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Business strategy defines the approach, tactics and strategic plan adopted by a
business to attract customers and achieve its business goals. It is a very broad
term that encapsulates everything a business does to make money. From
partnering with other firms and attracting top talent to acquiring new
technology all comes under the gamut of business strategy.
In this article, we will look at a few common business strategies and see some
actual examples of the same from the business world. You can learn more
about different business concepts with this simple smart business system.
price tag may have seemed exorbitant in 2012, but looks almost cheap today.
Instagram allows Facebook to compete in a market where it doesnt have a
very strong presence, and helps it retain younger users. Furthermore, by
buying Instagram, Facebook ensured that it has a competitive advantage over
Google, Microsoft, and other competitors.
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2. Product differentiation
Standing out from the competitors is a key requirement for business success.
Unless consumers can spot your product from me-too competitors, youll have
a hard time making sales. Businesses can do this either by highlighting their
products superior technology, features, styling, heritage, pedigree or price.
You can see this strategy at play in virtually every business, especially B2C
businesses.
A great example of this can be seen in Apples approach to products.
Example: Apple iPad Air vs. competitors
The new Apple iPad Air costs $274 to make and retails for $499 a margin of
45%. Competing tablets often cost nearly $200 less. Apple is able to command
such premiums because it has successfully differentiated its product from
competitors. The Apple iPad marketing, for instance, highlights following
features:
Lightness: The iPad Air is lighter, thinner than competitors.
Display Quality: The Retina display is visually superior to competing
tablets.
Software: Apple highlights both the base iOS and the bundled Apple
software as being better than what competitors offer.
Engineering: Apple seldom fails to highlight its superior engineering
and material quality than competitors.
Ease of Use: Since Apple makes both the hardware and software, it
often emphasizes its products ease of use.
Note that Apple almost never plays up its products price. The same is true for
the iPad Air, which is priced not to sell in volume, but to become an
aspirational product. This preserves Apples reputation as a superior,
aspirational brand.
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A couple of months ago, Amazon stirred the imaginations of futurists and scifi fans everywhere when it announced that it was developing drones for
delivering small packages. Although drones have been around for some time,
most of them were used in military applications. Using drones is a sound
business strategy for Amazon for four reasons:
By using drones, Amazon will gain a real technological advantage over
competitors who must rely on less efficient ground transportation
Nearly 86% of Amazon packages are under less 5lbs, which makes
drones the perfect delivery vehicles.
Drones will allow Amazon to reach rural areas where delivery networks
arent as efficient.
Drones can significantly improve delivery times in dense urban areas.
This is one example where a near-futuristic technology offers real-world
advantages to a business.
4. Pricing strategies
Businesses essentially have two choices when pricing their products:
1. Keeping prices low to attract more customers. Since profit margins are
very low, the business must sell a lot of products to make money.
2. Pricing a product beyond the reach of ordinary consumers, and hence,
giving it aspirational value.
Lets look at some examples of these two approaches:
Example: Walmart, Ikeas low prices
Walmart uses its position as the largest retailer in the world to bargain for low
prices with suppliers and manufacturers. At the same time, Walmart keeps its
profit margins very low, selling in volume instead. This enables the company
to price its products far below competitors which ultimately helps it sell more.
The Swedish furniture brand Ikea follows the same approach. By selling its
self-assembled furniture pieces in large volumes (the retailer has 338 stores in
40 countries), Ikea is able to price its products very aggressively.