service Differentiation Strategy

Cost is one way of adding new customers to a business. But to expand the existing client or customer base, the organization needs to incorporate a differentiation strategy. One way to do that is by rolling out the best quality products or services at premium prices in the market.

Thus, organizations can see growth in their customers and revenues over time by maintaining differentiation between their offerings and production cost. A differentiation strategy would look something like this:

• Offering the innovative, unique, and best quality products or services
• Providing industry-leading support to customers

3. Applying Focused Strategy

A focused strategy is where a company works on its core competencies to enhance the low-cost strategy and differentiation strategy. While the purpose remains to outperform its rivals, it is more of an improved and advanced version of cost leadership and differentiation.

• Focused Cost Leadership

Here the cost leadership strategy remains unchanged, and the only thing that goes into this is the market research. The company can achieve optimal outcomes by analyzing the target market niche before reducing operating costs and applying its strategy accordingly.

• Focused Differentiation Strategy

In a focused differentiation strategy, Instead of keeping an entire focus on lowering the price of the product or service, the company takes another route to dominate the niche market. In addition to offering unique products, the company explores the most profitable niche market with fewer competitors in a focused differentiation.