Types of Strategy: What Fits Your Business?

by Harvard Business Review

  • There are lot’s of different strategic frameworks…how do you know what’s best for your business?
  • 4 basic strategies to maintain profitability in marketplace:
    • Low-cost leadership. 
      • think: discount retailers. Success=deliver goods at low prices.
      • products undifferentiated or are commodities
      • consistency in low prices,while maintaining profitability is key to their customer experience
      • low-cost leaders squeeze costs out of supply chain
      • strategy mainly works for physical good, however, vanguard is an exception that isn’t a physical good
      • Able to maintain low-cost leadership through operational efficiency, exploiting the experience curve, product redesign, and an unbeatable supply chain
    • Product/service differentiation
      • every successful strategy is about differentiation at its core
      • can differentiate commodities through customer service
      • differentiation only matters if customers value the difference.
      • being different for the sake of being different is not helpful
    • Customer relationships
      • retaining customers through customer service
      • Making customer relationship strategy work:
        • simplifying customer’s lives/work
        • provide ongoing benefits
        • personalized service. (Think: hotel rewards programs)
        • customized solutions…no one-sized fits all
        • continuous learning through CRM systems
        • personal points of contact, not transactional
    • Network effects
      • a phenomenon in which the value of the product increases as more products are sold and the network of users increases
      • fairly new strategy…effectiveness of it relies on companies ability to be the dominant player
    • Vast majority of business strategy involves one of these aforementioned strategies
    • When selecting strategies think about trade-offs, and customer alignment

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