Setting clear goals for your company is necessary if you want to succeed, but how can you make sure these goals are achieved? Developing an effective business-level strategy or plan based on your company's unique needs will help streamline the overall approach and ensure all employees and departments contribute. Utilizing a business-level strategy will give your company a competitive advantage and maximize overall profits. There are many business-level strategies, but four are more common than others: cost leadership, low-cost, differentiation, and integrated low-cost/differentiation.
What Is Business-Level Strategy?
Companies worldwide utilize business-level strategies to display assets, increase competition within their market, and help each department operate cohesively. Business-level strategy strengthens how individual departments communicate and helps set guidelines for achieving company-wide goals. There are many different types of business-level strategy, and the ones mentioned below are a few of the most popular utilized by business owners today.
- Corporate Level Strategy - As the primary driver of all business decisions, corporate-level strategy is implemented at the company's highest level. Executives utilize corporate-level strategy to identify ways the company can improve and grow. A clearly identified mission statement or vision is considered a well-developed corporate-level strategy.
- Business-Level Strategy - Determining how business resources will be spent and how corporate aspirations are implemented is necessary for every company, regardless of size. The business-level strategy helps differentiate from the competition and defines objectives and initiatives for each department.
- Functional Level Strategy - Business owners must verify that corporate and business-level strategies are being carried out in everyday operations. The functional-level strategy helps measure individual department and employee progress toward company-wide goals and objectives.
Cost Leadership Strategy
Businesses utilize cost leadership business-level strategy to increase overall efficiency and minimize production costs. A cost leadership strategy is beneficial as it allows companies to discover the most cost-effective marketing approach and sell products or services to their target audiences. If a business spends less on production costs, consumers will see products or services offered for a lower price than the competition. A cost leadership strategy is an excellent option for larger corporations because they can buy in large quantities, which reduces production costs.
Risks and Advantages
Incorporating a cost leadership strategy into your business presents many advantages and risks. Business owners will likely notice increased profits, market domination, and improved business stability. Likewise, a large sales volume and additional capital are required for a cost leadership strategy to be effective. Each of these requirements can cause cuts that may impact overall business performance.
Low-Cost Business Strategy
At times, offering low pricing for all your products or services can be challenging, which is where a low-cost business-level strategy comes into play. Businesses that utilize a low-cost strategy focus on a small niche of customers by offering a lower cost for specific products or services. A practice such as this is particularly beneficial if your products, services, or business isn't appealing to a larger market because it offers an opportunity to be the lowest-cost provider and stand out from competitors with higher pricing. A low-cost strategy is useful if your competition isn't as strong or a niche customer audience can potentially create a substantial difference in earned revenue.
Risks and Advantages
Incorporating a low-cost strategy into your business presents many advantages and risks. Business owners will likely notice the low cost, a narrow market segment, and strengthening brand affinity. However, a low-cost strategy can be too specific for the company's market considering consumer demand, and the likelihood of future expansion can be limited.
Incorporating a differentiation business-level strategy can be helpful if you're a business owner who wants to reach a larger audience because of your unique brand. Businesses utilizing a differentiation strategy focus on incorporating unique features that help stand out from the competition, resulting in a higher ranking or popularity in that market. Unique features include overall product or service quality, design elements, customer experience, and more. When using a differentiation business-level strategy, it's expected that customers are charged a higher price for products or services, but profit is still considerable because of uniqueness.
Risks and Advantages
Incorporating a differentiation strategy into your business presents many advantages and risks. Business owners will likely notice increased brand loyalty, simplified marketing efforts, and high demand for products and services. However, an effective differentiation strategy requires a large investment, and niche market focus can exclude specific buyers and consumers.
Integrated Low-Cost/Differentiation Strategy
Rather than relying on a single business-level strategy, it's become popular for businesses to utilize a new hybrid, integrated low-cost/differentiation strategy. A hybrid strategy such as this allows business owners to produce low-cost products and services with differentiated features. Utilizing a hybrid business-level strategy helps your company target consumers whose needs and preferences differ from the larger consumer market.
Risks and Advantages
Incorporating an integrated strategy into your business presents many advantages and risks. Business owners will likely notice increased customer loyalty, a robust and adaptable business model, and company-wide versatility. An integrated strategy will also require extensive compromise and multi-tasking to be effective, which is crucial to consider during the strategizing process.
Incorporating a Business-Level Strategy
Suppose you're prepared to incorporate a business-level strategy into your company. In that case, you can take seven actionable steps below that help you create an effective and detailed plan based on your company's unique needs and goals. Regular check-ins are encouraged to ensure progress in each department after completing steps one through six, as individual movement directly contributes to company-wide success.
- Who is your target market?
- What are their needs?
- How can you cater to these needs?
- What is your competition doing, and how can you do it better?
- What goals can we set company-wide?
- What goals can we set by department?
- Schedule monthly check-ins
Enhance Your Business Model Today
Developing an effective strategy to meet your company's goals can be challenging, but utilizing a business-level strategy can be helpful. There are many different methods of business-level strategy that you, as a business owner, can incorporate. However, it's useful to identify your company's unique needs and market focus when choosing a strategy. If you're ready to enhance your current business model, it's highly encouraged to consider a business-level strategy for your company.