Table of Contents
Meaning
Using the firm’s core strengths, business-level strategies strive to provide customers with value and establish a competitive edge in each product or service market. It determines the enterprise’s position on the market relative to its competitors. Business-Level Strategies are primarily concerned with companies that have many businesses, each of which is seen as a Strategic Business Unit (SBU). It establishes how the corporation will compete in the market within each Line of Business, or SBU. In addition, it focuses on how the firm will compete successfully in each line of business and how to effectively manage the interests and operations of a given unit. Consequently, these strategies are the courses of action chosen by a company for each line of business or SBU separately in order to achieve competitive advantage in the various lines of business that the company has in its portfolio.
Business-level strategy concentration
These concerns are addressed through enterprise-level strategy as follows:
- Meeting the needs of the clientele
- Achieving a competitive advantage over rivals
- Mitigation of competitive disadvantage
This level of strategy focuses on competing with rivals, defending market share, and maximizing profits. A company has a competitive edge if it is able to attract its target customers and withstand competitive forces better than its competitors.
Business Level Strategies
Effective Business-Level Strategies require establishing and applying specific competencies in order to get an advantage over competitors. In the year 1998, Michael Porter proposed the following three business-level strategies:
- Cost Leadership
- Differentiation
- Targeting
Cost Leadership
This strategy emphasizes the production of standard, low-cost products for price-sensitive consumers.
The majority of the time, a cost leadership approach targets the mass market. In order to accomplish this, the company consistently and assiduously seeks to reduce costs in a variety of areas, including sourcing, manufacture, packaging, storage, and distribution of the product, while also reducing overhead costs.
Typically, organizations pursue forward, backward, and horizontal integration to attain cost leadership.
Methods to attain Cost leadership
- Rapid product or service demand forecasting
- Utilization of the company’s resources in an efficient manner to prevent waste
- Attaining economies of scale, which result in decreased unit costs
- Investing in high-end technology to facilitate intelligent workflows
- Product standardization for mass production results in economies of scale
Differentiation
As its name implies, differentiation strategy tries to produce and deliver differentiated products and services to clients across an entire industry in order to attract price-insensitive consumers.
In addition to targeting the large mass market, this strategy involves the creation of a distinctive product. Unique refers to originality in terms of design, brand image, specs, customer service, employed technology, etc.
In addition, this strategy may or may not result in a competitive advantage, mostly due to the fact that the customer’s wants may be met by standard items, or if competitors swiftly duplicate the product or service.
Consequently, the strategy should be implemented after a thorough examination of the market and the demands and preferences of the purchasers, as well as the incorporation of distinguishing elements into the product.
Methods to attain Differentiation
- Providing clients with functionality that corresponds with their preferences and tastes
- Improving performance of the product
- Product innovation
- Determining product prices based on the distinct characteristics of the product and the customers’ ability to pay
Focus
The firms employ this method to meet the needs of small consumer groups. The strategy focuses on a substantial portion of the market with strong growth potential that is unimportant to competitors’ success.
This is utilized frequently by small and medium-sized businesses. This method is only effective when consumers have diverse preferences and competitors are not attempting to specialize in that area.
Methods to attain Focus
- Selecting a specific market niche, something that cost leaders and differentiators typically avoid.
- Exhibit excellence in catering to the particular market
- High-efficiency micro targeting to satisfy these niches
- Developing novel value chain management approaches
Business-Level Strategy illustrates the firm’s decisions regarding how it intends to compete in the marketplace.
With the goal of achieving remarkable returns, the firm’s core competences should be centered on the requirements and desires of its consumers. In order to accomplish this, business-level strategies play a crucial role.
The objectives of business-level strategies are the development of a competitive advantage, the identification of reactions to shifting market trends, and the allocation of SBU resources.
