Business Strategies Explained

There are many business strategies you can incorporate in your business. We have taken a look at a few here to give you an overview and a starting point.

Stability Strategy:

When firms are satisfied with their current rate of growth and profits, they may decide to use a stability strategy. This strategy is essentially a continuation of existing strategies. Such strategies are typically found in industries having relatively stable environments. The firm is often making a comfortable income operating a business that they know, and see no need to make the psychological and financial investment that would be required to undertake a growth strategy.

Retrenchment strategies:

Retrenchment strategies involve a reduction in the scope of a corporation’s activities, which also generally necessitates a reduction in number of employees, sale of assets associated with discontinued product or service lines, possible restructuring of debt through bankruptcy proceedings, and in the most extreme cases, liquidation of the firm.

Focus Strategies:

The generic strategies of cost leadership and differentiation are oriented toward industry-wide recognition. The final generic strategy, focusing (also called niche or segmentation strategy), involves concentrating on a particular customer, product line, geographical area, channel of distribution, stage in the production process, or market niche. The underlying premise of the focus strategy is that a firm is better able to serve a limited segment more efficiently than competitors can serve a broader range of customers Focus strategies are most effective when customers have distinctive preferences or specialized needs.

Vertical Integration Strategy:

A business enterprise itself may decide to produce the raw materials needed for production to ensure continuous supply. On the other hand, it may also decide to start its own sales outlets to serve its customers better. In either case, the strategy is known as the ‘Vertical Integration Strategy’.

Merger Strategy:

It is also possible that identical business units may combine to rationalize production and sales and thereby derive the benefits of economics of large-scale operations. This is what is known as the ‘Merger Strategy’

Product Elimination Strategy:

A business unit may also eliminate products that have become unpopular with the buyers and bring only losses. Such unsuccessful products also damage the image of the business. Thus, the ‘Product Elimination Strategy’ may be adopted by a firm to avoid loss of profits as well as reputation.

Growth Strategy:

Growth strategies are designed to expand an organization’s performance, usually as measured by sales, profits, product mix, market coverage, market share, or other accounting and market-based variables

Diversification strategy:

This strategy entails moving into different markets or adding different products to its mix. If the products or markets are related to existing product or service offerings, the strategy is called concentric diversification. If expansion is into products or services unrelated to the firm’s existing business, the diversification is called conglomerate diversification.