by Mark Munday
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
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
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 specialized 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 specialized 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.
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