Business level strategy defines the combination set of moves and action that takes an aim offer value to the customers and develop competitive advantages.
Types of Business level strategy
There are two types of business level strategy that are as follows:
1. Generic Business Strategies
Michael Porter has said that the business must choose the kind and extent of the ways it can use its competitive advantages. The strategies that are generic work since they assist in the formulation of strategies at the most fundamental as well as broad scales. It is one of the types of business level strategy. There are a variety of risks that come with every generic strategy, and the firm must take on those risks to avoid being branded an unprofessional firm.
Porter believes that the firm’s standing in the market depends on whether its financial performance is higher or lower than the industry average. A company is an above-average profit if it has maintained its competitive edge over the years. On a broad scale, the company could possess two distinct competitive advantages. It could either focus on cost leading or differentiate.
The company’s competitive strategy includes various activities employed to gain customers and meet their needs to keep its standing in the marketplace. The specific area of focus of the strategy is more limited than the business strategy.
The competitive strategy focuses on the management’s efforts to give superior service to its customers and overcome competition in the marketplace. Business strategy is not only how the business can compete in the market but also how it can address other strategic problems the company faces.
i) Cost Leadership
Cost Leadership is a types of business level strategy that allows marketers to sell regular products at lower costs in a market that is dominated by mass. It helps reduce the company’s costs, allowing the customers to purchase the products at a lower cost.
Differentiation is a strategy that focuses on the presentation of a specific product to a broad market. The way the product is presented demands creativity and ingenuity constantly to satisfy the requirements of an extremely competitive market.
iii) Focus Strategy
Focus’s business strategy aims to market its products within an extremely small market. It is that types of business level strategy that is based on the idea that better service could be offered in a targeted market by focusing completely on the market. Focus meets the requirements of a limited segment by implementing a low-cost strategy of differentiation or leadership.
2. Competitive Tactics
Strategies are the basis for tactics, and consequently, tactics may be thought of as a sub-strategic” However, the two terms are often confused, and for a good reason, since the distinction lies in the level of importance that is associated with tactics. At times, what’s tactics for one might be an effective strategy for another and vice versa. Tactics are a component of the strategy. The term tactical planning refers to the process of creating specific and practical sub-plans for implementing the strategies of the company. Competitive tactics is one of the types of business level strategy.
While a decision to choose one of the competitive strategies is the base of a business plan, there are numerous variations and variations. Some of these include various strategies that could prove useful (in general, the tactics are less time-bound in time scope and have a smaller range than strategies).
Categories of Competitive Tactics
Three kinds of competitive strategies are focused on timing, the location of markets and tactics for competition.
i) Timing Techniques
Making a smart move is usually as important as the move you make. There are three types of business level strategy moves to consider: first-movers (i.e., the first to offer an item or service), Second-movers or fast followers and late mover (wait-and-see). Each approach has its advantages and drawbacks.
ii) First-Mover Strategic Advantage
Being the first-mover has important strategic advantages in the following situations:
- It creates an image and reputation among buyers:
- Quickly adopting the latest technology, new components and exclusive distribution channels etc., could result in cost savings and other advantages over competitors.
- First-time customers stay loyal to repeat purchases.
- The First mover makes imitation and entry by competitors difficult or impossible.
But being a second or late-mover isn’t necessarily an advantage. There are instances where the first movers’ skills, abilities, technologies and methods are easily replicated or even outclassed by the later movers. It allows the latter to catch up or surpass the first-mover in a time frame and also benefits from the ability to minimize the risk by waiting until a new market has been established.
iii) Second-Mover and Late-Mover Strategic Advantage
There are benefits to having a skilled follower instead of one who is a first-mover, e.g., in situations where:
- Being a “first-mover” is more expensive than copying, and the leader reaps only modest benefits from the experience curve.
- Products of an innovator may be basic and don’t meet the expectations of buyers and thus allow a savvy follower to entice customers away from the innovator with superior products.
- Technology is rapidly evolving, and fast-moving users have the opening to outdo first-movers’ products with more appealing and fully-featured third-generation and second-generation models.
- The first-mover needs to be aware of easily tapped markets.
iv) Market Location Techniques
This types of business level strategy falls into the offensive and defensive strategies.
a) Offensive Strategy
Offensive strategies are a strategy that is designed to gain an objective, typically market share from a competitor. Alongside market share, marketers can develop offensive strategies to gain important customers, high-margin market segments, or loyalty segments of markets. Competitive advantage is usually through effective offensive strategic decisions – actions designed to give an advantage in cost or differentiation or even a resource advantage. Conversely, defensive strategies can safeguard competitive advantages but are seldom the reason for gaining the advantage. The time it takes an offensive that is successful in getting an advantage is dependent on the competition.
b) Defensive Strategy
Defensive strategies are one type of warfare strategy designing for defend a business’s profits, market share, product positioning, and mind share. These strategies aim to reduce the chance of being targeted, reduce the effect of any attack and encourage competitors to focus their efforts on the other competitors.
Although defensive strategies generally improve a company’s competitive edge, they can help protect its competitive advantage, safeguard its most valuable assets and assets from the competition, and preserve any advantages to its position in the market.
c) Co-operative Strategies
Another type of competitive strategy involves cooperation between companies. They involve agreements or partnerships between two or more firms created to meet mutually beneficial and strategically significant goals. They could fall under the heading of different kinds of alliances that are strategic. Some are extremely short-term, while others are more long-term and could be the initial stage of a possible merger between the two companies.
Some of the reasons for strategic alliances are:
- Obtain/share technology.
- Share manufacturing capabilities and facilities.
- Share access to specific markets.
- Reduce financial/political/market risks.
- Achieve other competitive advantages not otherwise available.
- One could think of an array of strategic alliances.
They range from:
- mutual service consortiums (e.g., companies in similar industries combine their resources to create an item that is too costly on its own).
- Licensing agreements.
- Joint ventures (an independent business entity formed with two or more firms to carry out certain tasks and with a specific ownership structure of operational responsibilities, rewards and financial risks).
- Value chain partnerships (e.g., Just-in-time supplier relationships, as well as outsourcing of key functions of the value chain).