Business Level Strategy
Successful business model is the product of successful business level strategies. A successful business model can give a company competitive advantage over rivals.
To craft a successful business model, strategic managers must determine three issues stated below:
1. What to be satisfied-customer’s needs: Customer needs are the wants that can be satisfied by the means of attributes of the products. Customers choose a product based on:
A. Product differentiation
B. Price of the product
Product differentiation is the process of designing the products to satisfy the customer needs. If managers take the strategies to differentiate the products in terms of innovation, quality on excellence, customer responsiveness, and then it means that the company is pursuing a business model based on offering customer differentiating products. If managers take strategies to increase the efficiency to reduce cost or increase the quality of reliability, it means that the company is pursuing a business model based on low cost.
When company differentiates its products it inc8urs a cost as well as it can charge a premium for the cost. In developing a business model, strategic mangers face a tradeoff between the differentiation and the price.
2. Who is to be a satisfied-customer group: Mangers must decide what kinds of products to offer to which customer groups. Market segmentation is the way a company decides to group customers based on important differences in their needs or preferences in order to gain a competitive advantage.
There are three main approaches toward market segmentation in devising a business model.
a. Company may offer a product for average or typical customers. Here focus in on price not the differentiation.
b. Each market segment is offered with customized products. Here focus on differentiation not the price.
c. Company may choose one or two market segments and invest its resources to satisfy the needs of the market