what are the three basic business strategies?

Users-customers served 6. Not all the cost savings get passed along to the consumers, however. It was developed back in 1980 by Michael Porter and it was classified under Generic Strategies. Even outsourcing in few cases can be considered as reducing the costs. Such cost leadership or low-cost operation is o… Besides vital decisions like Marketing, budgeting, Sales forecasting, and business expansions are based on the choice and implementation of the strategy. These cookies do not store any personal information. The strategy may have several goals including. 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. Your email address will not be published. Business Strategy is a business plan devised to beat competitors. Success is when that strategy generates a sustainable, above industry average profit. Was perusing the net when I came across your article on types of strategies and found it indeed made a very interesting read. Competitiveness The wages are low, the rent of area is kept low and only a few pieces of equipments are used to achieve a uniformity of product while reducing costs considerably. Thank you for reading and learn about corporate strategy. Let’s look at these in a little more detail. Focus Type of Business Strategy is divided into two parts viz Focused Cost Strategy and Focused Differentiation strategy. Cost Leadership can be a high-risk strategy as it does not rely on unique attributes. This leaves a participating organization at risk and open to competition. 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. McDonald’s initially achieved Cost leadership through a mix of all three methods. This begs the question of what a strategic resource is. In cost focused, the prices are tailored for the particular need to cater specific group of people. Your email address will not be published. It is up to the firm to charge the premium or keep it below average for these products. A business strategy refers to the actions and choices that an organization utilizes to achieve its goals. The target market has unique needs and it is to cater these needs that firms focus on. Gaining market share by charging lower prices (as a result of lower operating costs). What is Charisma? Ex: Chrysler vehicles has cars for regular people as well as for handicapped audience tailor-made according to their needs. This strategy is exactly opposite of Cost Strategy, whereby here the target audience is far from being price sensitive, rather they are quality conscious or quality focused and they wouldn’t mind paying extra if its something unique they are getting which helps differentiate them along with the product. Also increasing costs and economic fluctuation can seriously affect the firm. The second strategy is differentiation, this utilizes a strategy of presenting products or services that are different from others in the market. Strategy is about how a company picks which activities it engages in. Usually, the strategy is documented as an organizational manual or statement so that: The concept of three basic strategies was originally outlined by Michael Porter (an academic and strategy expert who wrote several books including Competitive Strategy: Techniques for Analyzing Industries and Competitors). Understanding these strategies will give you a competitive edge and help you make smarter business decisions. I am a serial entrepreneur & I created Marketing91 because i wanted my readers to stay ahead in this hectic business world. 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. According to the resource-based view of strategic management, a firm can gain a competitive advantage by gaining access to strategic resources. Differentiate your product or service, whatever it may cost and offer to customers on a higher price (usually niche market).

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