Types of strategy
The Webster Dictionary defines strategy as:
a careful plan or method : a clever stratagem; the art of devising or employing plans or stratagems toward a goal
That is to say strategy is simply a plan to reach a goal. But is there more than one type of strategy? If so, which one should I use? Is one better than the other?
Corporate strategy is the overall scope and direction of a corporation and the way in which its various business operations work together to achieve particular goals.
The corporate strategy defines:
- Industry – What industry will the corporation will compete in?
- Geographic – Where will the corporation compete, local, state, national or international?
- Diversification – Should the corporation diversify its products or operations and if so to what level
- Organization – How should the company be organized, what does the hierarchy look like?
This is the implementation of the corporate strategy.
The corporate strategy defines where the corporation will compete, but the business strategy defines how the corporation will compete.
- Resources – What’s the best utilization of our resources
- Human Capitol – Do we have the right people and are they in the right job?
- Financial Capitol – Where do we get the most return on investment?
- Marketing Capital – Whats the best use of budgeted marketing dollars?
- Brand Capitol – Is the marketing message consistent with the brand image?
- Efficiency – What’s the best way to manage resources in order to gain synergies and momentum
Cost Leadership Strategy
A company’s ability to maintain lower prices than its competitors by increasing productivity and efficiency, eliminating waste, or controlling costs.
- Market Penetration
- Market Development
- Product Development
Differentiation is an approach where a firm develops and markets unique products for different customer segments. This is usually employed where a firm has a clear competitive advantage and can sustain an expensive advertising campaign.
Under the Structuralist strategy, you arrange operations to fit existing market conditions. For example, you may modify the way you order products using your existing supply chains.
When your competitor has the same product as you, you use differentiation to position you above your competition. This differentiation is to create a competitive advantage. You should differentiate at least one characteristic of a product that is known to be important to most buyers. On the other hand, you still need to retain the other characteristics of a product as well as keeping their costs controlled or in line with your competitors’ costs.