The Business Strategy that will Work Best for You

Ultimately, you have to settle for one of three business strategy

options. And it is important that you are clear on what one you are

going for.

Your business strategy choices are, at the end of the day, very

simple. The big question is, how do you want to position yourself

in relation to your competition. Basically your options are :

1. To be the cheapest

2. To be the best

3. To dominate a market niche

Many small businesses go for the first option, in the mistaken

belief that it is only way to survive. The problem is, there will

always be someone who can do what you do, more cheaply than you can.

A cost leadership strategy is only really suitable for big

businesses. Businesses that have substantial economies of scale.

They are able to spread their overheads thinly over large volumes,

and charge low unit prices. So if you are running a small business,

this strategy probably won’t work for you.

If, as a small business, you build your business reputation on

being the cheapest, you are operating from a position of weakness.

Even if you can survive with your low prices, you will not be able

to withstand a price war with a bigger competitor. So why take the

risk?

The second strategy, being the best, can be used to build a

powerful competitive advantage. It means, however, that you have to

have a unique product. Otherwise, you will have to spend a lot of

money on R&D to stay ahead of the competition.

You need deep pockets to win with this strategy. Unless, of course,

your product is so specialised that no one else is producing it.

And big companies, for whatever reasons, don’t want to produce it

either. That would give you dominance over a niche of your own.

Generally speaking, a product leadership strategy is only for

the big boys. Like, Nokia, Sony and Mercedes Benz. While being the

best in a category, and staying that way, can be a powerful

strategy for highly specialised small businesses, it is just not

sustainable for most. Which brings us to our third option.

Dominating a market niche in your industry. It is the most suitable

business strategy for most small businesses. By adding value in a

way that attracts a particular kind of customer, you can steadily

build your business success. You are able to charge a premium. And

you don’t have to be the “best”.

The trick, of course is to clearly identify your niche market, and

convince your target market that you provide the best solution to

their problem. For nearly all businesses, finding a niche and

dominating it provides a solid foundation for building a business on.

It is very important that you are absolutely clear on what generic

strategy you are relying on. Your business strategy, by definition,

is supported by a number of strategic tactics. Whether you are

aware of using them or not.

If you aren’t clear about your overall strategic direction, you may

end up using conflicting strategies. For example, focusing

customers on your low prices at the same time as you introduce best

of class products. Doing this means that your profitability suffers

and you fail to attract the customers you want : not good!

Deciding on the generic strategy that will create the business

success you are looking for, clarifies your thinking. And it helps

you see clearly what tactics you need to use.