Business Strategy and SCM

A plan for choosing how to compete. Three generic business strategies are:

• Least cost.
• Differentiation.
• Focus.

Typically a business strategy among supply chain strategies will outline how to grow the business, how to distinguish the business from the competition and outperform them, how to achieve superior levels of financial and market performance, and how to create or maintain a sustainable competitive edge. As per the definition provided previously, business strategies include least cost, differentiation, and focus. Least cost relates to a lower cost than the competition for an otherwise equivalent product or service. Differentiation relates to a product or service with more features, options, or models than the competition. Focus relates to whether the product or service is designed for a broad audience or a well-defined market segment or segments. There are many ways that these generic strategies can be combined or made into hybrids. For example, common business strategies that are generic to many industries and manufacturers include the following variations:

• Best cost—creates a hybrid, low-cost approach for providing a differentiated product or service.
• Low cost—focuses on delivering low price and no-frills basics with prices that are hard to match.
• Broad differentiation—creates product and service attributes that appeal to many buyers looking for variety of goods.
• Focused differentiation—develops unique strategies for target market niches to meet unique buyer needs.
• Focused low cost – designed to meet well-defined buyer needs at a low cost.

Choosing Business Strategies

While some firms may focus primarily on one business strategy, others may pursue a mix of strategies. Note, however, that making one strategy the priority may make other strategies difficult to achieve. For example, providing high quality at the lowest price is a challenge. But not all the strategies are mutually exclusive. Product differentiation and niche marketing fit well together. Either responsiveness or low cost may be a key competitive factor that differentiates a firm from its market rivals.

Once an organization has decided on a business strategy, it uses these choices to drive the organizational strategy and eventually the supply chain strategy.