Business Building: Types of Business Strategies and How to Use Them

Business Building: Types of Business Strategies and How to Use Them

21 Feb 2022


Binisha Sharma

Strategy: it’s the key to creating patterns that will accomplish your business’s desired course of action.

But 70% of business leaders spend less than one day a month reviewing business strategy, even though the majority of them believe their bonuses should be tied to the successful implementation of the strategy.

Your business strategy isn’t just a roadmap to guide your company’s actions – it’s also the way to achieving business growth.

Below we’ve put together an explanation of the 5 types of business strategies, how to use them, and the elements of every successful business strategy.

5 Types of Business Strategies

Generating a profit can be achieved in a number of ways. Depending on your company’s market share and goals, its optimal business strategy may look different than others.

Here are five popular types of business strategies that have been successful in various markets.

Cost Leadership

The cost leadership business strategy aims to generate profit by making prices lower than the competitors.

In this model, products or services are similar or the same as competitors. Price is the distinguishing factor.

To be successful with the cost leadership strategy, businesses look to make their production process as efficient as possible so they can cut down their final product price to below the industry average. You’ll need to conduct market analysis to determine what price point you should target.

A cost strategy is best for larger corporations that are producing generic products. Large firms can dedicate resources to creating state-of-the-art facilities designed to produce their products cheaply and in mass quantities.


Unlike the cost leadership strategy, the differentiation strategy will often involve selling your product for a cost above the market price.

The differentiation strategy targets customers by presenting a unique product. It solves their problems as no other product or service has before, making it the best choice among competitors.

Differentiation requires unique thinking to identify customer pain points that other businesses haven’t targeted yet. You may have to conduct large-scale market research to come up with an idea that people need.

A few ways to differentiate your product or service include by:

  • Quality
  • Level of customer service
  • Design
  • Functionality
  • Results

From elite technology companies to small businesses, differentiation can be used by any industry or business, making it a common business strategy choice. 

Differentiation gives you a baseline for your marketing strategy, too. The unique selling point of your product can be the focal point of any marketing campaign.

And if you’re seeing high demand for your product? You can raise the price and generate even higher profits.

Focused Differentiation

Focused differentiation follows a similar strategy to differentiation but on a smaller market. It targets a particular group of clients by using a niche strategy to meet a niche market’s demands.

Companies can target market segments in a few different ways. They could focus on a particular sales channel, like selling online. Or they could focus on a particular demographic group, like selling to teenagers only.

Succeeding with focused differentiation can be difficult for markets where product comparison is frequent. Like you would with a differentiation strategy, you’d need to conduct market research to identify what your target audience needs.

This model is will be the easiest to implement for businesses that already have their niche established and are looking to become more specialized.

If you do find success with the focused differentiation strategy, you’ll reap greater benefits than any other strategy.

First, you’ll be able to charge much higher prices. Your customers will view your product or service as a unique opportunity that adds significant value to their lives.

This value will generate customer loyalty. No one will want to switch to a competitor after experiencing the quality of your product.

In the long run, your competition will be limited. Some businesses may try to replicate your product or provide similar options, but no one will be able to offer the same experience to your customers.

Focused Low-Cost 

A focused low-cost strategy combines the principles of a low-cost and a focused business model.

Like a focused strategy, it identifies selecting a niche. Then, it involves using the low-cost strategy to charge the lowest prices in that niche.

Businesses that use the focused low-cost strategy will sell a variety of products and services at market price. Then, they’ll select a specific few to sell below the competitor’s offer. 

Small or new businesses who want to undercut competitors but can’t do so in all areas will be fans of this business model.

You may not be able to offer lower prices than a competitor for all of your goods and services, but you’ll likely be able to find at least a few where you can be the lowest-cost provider.

Integrated Low-Cost

The integrated low-cost strategy is the most diverse of any business strategy and is great for innovative thinkers who want to position themselves as leaders in a global market.

It combines the ideas of low-cost and differentiation strategies by providing unique products at lower prices than competitors. Often referred to as a “hybrid strategy,” the integrated low-cost model allows you to reposition yourself quickly against changes in the market by modifying your target customer.

This strategy would be the most effective for businesses that already have a customer base with preferences that are unlike the rest of the market. They can tailor their offerings to give these customers the best of both price and quality.

If done incorrectly, the integrated low-cost model can get your business stuck. Without expertise in cost or a truly unique product offering, you may fail to generate a loyal customer base.

Elements of a Successful Business Strategy

Regardless of the business strategy you choose, each one will follow the same best practices to generate results.

Define a Vision

The sole purpose of your business strategy is to achieve your organization’s goals. How these goals will be achieved is determined by the vision of your company.

Your goal setting will have to include decisions about the vision your company has for the future and what steps they’ll take to get there.

It’s key to remember that your vision and your strategy are different. Vision is your legacy, the inspiring ideals of what it will feel like to accomplish your goals. Meanwhile, your strategy focuses on the implementation of those goals.

Your strategy relates to your vision because it considers how the steps you’ll take to reach your achievements will be reflected in your vision.

For instance, if your company’s vision is to create a more sustainable planet, your strategy may include introducing recycled materials into your production process.

Embody Core Values

What are the ethical guidelines and mindset that your team will follow in order to achieve its goals? The core values of your company are the set of core beliefs that influence your team in making decisions.

Your core values are a key part of your business strategy because they instruct your team members to handle problems in certain ways. A core value of honesty means that your team will prioritize being open and direct when identifying a problem.

Use SWOT for Contextual Analysis

SWOT analysis provides key insights into the market to determine how effective a business strategy will be. It has 4 elements:

  • Strengths: positive attributes of the organization that may influence success, like a cutting-edge product design or new facility
  • Weaknesses: negative attributes of the organization that may create obstacles, like poor communication skills or a recent product recall
  • Opportunities: positive attributes of the outside environment that may influence success, like an increase in foreign demand or the recent closure of a competitor
  • Threats: negative attributes of the outside environment that may create obstacles, like supply shortages or increased labour costs from new regulations

Your SWOT analysis will tell you if it’s realistic to implement a certain business strategy before you invest significant resources.

For instance, a SWOT analysis could show you that a cost leadership strategy won’t be successful if new competitors have entered the market and your production cost increased from a global supply shortage.

Allocate Resources Properly

Your business strategy should explain how resources will be allocated in order to complete your company’s goals. You should clearly explain how much time and money should be dedicated to each part of the strategy, as well as who’s responsible for what.

Resource allocation tells your team how much effort they’re expected to put in for each part of the business strategy.

Define Measurement Variables

The definition of success depends on the individual and the organization.

A good business strategy will define the metrics for success so that everyone is on the same page. Consistent benchmarks should be established to evaluate performance and determine the standards of the businesses’ objectives.

Levels of Business Strategy

Your business strategy is broken down into a few different levels. Each level has different responsibilities in the strategy process.

Once you decided on your strategy, you should use the necessary elements of a successful business model in the relevant levels of your business strategy.


The corporate level is the biggest and broadest part of your strategy, often conducted among the highest-level company members.

Leaders of the company decide on goals and how they’ll be achieved. They’ll set the vision and the values necessary for reaching corporate objectives, and these values will be applied to every employee in the company.

At the corporate strategy level, you need to set high-level, corporate targets. Make sure that goals are measurable and focus on specific financial, internal, and growth goals.

Business Unit

The business unit level applies the generic goals from the corporate level into a more specific interpretation based on the company’s current business operations. It devises strategies for each industry the company operates in.

During this stage of the strategy process, a company may decide which niche it will focus on the most. Maybe it will exit an underperforming market or join one that it expects to take off.

What sets your business apart from competitors? Here you’ll want to focus on your SWOT analysis. You must be able to determine whether your new strategy will prove beneficial in the long run.

The business unit level should set goals that support each business unit but still prioritize the company. For instance, a great business unit goal could involve focusing on deeper market penetration for an existing product.


The functional level puts everything together. It is during this stage that managers and department heads start implementing the strategy in real-time.

It is especially important that you clearly allocate resources for each department and provide ways for them to measure their progress. Goals at this stage should be broken down as much as possible into achievable and granular steps.

Each manager or leader within the company should have a clearly-defined set of goals, ways to track progress, and contact information should a problem arise.

They need to be able to answer the question “What is a step we can take right now to get closer to reaching our goals?” at all times. 

Begin Building Your Business

Education is the first step in the business-building process. Now that you have an understanding of the types of business strategies, it’s time to start designing your dream company.

Whether you’re an investor looking to develop the next big product or a serial entrepreneur with a unique idea, the EB Pearls team can transform your online presence.

Our team of digital experts has been rated #1 for web design in Australia in the 2020/21 year by Clutch. We’ve created over 3400 websites for top businesses.

Book your free consultation – a great business always has a great website.


Serving as the lead point of contact for all customer management matters, Binisha focuses on fostering a talented and innovative team of design. She acts as client advocate and works with teams to ensure that client needs are understood and satisfied to help improve the overall customer experience.

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