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what are the three basic business strategies?

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In spite of being almost identical, product and services can be differentiated with the help of promotions and advertising, however, the advertising for these niche products should be unique and appealing. Ex: Chrysler vehicles has cars for regular people as well as for handicapped audience tailor-made according to their needs. To reduce Operating costs, you need to standardize the product and achieve a humungous output. Technology 9. Cost Leadership is a highly competitive strategy and relies on the organization practicing it to be the number one position. In case of Focused differentiation strategy, firms that compete based on uniqueness and target a narrow market are following a focused differentiation strategy. Even outsourcing in few cases can be considered as reducing the costs. October 23, 2020 By Hitesh Bhasin Tagged With: Marketing strategy articles. Usually, the strategy is documented as an organizational manual or statement so that: The concept of three basic strategies was originally outlined by Michael Porter (an academic and strategy expert who wrote several books including Competitive Strategy: Techniques for Analyzing Industries and Competitors). Final words, the choice of strategies as well as their implementation is crucial for business firms since the choice of strategy will help the firm in achieving sustainable competitive edge and it would also assist in long and short-term business decisions. Starting a business is a time of great hopes for big dreams, tensions and future successes and meaningful effects on the market with generic business-level strategies. Thinking from a company’s point of view, suppose a firm wants to manufacture cheap mobile phones. In Business terms, Strategy could be understood as a plan to beat competitors. The appeal of the product is for cost-conscious people. This reduces the overheads and spreads fixed costs throughout. Many infact, even feel that they must either avoid marketing totally, or keep it to the minimum (thereby trying to reduce costs), which needless to state affects their sales. These include: 1. Above, we’ve covered the three basic business strategies, but what are the benefits of having a strategy in the first place? Your email address will not be published. To maintain control over the value chain, the firm should achieve control over all functional groups like procurement, finance, inventory etc. Add a prefix and it will define the respective term. In the case of a service industry, a major player would be Air Asia, a low-cost Asian flight operator which operates only in Asia at a very low cost. This pass is priced at a lower price than regular unit ticket but this pass will not be valid for Airport Metro, which although run by the same company, charges higher than the usual fare. You also have the option to opt-out of these cookies. Three Basic Business Strategies If walking away from an individual or group makes you truly feel awkward, have a number of exit strategies prepared to use. Differentiate your product or service, whatever it may cost and offer to customers on a higher price (usually niche market). The strategy may have several goals including. Such cost leadership or low-cost operation is o… Those who heed, obviously over period of time thank me but the other breed is far clever by half, who will learn only when they approach doom! Successful retailers rely on a cost strategy. We'll assume you're ok with this, but you can opt-out if you wish. What is Charisma? You can follow me on Facebook. This doesn’t mean the prices are lower, on the contrary, the prices may be higher. Gaining market share by charging lower prices (as a result of lower operating costs). We also use third-party cookies that help us analyze and understand how you use this website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. Focus Type of Business Strategy is divided into two parts viz Focused Cost Strategy and Focused Differentiation strategy. According to the resource-based view of strategic management, a firm can gain a competitive advantage by gaining access to strategic resources. Also increasing costs and economic fluctuation can seriously affect the firm. In other words, the price-sensitive class of customers is the target segment of the firm and all the business activities are planned accordingly, right from procurement of raw materials to distribution and marketing. Not least is that in a smaller niche market, organizations can focus on delighting customers and building (and retaining) loyalty. What is a business strategy; What are the three basic business strategies. This website uses cookies to improve your experience while you navigate through the website. Business Strategy is a business plan devised to beat competitors. For ex: There has never been a celebrity endorsement for any iPhone since its inception to the recent iPhone XS and XS Max, while even Google Pixel is seen following a similar strategy for its newly launched Pixel 3 or one would find advertisement of Audi or Luxury cars or Watch brands like Tag Heuer, Rolex, and Patek Phillipe only in Business Magazines targeting businessman. In the case of services, the point of differentiation would be employee courtesy, availability, expertise and location. Get it right, and your market position will flourish; get it wrong, however, and you could find your organization struggling. Now commonly known as Porter’s Generic Strategies, they are commonly used by many firms worldwide. It is a Type of Business Strategies used by Apple, a company that promises differentiated products to its customers. The risk in applying this strategy is customer retention – if a competitor launches product priced even lower, the possibility of customer retention nullifies. It is mandatory to procure user consent prior to running these cookies on your website. Porter is known for “Porters Hypothesis”, “Porters Five Forces” and “Porters Four Corner Model.” Porter wrote that the generic strategy, whichever the company chooses, reflects the choices made regarding both the type of competitive advantage and the scope.

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