What are the different strategies that can be applied in the business to improve its strategic management?

1. Career development
2. 12 Strategy Types (Plus Benefits and How-To Guide)

By Indeed Editorial Team

Published November 30, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Many companies adopt one or more modern business strategies to help them achieve their organization's unique goals. Depending on the type, a business strategy may help you retain customers, grow your market share, reduce operational costs, make internal processes more efficient or increase profits. Before you decide on a company strategy, it's important to understand the various benefits and approaches of these different strategy types. In this article, we discuss why knowing about different business strategies matters, explore 12 different types and offer advice on how you can effectively manage a business's strategies.

Related: 10 Business Strategy Examples (And Why It's Important To Have One)

Why is understanding strategy types important?

Understanding the various business strategy types can provide your organization with a range of benefits, including:

• Unify staff members and departments: If you know about different types of strategies, then you can more effectively pick a strategy that helps your company's various employees and departments. This may help foster more collaborative and positive relationships between staff members.

• Strive for shared goals: Having a unified company strategy can help different departments design goals specific to their field that better connect to the business' overall plans.

• Make processes more efficient: Most business strategies aim to reduce organizational waste, such as by lowering operating costs or processing times.

• Continually optimize: An important part of most business strategies is continuously monitoring your organizational data in relation to these strategies. This can help you determine ways to further improve your strategy and its related procedures.

• Increase profit: An effective business strategy can help your organization reduce operational costs while selling goods or services at a higher volume. Both activities may lead to an increase in revenue.

Related: Porter's Generic Strategies Explained (With Examples)

12 strategy types

Following are 12 different strategy types that can help a business reach its unique goals:

1. Structuralist

Organizations that use a structuralists strategy begin by researching current market trends and economic conditions related to their business. These organizations then determine procedures and tactics that can help distinguish their company within the industry. For example, if a company notices that its top competitors offer primarily high-end goods, that company might strive to lower its own production costs and offer its products at a lower price point.

2. Differentiation

Businesses that pursue a differentiation strategy offer products or services with special elements. Many companies with a differentiation strategy charge more for their services or goods than businesses with similar offerings. An organization with a differentiation strategy can succeed with these higher price points typically because they specialize in products or services with unique features, customizable options or of exceptional quality.

Related: How To Use Strategy Formulation: Definition, Steps and Tips

3. Price-skimming

Companies launching a brand new product or service sometimes use a price-skimming strategy. When using this strategy, businesses charge a high price for their services or goods when they're first released and then lower those prices over time. A price-skimming strategy can help companies receive more revenue from markets where their products or services are in high demand. Price-skimming may also assist organizations in quickly paying for the product's or service's initial production or marketing costs.

4. Acquisition

Acquisition refers to when a business purchases another company. A company might also take part in acquisition if they purchase the rights of only a few of another organization's product lines or services. An acquisition strategy can help an organization broaden its consumer base or market reach with reduced starting costs.

5. Growth

Businesses adopt a growth strategy when they want to expand the scope of their company. An organization might benefit from using a growth strategy for many reasons, such as if they want to offer more products or services, increase their market share, add new operations or departments or build new worksite or retail premises. The exact goals and processes of your growth strategy depend on factors like your industry and business mission.

Related: 10 Steps to an Effective Change Management Strategy

6. Focus

Companies use a focus strategy when they want to target a niche market. A niche market might be a very specific type of consumers, such as vegetarians or pet owners, or a certain geographical location. Focus strategies include processes and tactics for creating, marketing and selling products or services to this niche market.

7. Cross-selling

Cross-selling refers to the process of encouraging your existing customers to purchase more products or services. Some businesses may focus on cross-selling additional products or services that enhance the products or services your customers have already purchased. For example, a company that sells household appliances might offer its own insurance or warranty policies for an extra charge. Other companies might instead focus on cross-selling bundles of products or services to customers at a discounted rate, such as a furniture company that cross-sells desk chairs with sofas.

8. Operational

Operational strategies emphasize optimizing your company's internal protocols and procedures. Businesses that adopt an operational strategy may strive to accomplish one or more of the following:

• Acquiring new technology systems or optimizing the speed, reliability or security of existing systems

• Making processes or workflows more efficient

• Getting new resources, such as personnel, relationships with vendors, industrial equipment or office space

• Reallocating existing resources

• Planning or redesigning work space facilities and layouts

• Optimizing production or manufacturing procedures and machinery

Related: Communication Strategy vs. Communication Plan: What's the Difference?

9. Transformational

A transformational strategy involves businesses making radical changes to their company. A transformational business strategy may drastically affect a company's operations, industry, business plans or long-term goals. For example, some companies may adopt a transformational strategy if they want to replace their entire existing technological network. As another example, a business might want to use a transformational strategy to help them succeed in a new industry.

10. Sustainability

A sustainability strategy can help businesses find ways to make their products, services or internal processes more environmentally friendly. Some businesses, for example, may want to reduce their carbon emissions produced during manufacturing procedures. Other companies might strive to develop products created from materials that use renewable sources.

11. Diversification

Diversification refers to a business strategy where companies increase their number of potentially profitable activities. A business may want to pursue a diversification strategy to reduce its vulnerability in the market or expand its product or service offerings. For example, a technology company that manufactures mobile devices may adopt a diversification strategy to develop laptops and desktop computers.

12. Retention

Retention strategies focus on helping you keep your current customers. Retaining existing customers can be a more cost-efficient tactic than acquiring new ones. A business using a retention strategy may want to increase customer loyalty or encourage customers to purchase upgrades or new offerings.

Related: What Is a Key Performance Indicator (KPI)? Examples, Best Practices and How To Create Them

How to manage strategies

Here's some advice on how to handle your business strategies:

1. Identify goals

Determine the company's unique goals, needs and strengths. As you identify these aspects of the business, it may become more apparent to you which aspects could benefit from improvement. A successful business strategy aligns with both an organization's goals and strengths while helping to optimize processes or overcome existing challenges.

Related: Strategy vs. Objective: Definitions, Differences and Examples

2. Evaluate strategies

Consider the various strategy types in relation to a company's objectives, strengths and areas of improvement. Each business strategy can offer different potential advantages to an organization, but some strategies may better suit its current needs or goals.

You might even consider combining more than one strategy and customizing these combined techniques for a business. For example, some companies may want to combine an operational strategy with a sustainability one to make their internal processes both more cost-efficient and environmentally friendly.

3. Figure out actionable steps

Once you've determined which type of strategy might most benefit an organization, figure out what actions you can implement that relate to the strategy. This may involve collaborating with company supervisors to determine the actions or steps that each team or department can take.

For example, if you're adopting a growth strategy, your marketing department might devise techniques and campaigns related to identifying new prospective customers. A product development department, meanwhile, may focus on creating a new product or adding specialized features that appeal to a wider audience base.

Related: What Is the North Star Strategy? (With Definition and Example)

4. Monitor continuously

Keep track of your business data that relates to your strategy. The exact data that you keep track of can vary based on factors such as your strategy type and business goals, but may include key performance indicators (KPIs) or metrics such as:

• Cost of goods sold

• Customer lifetime value

• Website traffic

• Sales by region

• Cost per lead

• Social media engagement rates

• Customer satisfaction rating

• Average purchase value

• Employee turnover rate

• Cost of acquiring new customers

• Number of customer support requests

• Return of investment (ROI)

• Customer retention

• Net profit

Continually monitoring your business data can help you evaluate the effectiveness of your current business strategy. If you're not reaching your target KPIs or goals, you can then find ways to optimize your existing business strategy or its actionable steps.

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