While brainstorming on customer experience development and cost reduction, I came to think about business strategy or business strategic planning. And my curiosity to solve the problem brings into the research world to discover more about it.
I went through the some research articles of Porter (1980) which gave me detail understanding to solve the problem hence I thought to share my discovery with you, hope it may save your time, effort and enhance your understanding on your business strategy.
In order to link customer service and cost reduction with business strategy, I landed on the choice of business strategy, portrait by Porter which are:-
Overall Cost Leadership
Differentiation Strategy
Time-Based Strategy
As you know that business and strategic planning are very critical in the success or failure of any firm. This is something which can give direction to any organization and de. It is the process of specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve the objectives and then allocating resources to implement the policies, and plans, projects, and programs.
Overall Cost Leadership
You got it correctly it’s all about low cost. The goal of the overall cost leadership strategy is known as a low-cost strategy is to gain sales by offering products and/or services at a price that is lower than that of competitors.
To achieve overall cost leadership, you must strive to reduce and control costs at every possible point within the business. And as you know cost is a hinder in "value chain" of a firm that is broadly speaking procurement, operation and distribution or in other terms Input, process, and output.
To successfully implement a low-cost strategy you must provide a product or service that satisfies customers without either charging more than competitors or without charging a price above the level customers are willing to pay.
This requires the careful containment of costs throughout the entire value chain, including raw materials, inventory and manufacturing processes, human resources, marketing and sales techniques, and channels of distribution. The successful implementation of a low-cost strategy can enable you to earn above-average returns, even when competing in a relatively competitive industry.
Differentiation Strategy
The goal of a differentiation, or benefits, the strategy is to gain sales by offering products and/or services that are superior to those offered by your competitors. The benefits offered to customers might include a greater array of product or service features and/or a higher level of quality in workmanship or materials.
A focus on quality you can enhance a product's performance and reliability and/or create additional differentiated features that customer’s value. Quality involves meeting or exceeding customer expectations in the goods or services provided.
In contrast, to the low-cost strategy if you pursuing a differentiation strategy then you need to recognize that the customer's purchase decision is generally made based on the benefits or quality that is offered by the product, rather than solely on the cost of the product.
Implementing a high-quality strategy can be high performing firms, partially because of improved customer satisfaction. Further contributions to performance may be seen through increased sales because of consumer purchasing preferences, reductions in complaints and returned products, and lower repair and warranty costs etc.
The successful implementation of a differentiation strategy can enable a firm to earn above-average returns, even when competing in a relatively competitive industry.
Time-Based Strategy
I call it survival strategy. A time-based strategy may also contribute to firm performance. Often it’s more suitable for a small enterprise. This strategy gains its advantage through good timing in seizing marketplace opportunities quickly. A turbulent environment it was important to move quickly in making and implementing strategic decisions.
The ability to move swiftly in a rapidly changing environment may be the hallmark of many successful firms today. Four techniques for implementing a time-based strategy I discover. You can be:
- First to market
- An early follower
- In step with majority of competitors; and
- A late follower
If you are first to market may earn above-average returns by being the exclusive provider of the product or service before competitors enters the market. You may also enjoy strong consumer preferences for products or services because of early identification with the new product.
However, this strategy may be restrained by high research and development and marketing costs for the new product or service. Some enterprise may find it difficult to endure these high levels of risk.
Firms that are early followers may enjoy some of the benefits of entering the market early, while avoiding some of the initial risk and cost. Further, an early follower firm may have the opportunity to learn from the response of the market to the products or services when they were first marketed.
Although firms which follow a strategy of being "in step with competitors" also known as a competitive parity strategy and "late followers" may avoid high R&D and marketing costs, their performance may suffer from competitive pressures on pricing and being unable to differentiate products or services from those of competitors. A strategy of competitive parity may not result in high performance for firms competing in today's rapidly changing environment.
To conclude
Focus and implementation of the strategy on the ground to the top level is the key. And most often mix strategy work well, depending on organization resource, competence and the industry you cater.Moreover, I am passionate about helping business towards success by strategic planning so if you need
any further help please feel free to contact me. I am just a click away at jpauljha@gmail.com :)
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