The essence of any company strategy is how the company’s offerings compare to the competition, how to gain an edge, and how to sustain this edge or difference. There are three basic types of strategy that a company can implement.
Cost – This strategy, which could also be called a cost/leadership strategy, is implemented when the company competes on the basis of the price of their offerings. A company must be careful to ensure that as price pressures come to bear, cost-reduction initiatives do not result in a decline in performance.
Differentiation – This strategy is implemented when a company offers something which is unique, oftentimes proprietary or patented, to distinguish it from the competition. The offering could also be value based, such as offering a distinct set of services. When the customer sees this offering as something that offers value, it becomes a competitive advantage and can result in a company being able to command a premium price. When pursuing a strategy of differentiation, a company must be in close contact with the customer to ensure what is offered continues to be unique and is of value to the customer.
Niche – With this strategy, a company will develop a distinct product or approach for a defined segment or group of customers versus going after the entire market. When deciding on this strategy, the size of the segment, the growth rate, and number of competitors are key considerations. With this strategy, a company must be wary of new market entrants, especially from companies in related markets that are mature or declining, as these larger entities seek business elsewhere and may have economies of scale.
Having a strategy is one thing, successfully implementing it is another. The next blog will address the mistakes or shortfalls companies make when failing to properly implement their strategy.