There are several kinds of strategies. Some are focus, cost leadership, and competitive. The most successful ones combine several of these factors and lead to increased profits. These types of strategies are best suited for organizations that are looking to make a big impact while minimizing costs. Below are the three most common types of strategies. Listed below are some of their key benefits. If you are unsure of which type of strategy will work best for your organization, read on to discover the most effective strategies.
Competitive strategy
What is a competitive strategy? This is a business plan that is intended to achieve a competitive advantage over rivals through cost, differentiation, or other means. It is important when there is fierce competition in an industry and many similar products available. It also helps in generating superior ROI. Ideally, it should be developed before a business venture begins. Read on to learn more about the importance of competitive strategy. Listed below are some of the most common competitive strategies that should be a part of any business plan.
Cost Leadership – This strategy involves building a product that is lower in cost than the competition’s. The cost-leader must spend the least amount of money to develop the product but still earn a substantial profit. Differentiation Leadership – Using differentiation to differentiate your product from the competition, a company can command higher prices than its competitors. This strategy helps a company increase its share of profits while limiting its costs. But cost-leadership strategies are not for every business.
Cost leadership
A cost leadership strategy requires a company to identify and quantify the costs of its operations and produce a plan to address those costs. Strategies may include negotiating with suppliers, creating larger supply orders, and introducing new technologies. In one case, fast food restaurants introduced touch screen ordering kiosks at select locations to free up workers for other tasks. Companies also need to measure their progress toward achieving their goals and determine how to improve processes and measure their success.
A cost leader operates at higher margins than its competitors and is often able to absorb price increases from suppliers while limiting the growth of their profits. In addition, a cost leader’s low operational costs allow it to be flexible, discount more often, and experiment with new product offerings. Ultimately, a cost leader will be able to sustain a better position relative to rivals in price competition. This can lead to a competitive advantage and higher overall profits.
Focus strategy
A focus strategy focuses on specific markets, products, and services. This approach helps companies build an expert reputation and set themselves apart from competitors. It enables companies to identify the future needs of consumers and creates a barrier to entry for competitors. The key to a successful focus strategy is active listening. By listening carefully to consumer needs and concerns, a company can build a value proposition around those needs. This type of strategy improves a company’s relationship with consumers, and improves the pricing structure as well.
Another advantage of a focus strategy is that it helps companies reach a specific demographic. This helps a business pinpoint its target market, and tailor marketing messages to reach a targeted group. This method allows a business to stretch its marketing dollars further, keeping the brand at the forefront of consumers’ minds. A focused strategy also limits competitors by keeping the business at the top of their customers’ minds. Therefore, it’s imperative for businesses to understand the potential risks and benefits of a focus strategy.