If you’ve been reading business books for any length of time, you’ve likely come across concepts such as the yin/yang of Strategy. This concept describes two symbiotic elements of strategy – Preserving the Core and Stimulating Progress. In business, this means defining the Core Purpose, Core Values, Big Hairy Audacious Goal, and Vivid Description of the Envisioned Future. If you’re interested in creating the right strategy for your business, this article will explore three essential elements of a built-for-the-long-term plan.
Cost leadership strategy
The concept of cost leadership has two main meanings. First, it creates benefits for new entrants. Since a firm can’t match the prices set by the cost leader, new entrants would be discouraged. Second, a firm that uses this strategy creates barriers to entry that protects existing rivals. The key to cost leadership is to reduce costs to a level below that of competitors. This results in a higher efficiency level, which boosts profit margins and acts as a substantial entry barrier for any prospective competitors.
Effective differentiation strategy begins with an in-depth analysis of the target customer. Identifying their needs and wants is a critical step toward developing a compelling offering. Once identified, opportunities must be assessed for feasibility, difficulty, and profitability. A true differentiation strategy must provide value to the audience while allowing the brand to increase its revenues. This is more important than ever as more businesses compete for the same customers. Read on to learn more about this important concept.
Cost containment strategy
Increasing drug costs have led many Americans to stop taking their medications. In addition to patient assistance programs, healthcare providers can reduce copays by providing information about lifestyle changes and disease maintenance. Preventive prescription programs may also be beneficial, helping patients avoid unnecessary medication spends. But how do you keep costs down in the first place? Here are three effective strategies. Read on to learn more. Adaptive care delivery and telemedicine are two other strategies employers can consider.
Second-order fit as a strategy refers to how chosen activities reinforce one another. Michael Porter uses an analogy of chain strength to explain the concept of fit in strategy. One can make a chain stronger if the weakest link is reinforced with a unique activity. Similarly, third-order fit as a strategy refers to how chosen activities are consistent with each other and can improve implementation. The Gap is an example of a company that has a low cost-to-sell inventory, while comparable retailers aim to achieve three to four times-per-year turnover.
Scope of strategy
The scope of a strategy defines the extent to which a business can compete in a particular market. In general, a company’s competitive scope consists of three dimensions: geography, target customers, and vertical integration. The scope of a strategy defines the activities a company should concentrate on and those it should avoid. A strategy must clearly specify the limits of what the company can and cannot do, so that its employees do not waste resources trying to do something that does not fit within its scope.