A strategy is a plan which is specially made to accomplish a particular objective. Similarly, a business strategy is a plan which is made to achieve and meet business goals and objectives. Strategy also stimulates actions to be performed.
In order to cope with the ever-changing business world, it is important to formulate your plans and strategies accordingly. Planning beforehand will answer the following questions:
• What to do?
• How to do?
• Who will do?
• When to do?
Having answer to all these questions will help you to tackle different situations. Even it is important to make sure your business strategy is flexible and rigid. Having flexibility in your plan helps it be modified easily. Am effectively developed business strategy being helpful to increase the efficiency, facilitate proper coordination, reduce risks involved, accomplish business objectives and goals, motivates personnel, helps in organization, etc.
There are three different levels of business strategy (https://www.business2community.com/strategy/6-steps-create-effective-business-strategy-01391113) such as corporate level, business level and functional level as discussed below:
1. Corporate Level Strategy – Corporate level strategies are formulated by the top management. While framing and planning these strategies inputs are taken from the middle level management. These strategies are formed for the accomplishment of the business objectives and goals.
Top management delegates the scarce resources and ensures their proper allocation and utilization for the benefit of the organization. Corporate level strategy can be subdivided into three types:
• Growth – As the name suggests, these strategies are related to the growth and expansion of the business concern. Strategies are formulated to achieve business goals and one the key goal is expansion of business. This expansion could be in sales, revenue or total assets, etc. Growth strategies can be broadly classified as like:
• Concentration strategy
• Diversification strategy
• Stability – In this strategy plans are developed in order to stay stable on a position. Once a target is achieved plans are made to stay and have a hold on that position or the strategy that bought the concern to success is followed with little or no change in it. There three types of stability strategies:
• No change strategy
• Profit strategy
• Pause/ Proceed with caution strategy
• Retrenchment – Retrenchment is the reduction or downfall of a something. So, as its name implies, these strategies are prepared in a situation where there is downfall in business. When a business firm faces a circumstance where their product line or sales are not showing positive result, due to which the firm comes to a weak competitive position. Therefore, retrenchment strategies are prepared to get the firm out of that situation. Types of retrenchment strategies are:
• Turnaround Strategy
• Divestment Strategy
• Liquidation Strategy
2. Business Level Strategy – Business level strategies are plans that are formed by the people of middle level management and they relate to a particular business. They are developed by general managers who put their efforts to achieve the mission and vision of a business concern. Customers are the foundation of an organization’s business-level strategy. There are main five types of business level strategies, they are as follows:
• Cost Leadership – In cost leadership, cost is very as crucial factor in attracting the customer. Best price is offered on products. Usually low prices are set to allure customers to buy their products. There are many other factors that are needed to be considered before lowering the prices such as meeting production expenses and other miscellaneous expenses.
• Differentiation – When a business provides their product at a higher price than the others, they have to specify as to why their product is worth more money. Differentiation of the product or brand must be provided. The concern needs to identify the features and benefits of their product that makes their product an exception then the others. For example, BMW is expensive than a Toyota. Many customers tend or prefer to buy Toyota due to low price but BMW has differentiated as a luxury automobile brand that has higher quality standards and extra features.
• Focused Low Cost – Focused low-cost strategy is used to provide products on a low price to a small amount or segment of customers. This strategy is also used to beat the competitor’s prices. For example, a company selling products and services at a low cost only in India.
• Focused Differentiation – It is an extension of differentiation strategy. It finds the added features of products and services and then targets a small market. Using this strategy companies differentiate themselves by provide services to a small segment of customers at a low price. For example, a small travel agency can provide offer good services at a lower price at a particular location then the international travel agencies that have wide coverage of customers.
• Integrated Low Cost Differentiation Strategy – This strategy is a combination of low cost strategy and differentiation strategy. This model is increasing its popularity extensively in the global market. A balance and flexibility is maintained in both price of the product and added value. Company focuses on new technology and use them in the production, make their concern adaptive to environmental changes, etc. Main aim is to provide a product of good quality at an affordable price thereby meeting their expenses.
3. Functional Level Strategy – Functional level strategies define day to day tasks that are to be performed by the low- level management. These strategies are framed as per the guidelines given by the top- level management. But the strategies are developed by the line managers of the lower level management. These decisions are made concerning different departments or functional areas like marketing, production, human resource, Finance, research and development, etc.
In order to achieve and accomplish various business objectives and goals, a company requires many strategies depending on the circumstances. Different strategies are required at different level. A single strategy cannot meet the requirement of all levels of management. Therefore, a business structure always has three levels and various other plans and strategies are required to meet the needs of these management levels.