Businesses are always trying to outdo each other on the size of their market share. They, therefore, come with different strategies to help them stand out. A strategy is necessary even for a business to survive the vicissitudes of the market. There are three corporate strategy examples that a company can adopt in line with their reading of the market. A company might have a strategy with some variation, but all are spin-offs or combinations of the three.
Cost Leadership Strategy
This strategy works best for companies operating in an environment where the price is an essential determinant of customers’ choices. Even when the cost is the primary determinant for customer decisions, buyers still have expectations for quality. Thus, when the business leaders are working towards reducing the cost of production to achieve cost leadership, they must also be careful to meet the customer’s definition of a quality product.
Cost leadership can be achieved by reducing the cost of production through strategies such as global sourcing or reducing the company’s margin. The earnings lost on a reduced margin can be recovered by selling more products and being in business for a long time.
For an ongoing business, the leaders need to determine how much of the market share they need to control to enjoy meeting the target revenue they need to meet. They should then scale up their marketing efforts accordingly. This breaks down corporate strategy vs. business strategy; cost leadership is corporate strategy while scaling up marketing is business strategy. This strategy is usually good for market penetration.
This strategy requires the company to make its product stand out among competitors. Its implementation requires the board or the implementing body to determine the product feature target customers consider most important. The features could be image, reliability, quality, durability, availability, or after-sales service.
The company should then work backward to ensure the product stands out in the aspects customers consider most important. Once implemented successfully, a differentiation strategy can allow the company to apply a price skimming strategy. They raise the price to capitalize on the fact the company is offering a better strategy.
Sometimes, increased price is a necessity occasioned by increased production cost to meet the higher standards. Be careful to keep the price as low as possible while enjoying the benefits of your better-quality product. This is because competitors may offer the same price and undercut you. You should be able to maneuver.
This is also referred to as niche marketing. The company focuses on a particular segment of customers and tailor their product to meet the needs of their target customers. Such needs may be quality, price, after-sales service, etc.
Focus strategy typically focuses on relatively wealthy people willing to pay extra for the product in question. In many settings, wealthy people live in the exact locations, and the business can take the products close to them and brand them accordingly.
The niche needs to be big enough to meet the company’s customer needs depending on the products you are selling. If the market isn’t big enough, it can cause you challenges with pricing because you’d have to give the product a high enough markup to meet your costs, which may not be sustainable.
Based in New York, Jason Feintuch has dedicated his career to helping businesses exceed industry standards in finance.