Business Strategies
Business Strategies
Business Strategies
If you choose to offer your product at a lower price than your competition, then you
have chosen a cost leadership strategy. In case you decide to make products different
from those the competition offers, then we are talking about a differentiation strategy.
Developing your business strategy further, you should choose a competitive scope and
whether you want to focus on:
Combining these two approaches can further refine the business strategy into a focused
cost leadership strategy and a focused differentiation strategy.
This business strategy relies on offering products at a low cost thus becoming the least
expensive producer or provider of goods and services in a particular industry. To
achieve this, companies need to cut costs across the entire value chain, so they can offer
their products or services at lower prices than rivals. By being cost leaders, businesses
can draw in customers who are looking for affordable products, expand their market
share, and possibly increase their profits.
Benefits
Risks
1. Price Erosion
2. Imitation by Competitors
3. Technological Changes
Example
McDonald's utilizes this strategy in the fast-food industry, optimizing its processes,
streamlining operations, and delivering standardized products at affordable prices.
Differentiation Strategy
Benefits
1. Customer Loyalty
2. Premium Pricing
3. Barriers to Competitors' Entry
Risks
1. Imitation by Competitors
2. Cost Structure
Example
Apple differentiates itself in the technology industry through its focus on sleek design,
intuitive user interfaces, seamless integration of hardware and software, and premium
quality, creating a distinct and loyal customer base.
Companies using this business strategy gain an advantage in cost within a particular
and specific market segment. They concentrate on serving a specific group of customers
with affordable products. This allows them to optimize their operations, processes, and
products to create cost-efficient solutions that meet the specific needs of their
customers.
Benefits
Risks
Example
Southwest Airlines (with a focus on regional routes) adopts this strategy by offering
low-cost flights on regional routes. By operating with a streamlined business model,
high aircraft utilization, and efficient operations, Southwest Airlines provides cost-
effective air travel options to customers in specific markets.
Benefits
Risks
Example
Tesla (with a focus on electric vehicles) has differentiated itself in the automotive
industry by offering high-performance electric vehicles with advanced technology,
sustainability, and sleek design. By targeting customers seeking environmentally
friendly and cutting-edge transportation solutions, Tesla has established a leadership
position in the electric vehicle market.