- There are four types of business-level strategies: cost leadership, differentiation, focus, and hybrid business level strategy.
- Each business-level strategy has weak points and benefits for different business types and industry sectors.
- Many tech giants and start-ups implement one or two of the four main business level strategies and often combine them.
- Market research, assessing internal capabilities, and current trends and innovations come first, and business strategies – second!
Without business-level strategies, you can’t expect your company to grow, employ more people, and establish itself on the market. A business-level strategy is the first step towards optimized business processes and increased production. Simply put, this strategy consists of the vision, mission, and plan for your company to compete in the rapidly growing and ever-changing market.
All business-level strategy examples will prompt you to think analytically and create a strategy for different business levels, such as focusing on activities that’ll allow you to realize broad objectives on a corporate level. That’s why business-level strategies are essential for young tech entrepreneurs and anybody who wants to try their luck on the market!
These strategies are crucial in the tech world which is full of new inventions, innovative and creative solutions, and a constant influx of ideas! Nonetheless, each strategy has weak and strong points, which you can quickly notice if you conduct a SWOT analysis.
This article will be a comprehensive guide focused on the questions: What are business-level strategies?, What are different business-level strategy examples?, and Why are they so important?
Let’s dive in!
Understanding Business-Level Strategies
Before we delve into the subject, let’s answer, “What are business level strategies?” Business level strategy is a method of how a company places itself on the market by increasing the competitive advantage and aligning all organizational elements to function as a whole.
These strategies should direct all the organizational levels, sectors, units, and individuals into a single business direction based on the business mission and vision. Business-level strategies are the most efficient and effective way to distinguish your company from the other companies in the market through plan implementation, control, monitoring, and adjustments. This strategy focuses mainly on a single business of the organization or a particular product or service.
Here, we must make a difference between a business level strategy and a corporate-level strategy (a strategy for expanding and improving the company as a whole). Another distinction is the difference between the corporate and the functional strategy (a business strategy on an operational level).
A business-level strategy is placed on the scale between the functional and the corporate strategy. Nevertheless, entrepreneurs and academics sometimes refer to the business-level strategy as “corporate” or “functional.”
The Importance of Business-Level Strategies For Competitive Advantage
The main focus of these strategies is to provide a competitive advantage over other market participants and companies offering similar products and services. To understand what are the business level strategies and how they support competitive advantage, we must outline the steps in defining a single business strategy.
For instance, numerous academics and entrepreneurs divide these strategies into four phases:
- Analyzing and identifying the target customers
- Identifying and defining their needs
- Looking for a way to satisfy them
- Comparing your strategy to other competitors
This way, you’ll be able to position your company on the market and gain a competitive advantage through thorough analysis and implementation of the particular strategy.
Relevance of Business-Level Strategies in the Tech Industry
The business-level, corporate, and functional strategies are essential in the tech industry, especially for newcomers and enthusiastic entrepreneurs. Consumer preferences constantly change, and there’s an ever-increasing number of trends, innovations, and creative solutions.
On top of that, you can spot the relevance of these strategies in the number of products and services or sectors known as strategic business units (SBU).
Cost Leadership Strategy
There’re many examples of business level strategies, and the first one is the cost-leadership strategy! The cost-leadership focuses mainly on providing customers with the lowest product or service cost, boxing the product and service to the top of the market. The logic behind this strategy is that the company will be more competitive if it offers the products and services at lower costs and attracts more customers.
The following are some of the key elements or methodologies to become a cost leader in the tech market:
- Increase the overall production of the particular products and services – This way, you’ll utilize the “economy of scale” and significantly decrease the costs per unit.
- Implementation of advanced technology – Advanced and emerging technologies will support your business in minimizing the costs per production unit and thus decreasing the overall product or service price tag.
- Limitation of products and services – The next thing you can do to improve the performance of your strategic business units is to limit the number of products and services, focusing on a particular line.
- Improving efficiency – Also, you can improve the efficiency in production and other business-relevant activities by process optimization and automatization.
Other elements that drive the cost-leadership strategy are the company’s learning curve and its improvements, production scale and scope, and business size and scope.
Successful Examples of Cost-Leadership Strategy in the Tech World
Across the tech world, there’re tons of successful cost-leadership strategy examples. The tech giant Apple is one of the cost-leadership strategists, aiming to sell their products and services for a lower price. They do this by reducing the SBU’s costs for research, development, production, and quality control.
Another example of a tech giant utilizing the cost-leadership strategy is Samsung. We all know that Samsung’s Android products, such as mobile devices, laptops, and other gadgets, come at a lower price than some of its main competitors – Apple or Microsoft.
Across the tech market, you’ll find many other examples of cost-leadership strategies, including communicational or creative platforms. For example, platforms like Slack or Canva also utilize the cost-leadership.
Cost-Leadership Strategy: Benefits & Challenges
Being a cost leader offers numerous benefits. Firstly, you’ll offer your services or products at a much lower price than your competitors. Secondly, you’ll regularly offer discounts and provide custom-made packages for your customers. On top of that, companies that utilize the cost-leadership strategy to withstand recessions and be more flexible.
However, the cost-leadership strategy also has some drawbacks and serious challenges. The following are some of the main challenges of cost leadership:
- Riskiness and the constant necessity for cost-lowering innovations and solutions
- Maintenance of quality with lowered costs
- Depends on high production and sales volumes
- Depends on brand loyalty and customer satisfaction
The differentiation strategy is one of the most common business level strategies! The name tells it all – differentiation strategy is building a competitive advantage by providing potential customers with unique products or services! The main objective of this strategy is to offer customers different and distinct products and services from the competition.
We distinguish between broad and focused differentiation strategies. When we think about the broad-differentiation of business level strategies examples, we think about building a whole tech business or brand as something different and unique. Tech companies apply this business strategy at the organizational level and cover the potential consumer portfolio.
On the other hand, we have focused differentiation strategies which require a tech business to provide its customers with specific and unique features and product or service characteristics. Companies usually apply the focused business strategy to a particular tech product or service.
Contrary to the cost-leadership strategy, the differentiation strategy focuses on other focal points, such as the characteristics of the brand or product. Thus, we’ve separated for you the key elements of a differentiation strategy and their interconnectedness:
- Product design – The product or service design is the first and foremost element that separates your offer from the competitors’ offer. The design should be creative, catchy, and user-friendly.
- Marketing – Innovative marketing strategies are also essential for reaching the target customers and grabbing their attention, focusing on the unique features of your tech product or service.
- Packaging & Pricing – The packaging and pricing can also differentiate your offer from the competitors’.
Successful Tech Companies Using Differentiation Strategy
There are numerous examples of tech companies using differentiation strategies to boost their brand’s visibility and turn their target audience into potential customers. Apple and Microsoft are the two most famous companies that use broad differentiation strategies.
Apple and Microsoft use these strategies because their products have distinct and unique features and characteristics, including operating systems and available applications and upgrades.
We can easily conclude that they use a broad differentiation strategy because they offer their products to wide audiences and build their competitiveness based on the uniqueness of their products and services.
Differentiation Strategy: Advantages & Disadvantages
The following are some of the main advantages of implementing a focused or broad differentiation strategy:
- It makes it easier to focus the marketing efforts of the company;
- It generates a loyal and raving fan and customer base;
- Helps in refining the targeted customers by various parameters;
- Helps in better understanding of the customers.
Nonetheless, the differentiation business level strategies also have some disadvantages. The following are the most business-critical ones:
- It can be a risky endeavor that can prevent you from reaching a broad spectrum of other potential customers;
- Differentiation strategies can exclude certain customer types;
- Revenue isn’t guaranteed;
- It’s usually applied to larger businesses because it can strain the company’s resources.
When looking at focus strategy, we find that there are two types:
- Cost-focused strategy – This strategy is aimed at attracting potential customers through the competitive price tag of the business’s products and services. The companies that apply this strategy target a specific market segment and try to beat their competitors, offering the lowest price.
- Differentiation-focused strategy – focus differentiation examples of business level strategies outline the companies’ efforts to offer unique and high-quality products and services to a particular market segment. Simply said, a focused differentiation strategy is a fragment of the broad differentiation strategy but focused on a particular audience while aligning the organizational efforts to dominate that industry sector.
Companies Using the Focus Business Level Strategy
All tech companies mentioned above, such as Apple, Samsung, and Microsoft, use focus business level strategies to reach their target audience. For example, Apple uses particular apps and features in their App Store and Mac products, while Samsung has mobile devices designed especially for lower-budget consumers.
Focus Strategy: Advantages and Disadvantages
Here are the advantages of utilizing the focus strategy on organizational, sector, and unit levels:
- It exponentially draws customers because of the products and services’ uniqueness and low costs;
- It supports supply chain efficiency;
- It supports constant technological advancements and improvement of business processes;
- Increased focus on particular marketing efforts and aligning the marketing policy with the strategy;
- Greater profit margins;
- The competition can find it difficult to tailor an offer that can substitute the particular company’s products and services.
There are also disadvantages of utilizing the focus strategy for the business and the different business units, including the impact on the potential customers:
- The focus business level strategy can have a negative impact on the economy of scale;
- The focus business-level strategy can impose entry barriers for specific customer types;
- It can drain the innovative and creative potential.
The hybrid business level strategy focuses on delivering value to customers by combining increased differentiation and lower cost. The hybrid business level strategy provides customers with a unique product or service with an alluring price tag because of the low production costs and is unique compared to competitors’ products and services.
The hybrid strategy aims to get the most out of the two concepts and target customers through all the company’s strategic business units (SBUs).
Companies Using the Hybrid Business-Level Strategies
Some well-known examples of companies using hybrid business-level strategies are Canon and Sony. For example, one of Sony’s principles is to target different customer segments across different parts of the world with products that differentiate from the competitors and offer them for a lower price. Sony utilizes the hybrid approach by combining key business elements such as design, packaging, delivery, post-sales services, digital marketing and customer experience.
On the other hand, Canon produces unique technology for medical purposes for private and public medical institutions and organizations. There is a high diversity of unique Canon products with specific features and characteristics that companies can purchase depending on their needs and budget.
Hybrid Strategy: Advantages and Disadvantages
Like any other business level strategy, the hybrid strategy also has its advantages and disadvantages. The following are the main benefits of the hybrid strategy on the organizational and customer levels:
- You can combine the benefits of differentiation, focus, and cost-leadership strategies.
- Your tech company can become more flexible to adapt to significant changes in the tech industry and the particular market.
- You can offer your products and services at a lower price and with higher quality and uniqueness.
However, the hybrid strategy also has disadvantages and risks to the business’s profitability, flexibility and liquidity. The following are the disadvantages with the highest probability and severity on the tech business operations:
- Higher complexity and costs for the implementation of the hybrid strategy on the organizational level.
- Communication issues between business units and sectors within the company.
- Cooperation issues between different employees, management and executives.
- Higher costs for monitoring and quality control.
Implementing Business-Level Strategies
Before you decide which business level strategy to implement, you should analyze the market conditions and the competitors’ products, services and business-level strategies. Analyzing the market conditions and the competitors’ strategies is essential because the market and the trends constantly change.
On the other hand, accessing the internal capabilities or conducting a SWOT is essential to identify the weaker and stronger dimensions of your operational and strategic business plans. This way, you’ll craft the most effective and efficient business-level strategy.
Analyze the Market and Industry Conditions
In the past few years, emerging technologies like Artificial Intelligence and Machine Learning have grasped the tech market! Moreover, the global revenue of the tech market constantly increases, which means that numerous trends can change monthly and even daily. That’s why when you analyze the market conditions, you should keep an eye on the following aspects:
- Identification of the target customers;
- Identification and analysis of competitors’ strategy and target customers;
- Analysis of customers’ needs and how to satisfy them;
- Identification of trends and the possibility of having an impact on them;
- Benchmarking, etc.
These aspects are important because you can easily find a gap in the market that you can fill with your unique and cost-effective products and services. For example, global software revenues are growing by 5.42% annually. There will always be updates and apps fresh out of the oven which can substitute your particular software of service. That’s why it’s crucial to analyze market conditions and customer preferences.
Analyze Your Internal Capabilities
One of the best ways to analyze your company’s internal capabilities is to conduct a SWOT (Strengths-Weaknesses-Opportunities-Threats) analysis. Another way is to conduct a VRIO analysis. These frameworks will give you insights into your most valuable resources, strengths, weaknesses, and opportunities.
For instance, the SWOT analysis will prompt you to identify what business processes you can improve, such as design, production or manufacturing. Additionally, the VRIO analysis can help you identify tangible (physical) or intangible (intellectual) resources in gaining a competitive advantage.
Nevertheless, the process doesn’t end here! Once you execute these internal capability analysis types, you must match them with the previously gained insight into the market conditions and the customers’ preferences.
Crafting a Business-Level Strategy
The next step is aligning the strategy with the market conditions and internal capabilities. Your capabilities, such as the tangible and intangible resources, including the company’s strengths, should meet the market opportunities and minimize the risk and threats. The business level strategies should be the chain connecting your company’s internal capabilities, market conditions and customer preferences.
Following is a brief guide on how to develop and implement a business level strategy most effectively and efficiently:
- Identify your business vision;
- Define the competitive opportunities and advantages;
- Define simple, measurable and attainable targets and parameters;
- Focus on the systematic growth of the company;
- Make your business level strategy a part of your company’s long-term strategic plan;
- Be flexible;
- Be inclusive;
- Communicate, cooperate, and delegate!
Case Studies and Success Stories
The tech giant, Apple, offers us the most successful development and implementation of business level strategies benchmark. According to a case study, Apple focuses on providing its customers with the highest-quality products and services. These particular products have distinct features and characteristics from their competitors. From Mac Studio and Mac Mini to iPhone and smart-watches – although Apple has a product for each one’s pocket, they mainly focus on quality and distinctiveness.
By combining the differentiation strategy and the focus business-level strategy, Apple dramatically increased its revenues! They managed to outmaneuver their competition by offering user-friendly, customer-oriented, and uniquely designed products and services!
On the other side, we have Samsung and Xiaomi which use the cost-leadership strategy and have products affordable to almost any potential customer. For example, Xiaomi aims to capture a huge portion of the potential tech customers by providing its products for a lower price, which means they also produce their products and services at a lower cost. Furthermore, Android is still the leader in market share due to its combination of focused, cost-leadership and differentiation strategies.
Challenges and Considerations
If you’ve already decided which business-level strategies to implement, you should also address the various challenges and consider multiple factors that can have a huge impact. For instance, you must first address the diversity of the market and identify your key competitors. Then, you should access your internal capabilities and find a way to improve them.
If your key competitors are tech giants, you should probably choose the business-level strategy, enabling you to fill the market gap where they can’t! On the other hand, a business-level strategy can be interdependent with the number of suppliers, buyers, potential entrants, or substitutes. To illustrate, you can easily implement the cost-leadership strategy if you have many available and affordable suppliers. You can also successfully implement the differentiation if there’s a small number of substitutes and potential entrants on the market.
Many other challenges can pop up, such as future trends and innovations. That’s why experts will prompt you to analyze the market in detail before you launch a new product or service. You should foresee the product or service life-cycle, potential upgrades, integration with other products and services, etc.
We can give you many other tips to overcome the various challenges. The foremost one is to consider the company as a whole and to align the various business units and company sectors to support the business-level strategy. Moreover, you should align the corporate and the business-level strategy with each other and the company’s vision, mission and management goals.
Future Trends and Innovations
As the tech market continually evolves and numerous innovations are being implemented, so do the business level strategies! As we’ve seen, tech giants such as Apple, Microsoft and Android combine multiple business level strategies into a single one. The combination of different business-level strategies comes naturally because of the increased number of potential buyers with various buying potentials.
Also, many of the tech giants employ specific business strategies for particular geo-located customers. They usually adapt their costs and the uniqueness of their products according to their buying potential, feature preferences and ethical and social standards.
On top of that, across the tech market, companies implement numerous innovations monthly and even daily. After the Covid-19 Pandemic, numerous companies across the United States are digitizing their businesses and starting to utilize emerging technologies, thus changing the outlook of the tech market. Artificial Intelligence (AI), cloud services and big data are the most commonly used technologies across the tech world, with a significant impact on how business-level strategies are devised and implemented.
Artificial Intelligence and cloud services can support multiple business level strategies at once! For instance, you can use AI to reduce production costs for implementing cost and price-leadership business strategies. It can also improve the quality of your tech product and services by optimizing the business processes and the company’s learning curve. Numerous experts will prompt you to use multiple clouds to add value to your tech products and service to build a healthy and long-term differentiation business-level strategy!
By answering what are the business level strategies, we’ve given you options on how you can implement them. There are three main business level strategies examples: cost-leadership, differentiation, and focus business-level strategy, and they are equally important for tech entrepreneurs or industry giants like Apple or Microsoft.
However, before anything else, tech enthusiasts should analyze the market, their internal capabilities and the key challenges and threats. Each strategy applies to different tech sectors and business types. So, don’t hesitate to learn more about the benefits and disadvantages of the various strategies as well as the current trendsetters, emerging technologies, and future innovations.