Essay Example. Competitive Business-Level Strategies

To remain relevant, maintain profits while at the same time reducing the cost of operation, business and industries tend to adopt various techniques and strategies. The competitive nature of the market plays an essential role in determining the best strategies to use. Among the different plans that are applicable in business-level approach are a low-cost strategy, differentiation strategy, and market segmentation (Johnson, 2016). In an industrial level, a business can either take fragment or consolidate route, while at the same time apply either horizontal or vertical integration. Therefore, the choice of which business strategy to approach largely depends on the features, similarities, differences, and advantages of each policy in comparison to another.

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The price and quality of a product or service are the main factors that determine the demand for a product. Low-cost and differentiation largely depends on these two factors. The low-cost strategy, which can be used by a business to attract prospective buyers and maintain regular customers, is a business strategy where the market tends to lower its prices relative to its competitors. The approach is most effective when a company can lower its costs of operation, making it easy to reduce its rates. The focal point of this strategy is the price of the commodity. Differentiation, on the other hand, focuses on quality such that a business wants to remain competitive by providing products or services which are perceived by consumers to have a high value relative to competitors. Unlike low-cost strategy, differentiation strategy focus on the value of a product as seen by the consumer. Low-cost strategy and differentiation strategy relates in the sense that both aims at maintaining the competitive position of business without increasing capacity or levels of production.

Branding is another competitive strategy that a business can employ. It refers to a name that a company uses when promoting its products. Besides price and cost, consumers are influenced more by brands that they can relate to. Branding is closely related to differentiation in that high quality will have a brand that's popular to consumers. Segmentation is another critical aspect of competitive strategy. It involves identifying and dividing markets for products from a business to obtain the strengths and weaknesses of the company in a given market segment. Segmentation is essential in deciding which strategy to employ in different segmentations since the competitive atmosphere in each section tends to differ. Nevertheless, the size, resources, nature of products, and market segmentation are essential when deciding which strategy to use.

On an industrial scale, an industry can comprise several organizations or small businesses with no single company controlling the trade. Thus, an enterprise can either be a fragmented or a consolidated sector. A fragmented industry refers to an industry that has various small industries such that no single business controls the market share. In other words, there is less competition in such setups. Companies are established and run efficiently in such an environment. Besides the fragmented industry is the consolidated industry, which is dominated by one key organization. The formation of the unified industry involves independent companies coming together through either a merger or absorption (Madsen, & Walker, 2015). The new company established runs as a separate entity. The consolidated industry offers the benefit of access to significant financial support from financiers due to their vast resources in comparison to the fragmented sector. They also have increased productivity due to healthy competition amongst the workers. The ultimate result of consolidation is the higher profit margins from the industry.

A business can remain competitive by increasing its goods and services in the supply chain, a strategy known as horizontal integration. Horizontal integration can be achieved either through a merger or expansion within the business premises. Besides smooth integration, a company can remain competitive in business through what's popularly known as vertical integration. This refers to the strategy where a company tends to own all the key players in the supply chain of its product such as the suppliers, distributors and retailers. In controlling the supply chain, the business can reduce costs of operation and improve its efficiencies. Horizontal and vertical integration are essential tools for businesses to remain competitive in the market. However, these strategies can cause the failure of a company (Noe, Hollenbeck, Gerhart, & Wright, 2017). Horizontal integration heavily depends on internal profits for the business to increase in size. A business may invest heavily on resources to achieve this integration leaving no remedy that can be used in case of an emergency. Horizontal integration is mostly applied in one location of the business. In case of an unfortunate event in this area, there will be a negative effect on the market. In vertical integration, a failure in any part of the supply chain will result in considerable losses for the company.

In conclusion, the strategy adopted by a business to remain competitive in the market largely depends on the company. None of the approaches available can be used in isolation. They all depend on each other. They all have different advantages and disadvantages. Therefore, for a business to get the most from any strategy, it has to examine the features, pros, and cons of each.

References

Johnson, G. (2016). Exploring strategy: text and cases. Pearson Education.

Madsen, T. L., & Walker, G. (2015). Modern competitive strategy. McGraw Hill.

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.