When I was younger… I [didn’t] you want to be pigeonholed… Basically, now you want to be pigeonholed. It’s your niche. -Joan Chen, actress
A business strategy represents the game plan your company will use to run your business, gain market share, and conduct operations. This action plan determines how the company attracts and satisfies customers, competes effectively, and achieves management objectives. Developing a strategy must mean that there is a managerial dedication to follow a specific group of actions that will improve the financial market performance of the company and increase its results.
How management will grow the business while building a loyal customer base and outperforming competing rivals becomes the perspective for both short-term and long-term goals. To drive performance and succeed, every functional piece of the business—research and development, supply chain activities, production, sales and marketing, distribution, finance, and human resources—must be unified in operation. Clearly, management’s choice of strategy should be guided by the company’s mission statement and vision. The strategic choice made by the company and by managers speaks loudly… “Surrounded by the myriad of unique business approaches and ways to compete that we could have selected, we have decided to use this particular combination of competitive and operational approaches to drive the company forward.” in the planned direction, increasing its market position and competitiveness, and advancing execution.” These conclusions regarding strategy are rarely easy and painless for any company, and some of the conclusions may turn out to be wrong, but that is not a justification for not making a decision on a specific course of action.
When developing a business strategy, the current situation of your company should be considered. Managers must be motivated to assess the business environment for the particular industry and competitive forces, the company’s recent performance and status in the marketplace, its competitive strengths and abilities, and its competitive weaknesses. Depending on the company’s needs and vision, managers are forced to set a clear path for direction. By no means is this path absolute. Setting foot on this path of action requires that the company’s strategy evolve over time with both proactive and reactive activity. Company strategy development is intended to guide the company in the planned direction while growing the business and improving financial and market performance. Thus refining the company vision and strengthening the company mission statement.
This article describes the five basic competitive strategy options: which of the five to use is an important and fundamental choice for any company. By developing this overall strategy, your company is beginning its search for a competitive advantage. The main differences between competitive strategies boil down to (1) whether your company is aiming for a market target that is broad or narrow, and (2) whether your company is seeking a competitive advantage linked to product differentiation or low cost.
The five distinct competitive strategy approaches that stand out are as follows:
The Five Generic Competitive Strategies
1.A low cost provider strategy – Strive to achieve lower overall costs than rivals and attract a broad spectrum of customers, often below rivals’ prices.
2.A broad differentiation strategy – seek to differentiate the company’s product offering from that of rivals in a way that appeals to a broad spectrum of buyers.
3.A best cost supplier strategy – give customers more value for money by incorporating good to excellent product attributes at a lower cost than rivals; the goal is to have the lowest (best) costs and prices compared to rivals offering products with comparable attributes.
4.A focused (or market niche) strategy based on low costs – Focusing on a narrow buyer segment and outperforming rivals by having lower costs than rivals and therefore being able to serve niche members at a lower price.
5.A focused (or market niche) strategy based on differentiation – Focus on a narrow buyer segment and outperform rivals by offering niche members personalized attributes that suit their tastes and requirements better than rivals’ products.
Each of these five generic competitive approaches establishes a different market position. Deciding which generic strategy to employ is possibly the most vital strategic commitment for your company. This commitment will drive the rest of the strategic actions your company agrees to and set the tone for your pursuit of a competitive advantage over competitors as you “Create Your Own Path” to business success.