Ultimately, you have to settle for one of three business strategyoptions. And it is important that you are clear on what one you are
going for.
Your business strategy choices are, at
end of
day, verysimple. The big question is, how do you want to position yourself
in relation to your competition. Basically your options are :
1. To be
cheapest
2. To be
best
3. To dominate a market niche
Many small businesses go for
first option, in
mistakenbelief that it is only way to survive. The problem is, there will
always be someone who can do what you do, more cheaply than you can.
A cost leadership strategy is only really suitable for bigbusinesses. Businesses that have substantial economies of scale.
They are able to spread their overheads thinly over large volumes,
and charge low unit prices. So if you are running a small business,
this strategy probably won't work for you.
If, as a small business, you build your business reputation onbeing
cheapest, you are operating from a position of weakness.
Even if you can survive with your low prices, you will not be able
to withstand a price war with a bigger competitor. So why take the
risk?
The second strategy, being
best, can be used to build apowerful competitive advantage. It means, however, that you have to
have a unique product. Otherwise, you will have to spend a lot of
money on R&D to stay ahead of
competition.
You need deep pockets to win with this strategy. Unless, of course,your product is so specialised that no one else is producing it.
And big companies, for whatever reasons, don't want to produce it