Business environments are highly uncertain and executives need to be innovative and flexible to survive. They achieve this through strategic alternatives that enable their companies to maintain a competitive edge over rivals. For instance, executives can adapt through safer small investments or risky and costly changes, according to the Harvard Business Review. Some alternative strategies include price focus, differentiation, diversification and adjacent businesses.
Price Focus
Price focus is a market niche strategy where a company competes on cost. This strategy targets a small buyer segment and the company needs to have a low-cost structure compared to rivals. This strategy is effective when a business is new, it cannot pursue a bigger market, customer segments are different, or when no other competitor is focusing on the targeted segment.
Differentiation
In cases where competition is stiff because of the proliferation of similar products, a company can come up with features that differentiate their products or services from those of rivals. The differentiating features need to be valuable to customers so that they are ready to pay premiums for them, and difficult for rivals to copy. When introducing new features, executives need to ensure that the product is affordable and that it complements customers’ needs.
Diversification
Diversification is a type of growth strategy where a company develops new products for existing or new markets. This strategy is especially effective where a company can no longer gain competitive advantage through product differentiation. Other than gaining competitive advantage, diversification can help a company to better use its resources, increase sales and minimize the risk associated with market upheavals that affect a particular product.
Adjacent Businesses
The adjacent businesses strategy involves entry into a niche where a core business is operating at its full or near-full potential and generating surplus cash. The business focuses on current customer preferences to seek growth opportunities. When making an adjacency move, a company can introduce new products or develop new distribution channels. To make a successful adjacency move, a company needs to have discipline and conduct in-depth analysis on customer preferences and economic capabilities.
There are always detours. It’s simply a matter of finding creative solutions.