With more than ninety thousand start-ups in India today, the need to discuss business strategy has become important. But are you aware of different types of business strategies? This blog will discuss what are different types of business strategies along with important questions to consider before selecting a strategy and steps to implement the strategy.
What is a Business Strategy?
A business strategy is a plan of action that aids the stakeholders of the businesses to achieve their organizational goals and objectives. From analyzing the current situation of the business to the allocation of resources, from hiring new employees to reinventing the current working of various departments, a business strategy document discusses all of these in detail. The end goal to be achieved through a business strategy is the expansion of business in newer markets while maintaining customer satisfaction.
Questions to Consider Before Choosing a Business Strategy
Before you begin planning your business strategy and choosing among the various types of business strategy, there are some fundamental questions that you must consider. Go ahead and read these questions. Check if you have a clear answer to these.
- Who are we?
- What do we do?
- What is our objective?
- How do we stand out?
- What resources are available to us?
- What are the risks involved?
- What is our current strategy?
- What is our market?
- What current products or services do we offer?
- What are our growth, size, and profitability goals?
- What do we require more?
These are some of the questions to keep in mind before beginning to develop a strategy. One should know the current status of their business, the products, market, growth till now sling with future aspirations. You can only strategize if you have a clear goal in mind.
Types of Major Business Strategy
Here we will discuss some of the most important types of business strategies that are employed in the business world.
#1. Corporate Strategy:
A corporate business strategy is focused on the vision or purpose of the organization. Implemented at the highest level of the organization, it strategizes around the core value proposition or the essence of the organization. What the organization stands for and how the stakeholders and third parties are going to perceive it, are some important questions that a corporate or organizational strategy looks at. Since it involves the highest level of the organization, it is the executives who look for ways to expand the organization by identifying additional markets to enter along with other methods.
#2. Competitive Strategy:
A competitive strategy, also known as a business-level strategy deals with corporate aspirations being implemented in the individual company settings. The major focus though is on the ways through which a company will compete with its competitors within the market while achieving the objective of establishing a sustainable competitive advantage.
The strategy has been influenced by some generic strategies described by Michael Porter. These are cost-based strategy, differentiation strategy, and focus strategy. Resource-Base View (RBV) is the effective use of company resources to create competitive advantage. The RBV along with the concept of the value chain is another influence on the competitive strategy.
#3. Functional Strategy:
A functional strategy focuses on the role of individual departments in achieving the goals of an organization. The strategy works towards increasing the productivity of the resources and developing competence in the various departments of the organization to attain a competitive advantage. Though this way, a functional strategy works in support of the organization’s competitive strategy.
Departments such as human resources, finance, marketing, and research and development are key areas for implementing this strategy where the focus is on aspects such as productivity, efficiency, pricing, logistics, product design etc. Formulating a functional strategy involves considerations of factors such as the nature of the objective in the short term and its specificity along with the extent to which the managers are involved.
#4. Operational Strategy:
Included in the functional strategy most of the time, an operational strategy deals with how the operating divisions of the organization implement different types of business strategies in terms of resources, processes, and people. The aim is to achieve short-term objectives or targets at the department level.
Other Business Strategies to Consider
Along with the major ones, there are a number of other different types of business strategies. We will discuss some of them here.
#5. Transformational (Platform) Strategy:
It focuses on transforming an organization or a business through technology. It involves disruptive changes and though complex, it is quick to unfold and stakeholders are directly affected. It demands technical resources that are highly experienced and knowledgeable. The changes are made in not just services and products but the entire business model along with processes, equipment, and infrastructure, to ensure long-term success.
#6. Acquisition Strategy:
A form of organic growth strategy, it focuses on buying other businesses. Some of its benefits are the addition of quality staff with new skills, access to funds for development, diversification of products and services, and reduced costs with shared budgets. It not only minimizes the competition but also helps in increasing the market share by attracting a wider customer base.
To acquire a business you need to analyze your various options well. Learn business analytics to improve your business strategies.
#7. Cost Focus Strategy:
The idea here is to target the narrow market by competing based on price. The businesses will have a lower price than their direct competitors though they may not be the lowest-priced product sellers in the market.
#8. Growth Strategy:
It is a good strategy for businesses that are looking forward to tapping new markets by introducing new products and features. To target potential customers, unique experiences are marketed and offered.
#9. Value-Based Strategy:
It focuses on setting the price of a product or a service based on consumers’ perceived value of those products and services rather than the cost of production. Key aspects that this strategy considers are willingness to pay (WTP), cost, price, and willingness to sell (WTS).
#10. Differentiation Strategy:
The strategy allows businesses to take a more creative approach and charge premium prices for their product and services. They focus on selling not just the product but an entire experience to the customer. With innovation, creative presentation, and pricing, the experience provided aims at evoking an emotional response from the customers.
#11. Fast Follower Strategy:
Here the businesses let their competitors enter and develop the market by using their resources and taking risks. It is when the market is established that these businesses enter it. Consider this a smart strategy that can help a business save a lot.
#12. Blue Ocean Strategy:
Through this strategy, the businesses aim to create an uncontested market space by adopting both differentiation and cost leadership strategies. We have discussed the differentiation strategy above. Cost leadership is when a business reduces production costs and in a broad market forwards the cost saved to the customer. It allows businesses to gain a competitive advantage in the market.
#13. Guerilla Strategy:
Here the businesses use quick and innovative ways to defeat their competitors. The customers are approached in surprising and unexpected ways. Viral marketing can be seen as a subset of this strategy.
#14. Price Skimming Strategy:
The strategy involves two steps. First, a certain product or service is launched at a high price and sold to a targeted group of customers. In this way, the business will recover the cost of production. The second step involves lowering the price of the product to expand its reach and in turn the customer base.
#15. Human Resource Strategy:
Here businesses invest in human capital. New talent is hired to diversify and enhance the working culture of the organization. It helps in bringing new ideas, innovations, and solutions to the business.
Along with this a regular check on the market and new start-ups and businesses is a must. Here’s a list of emerging start-ups in India in 2023.
How to Implement a Business-level Strategy?
The following steps will help you in the implementation of any type of business-level strategy and achieve the objectives of your organization.
- Find target market and consumers: Before implementing any strategy, the focus areas should be identified along with the ideal consumers of the product and services of the business.
- Identifying the requirements of the consumer base: After identifying the market for the business’s products and services, we need to realize what the consumer needs to market and sell accordingly.
- Fulfilling the requirements of the consumer: Now that we know what our customers want, we need to work on pricing and logistics. It is important to be set apart from the competitors early on.
- Comparative analysis of competitors’ strategies: Analyze well the pricing, profits, and growth in the consumer base of your competitors. Based on this we review the areas in our strategy where there is scope for improvement.
- A common goal for the organization: Plan goals and objectives that will apply to all the departments, that is, the entire organization.
- Individual department goals: Assign the departments their individual goals so that the common goal of the organization can be achieved in the longer run. These specific goals require good communication between the top-level management and the various departments.
- Routine checks: Timely checks at regular intervals in the departments help one maintain a record of the progress made towards the goals of the organization.
Creating a business strategy is critical to the growth of any organization. Always begin by asking certain questions about the aims and objectives along with the resources at your disposal before beginning to formulate a strategy. Different types of business strategy caters to different businesses and sometimes a mix of strategies are used. But corporate, competitive, functional, and operational strategies remain the major ones in use by various businesses.