A proper business level strategy will help your company gain a competitive advantage in the industry. It connects your corporate-level strategy and functional-level strategy, breaking down the big plans into specific, actionable strategies and tactics.
In this post, we’ll talk more about business-level strategy, its benefits and characteristics, and some examples to help you further understand and create some for your business.
What is a business level strategy?
Business level strategy determines how your business can be differentiated from competitors and how your resources will be spent.
It emphasizes how your business can deliver value to consumers while retaining a competitive advantage.
Before getting down to making a business-level strategy, ask yourself these questions:
- What is it that your target customers value the most? (pricing, quality, brand prestige, etc.)
- What differentiates you from your competitors?
- What are your resources?
- Does your business have the capability to lead and sustain in the market?
To further understand how business-level strategies work, let’s take a look at the other 2 levels of strategy.
3 levels of business strategy
Corporate level strategy
The corporate level strategy defines the vision and main objectives of your business. It influences business- and functional-level strategies. It often comes in the form of a vision statement or a mission statement.
This level of strategy is important to any business, especially for companies with multiple lines of business.
Most corporate-level strategies focus on these goals:
Corporate-level strategy is used for the long-term development of your business, so it’s always broad and overarching. To make them more specific and actionable, you need the next-level strategy—business-level strategy.
Business level strategy
When it comes to how resources will be allocated and how your company can stand out in the market, it’s important to mention business-level strategy.
Business-level strategy is not as broad as corporate-level strategy, and is not as specific as functional-level strategy.
For instance, if your corporate-level strategy is to redefine your business, then your business-level strategy may include:
- Eliminate certain products/services
- Lay some employees off
- Reduce the budget for certain marketing campaigns
Functional level strategy
Functional-level strategy comes after business-level strategy. It focuses on more specific strategies and tactics to help businesses implement business-level and corporate-level strategies.
This type of strategy is applied in the day-to-day operations of each team/department in your company—from marketing, finance, and manufacturing to logistics and human resources.
For example, if your corporate-level strategy is entering a new market and your business-level strategy is increasing your brand exposure on social media, then a functional-level strategy for the Marketing team can be creating a social media marketing campaign for that specific market.
The marketing team can then break down this strategy into tactics, achievable tasks, and each member of the team will complete tasks to implement that strategy.
Characteristics of business level strategies
Business-level strategies need to be specific enough to break down the broad corporate-level strategies.
Business-level strategy concentrates on short-term goals. These goals often related to monthly or quarterly revenues, ROIs, etc.
Business-level strategies are often simple and tangible, not as abstract as corporate-level strategies.
Types of business level strategy
Just like its name, this strategy means you try to become the leader regarding costs in your market/industry. To gain that competitive advantage, you can:
- reduce costs and charge industry-average prices to increase profits
- reduce costs and charge lower prices to increase market share
This strategy can bring a greater advantage in pricing. Low costs ensure businesses are less vulnerable if suppliers increase prices based on buyers’ strength.
Furthermore, since the cost leader often buys a relatively large number of inputs, they can negotiate better prices with suppliers.
The cost leadership strategy isn’t that simple to carry out because there’ll be other producers who charge lower prices and competitors who copy what you do.
Some ways to cut costs include:
- Control costs rigidly
- Invest in technology and facilities to produce more at a lower cost
- Upgrade the efficiency of logistics
- Find low-cost resources (materials, labor, etc.)
You can see how Amazon successfully uses this strategy to attract millions of customers while receiving high profits. Their prices are low and competitive. There are no physical stores, which reduces a huge cost. Their logistics are modern and effective.
Differentiation means you try to be different from your competitors. There might be many factors affecting how you can be more attractive and unique, including:
- the nature of your products/services and your industry
- brand image
- customer service and support
This strategy requires you to:
- add more unique and innovative features to your products/services
- upgrade the quality of your products/services
- improve the customer service experience
- enhance marketing and sales to make customers aware of the differentiated benefits they can get from using your products/services
A big example of the differentiation strategy is Apple. They sell millions of devices each year even though their prices aren’t the cheapest on the market. What keeps Apple customers is the design, functionality, and quality.
Product differentiation guarantees customer’s loyalty, and large organizations often pursue this strategy. But it creates challenges for small and new companies that want to enter the industry.
This strategy requires companies to focus on a specific niche market and serve only that niche. Because that niche is what they concentrate on, they can understand the market needs and market dynamics better.
Thanks to that understanding, companies can figure out needs that only those who observe closely can notice. Then they can develop and produce products that are more unique, low-cost, and serve exactly what that niche market needs.
Even though you can pick Focus to be your main strategy, it’s often not enough. You need to use Cost Leadership, or Differentiation, or both, in order to compete in the market.
The Focus strategy helps you understand customers’ needs better, so you can either look for differentiation opportunities, or find better suppliers and reduce costs.
This strategy is a combination of Cost Leadership, Differentiation, and Focus. To maintain it, you need more concentration, planning, and resources.
Choose the right business level strategy
Deciding on business level strategy determines how you can compete in your market/industry. To choose the right strategy, you need to examine your competencies, understand the market you’re in, and figure out what your competitors haven’t done yet.
The success of a business is not a random occurrence. It takes planning, connection, and execution among every department. A detailed and efficient business-level strategy will help bring your business to the next level.
Read about the next level of business strategy—functional-level strategy.