What is Business Level Strategy?
Business level strategy is a strategy that attempts to create customer value and achieve a competitive advantage by exploiting core competencies in specific product markets. It combines and integrates the set of commitments and actions of a business to achieve a competitive goal.
Business level strategy deals with the question “How do we compete?” Its main goal is to stand out in the market better than its competitors.
It directs the business SBUs i.e. strategic business units toward competitive goals. The SBU can be a different product or business as such it requires to have separate business-level strategies to deal with specific SBUs.
The main objectives of business-level strategies include:
- To fulfill customers’ needs and attract them.
- To reduce competitive pressure.
- To achieve a competitive advantage.
- To enhance the market position by enhancing the market share.
Types of Business-Level Strategy
Strategies to achieve competitive goals can be of various types. However, Michael E. Porter has provided us with three main business-level strategies which are most commonly accepted to realize the business-level dreams of organizations.
Cost Leadership Strategy
A cost leadership strategy aims to produce products or services with qualities that customers will find acceptable at a price that is lower than that of competitors.
Businesses that employ this tactic seek to undercut rivals’ prices by providing customers with uniform goods. By offering fair prices, it aims to decrease costs and grow market share.
With this strategy, despite the cheaper price, the overall profit rises due to higher sales. This works well when the customers are price-conscious.
Following the given alternatives you can quickly implement the cost leadership strategy.
- Through economies of scale.
- Full capacity utilization.
- Resource sharing.
- Low-cost materials.
- Direct marketing.
- Simple product design and process.
The goal of the differentiation strategy is to create goods that, in the eyes of the consumer, vary in key areas. Businesses strive to provide goods that stand out in their customers’ views as different than other businesses.
The basis for the differentiation could be the product’s attributes, specifications, quality, backup, promotion, etc.
The following situations determine the success of the differentiation strategy.
- When diversification in products is used.
- Where there are few rivals.
- Dynamic technological environment.
- Quality-sensitive customers.
The final category of business-level strategy is this one. The focus strategy consists of a coordinated series of steps done to create goods that meet the needs of a particular competitive segment. It concentrates on a certain market of clients.
In this scenario, a company tries to either achieve cost advantage or differentiation. Businesses adopt a focus strategy to concentrate on a profitable and growing segment.
The following conditions determine whether or not the focus strategy succeeds.
- The focused market segment is profitable with growth potential.
- The competitors are not aware of a particular segment.
- Intensive research and development are carried out to assess customer needs and preferences.
How To Implement Business-Level Strategy?
Making only business-level strategies does not bring a competitive position in the market. These strategies need to be implemented.
Below are the following steps/ways you can consider effectively implementing your business-level strategy.
Find the Market
The first step you should take is to find the target market and analyze and understand the market. Search for the ideal customer as your company wants to serve either focused, cost, or differentiation customers.
Know the Customer’s Need
It is time to get to know what actually your target market needs. Knowing customers’ actual may be tricky but interacting with the target market can get you the details about their actual needs.
Understand the Competition
Once the target customers’ needs are identified the next task is to know whether or not other companies targeting the same customers. If not the strategy can be quickly implemented.
But if other companies are targeting, understanding their products, prices, services, and practices are necessary.
Assign Duties to Employees
As the target market, their needs, and possible competitors are identified it is time to assign duties to employees of various departments to turn the strategy into reality. And doing so effective coordination between different departments is essential to effectively complete the assigned duties.
Review the Performance
Once the business level strategy is implemented it is necessary to know whether or not it is working as expected. Regularly reviewing the performance is required to know the results and take corrective actions when not.
In conclusion, business-level strategies are a set of actions companies take to be competitive in the market and outperform better than competitors. And, for business-level strategies to perform better, proper coordination between different departments, business units, and strategies is worth maintaining in the organization.