Business level strategy refers to a company's plan or approach to creating and delivering value to its customers in a particular market segment or industry. It involves decisions about how to position the company in the marketplace, what customer needs to satisfy, how to compete against rivals, and how to allocate resources to achieve business objectives.
Business level strategies typically fall into one of three categories: cost leadership, differentiation, or focus.
- Cost leadership strategy: This involves offering products or services at lower costs than competitors while maintaining acceptable levels of quality. Companies that employ a cost leadership strategy often have efficient production processes and supply chains, and they leverage economies of scale to achieve low costs.
- Differentiation strategy: This involves offering unique and superior products or services that stand out from those of competitors. Companies that employ a differentiation strategy may focus on quality, design, features, or customer service to create a competitive advantage.
- Focus strategy: This involves concentrating on a narrow segment of the market and tailoring products or services to meet the specific needs of that segment. Companies that employ a focus strategy often have deep expertise in a particular area and can develop close relationships with their customers.
Ultimately, the goal of business level strategy is to create a sustainable competitive advantage that allows a company to outperform its rivals and achieve long-term success in the marketplace.
Here are some additional points to consider regarding business level strategy:
- Business level strategy is closely related to a company's overall corporate strategy. The corporate strategy defines the company's overarching goals and objectives, while the business level strategy focuses on how to achieve those goals in specific market segments or industries.
- Business level strategy is often informed by a company's analysis of its external environment, including competitors, customers, and market trends. A thorough understanding of the external environment is essential for developing a successful business level strategy.
- Business level strategy also takes into account a company's internal resources, capabilities, and core competencies. A company's strengths and weaknesses relative to competitors can inform its choice of business level strategy.
- Business level strategy is not a one-time decision. Companies may need to adjust their strategy over time as market conditions change or new opportunities arise.
- Successful implementation of a business level strategy requires alignment across all areas of the organization, including marketing, operations, finance, and human resources.
In summary, business level strategy is an important component of a company's overall strategy that involves making decisions about how to compete in a particular market segment or industry. It requires a deep understanding of the external environment, internal resources and capabilities, and a commitment to ongoing strategic alignment and adjustment.
Strategic Business Models
- Porter's Five Forces: This model, developed by Michael Porter, helps companies understand the competitive dynamics of their industry by analyzing five key forces: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitutes, and the intensity of rivalry among existing competitors. Understanding these forces can help companies identify opportunities for competitive advantage and inform their choice of business level strategy.
- SWOT Analysis: SWOT stands for strengths, weaknesses, opportunities, and threats. This model involves assessing a company's internal strengths and weaknesses as well as external opportunities and threats in order to develop a strategic plan. By identifying areas of competitive advantage and potential risks or challenges, companies can develop a business level strategy that leverages their strengths and addresses potential weaknesses.
- Value Chain Analysis: This model, developed by Porter, helps companies identify the key activities involved in creating and delivering value to customers. By analyzing each step in the value chain, companies can identify opportunities to reduce costs, improve quality, or differentiate their products or services. This can inform their choice of business level strategy, such as a cost leadership or differentiation strategy.
- Blue Ocean Strategy: This model, developed by W. Chan Kim and Renée Mauborgne, encourages companies to seek out uncontested market spaces, or "blue oceans," rather than competing in crowded and highly competitive "red oceans." By creating new market spaces or redefining existing markets, companies can avoid direct competition and achieve sustained competitive advantage.
Overall, strategic business models can help companies develop a deeper understanding of their industry, identify areas of competitive advantage, and make informed choices about their business level strategy.
Differences Between Business Level Strategy and Corporate Level Strategy
Business level strategy and corporate level strategy are two distinct types of strategic planning that companies use to achieve their goals. Here are some of the key differences between the two:
- Scope: Corporate level strategy is concerned with the overall scope of the company's operations, including which businesses to enter or exit, which products or services to offer, and which geographic markets to serve. Business level strategy, on the other hand, focuses on how to compete within a particular market segment or industry.
- Level of analysis: Corporate level strategy involves a higher level of analysis than business level strategy, as it considers the company's overall position in the market and how its various business units or product lines fit together. Business level strategy, on the other hand, focuses on the specifics of how to compete in a particular market.
- Resources: Corporate level strategy involves allocating resources across the entire organization, while business level strategy is concerned with how to allocate resources within a specific business unit or market segment.
- Timeframe: Corporate level strategy tends to have a longer timeframe than business level strategy, as it involves decisions that will impact the company's overall direction for years to come. Business level strategy, on the other hand, may involve shorter-term decisions that are focused on achieving specific objectives within a particular market segment.
- Level of risk: Corporate level strategy is generally riskier than business level strategy, as it involves decisions that can have a significant impact on the company's overall performance. Business level strategy, on the other hand, is focused on achieving success within a particular market segment or industry, which may be less risky than making broad strategic decisions that impact the entire organization.
Overall, while both business level strategy and corporate level strategy are important components of strategic planning, they have different scopes, levels of analysis, resource allocation, timeframes, and levels of risk.
