8 Types of Business Strategies to Outpace the Competition

Updated May 23, 2023.
Types of Business Strategies

In the cutthroat world of business, you need a solid business strategy to stay ahead of the game. But with so many types of business strategies out there, how do you choose the right one for your organization?

Fear not, for I’m about to dive into the world of strategic planning and explore 8 types of business strategies you need to know.

Discover the secret sauce to crafting a business strategy that defines your competitive advantage and aligns with the best business objectives.

From cost leadership to corporate strategy, these business-level strategies will help you navigate the complex landscape of competition and drive your organization toward success.

Importance of Business Strategy

Effectiveness of Business Functions
Source: Consulterce

A business strategy defines the path your company takes to achieve its business objectives. It's the secret sauce that sets you apart from competitors, establishes brand loyalty, and drives success. Let's explore the importance of a solid business strategy.

Strategic Focus: The Roadmap to Success

Business strategies provide direction. They are roadmaps for achieving business goals and charting the course for growth. Without a clear strategy, companies can lose focus and struggle to stay on track.

Competitive Edge: Outsmarting the Competition

Different business-level strategies give companies a competitive advantage. By pinpointing weaknesses in competitors, you can tailor your approach to excel in those areas, leaving rivals in the dust.

Targeting Your Market: Reaching the Right People

A well-crafted business strategy identifies your target market. By understanding who your ideal customers are, you can tailor your products and services to their needs. Focusing on a narrow market segment ensures you cater to the right audience, maximizing profits and satisfaction.

Organizational Cohesion: Aligning Your Team

Organizational strategies connect your team with common goals. With a clear business strategy, employees understand their roles and responsibilities, boosting morale and productivity.

Long-term Sustainability: Building a Lasting Legacy

A business strategy is essential for long-term success. It helps companies adapt to changing markets, foresee potential roadblocks, and stay ahead of the curve. A robust strategy ensures your business remains relevant and profitable for years to come.

Crafting Your Business Plan: Blueprint for Success

Your business plan outlines your company's vision, mission, and goals. A well-thought-out strategy is the foundation for this plan, guiding your decisions and actions as you grow.

If you’d like some help, check out our guide on how to write a business plan.

Flexibility: Adapting to Change

Different business strategies allow you to pivot when needed. As markets evolve, so should your strategy. Being adaptable ensures you stay competitive and relevant in an ever-changing world.

Levels of Business Strategy

Corporate level, Business Level, Functional Level
Source: Cascade

Before we dive into the depths of business strategy, let's lay the foundation. There are three primary levels of strategy in the business world: corporate, business, and functional.

Each level is crucial in shaping the company's trajectory and ultimate success. Ready to explore? Let's get started.

Corporate Level Strategy

At the top, we've got the corporate strategy. It dictates the company's overall direction and focuses on the big picture. This strategy aims to create a competitive edge in the market by:

  • Identifying new markets to explore.
  • Deciding on mergers and acquisitions.
  • Allocating resources wisely.
  • Determining the right mix of business units.

A well-crafted corporate strategy can make all the difference, driving growth and boosting profitability. So, always aim high and think big.

Business Level Strategy

A step down from the corporate strategy, we have the business-level strategy. This strategy targets individual business units, tailoring their approach to conquer specific markets. Here, you'll find two main types of business-level strategies:

1. Competitive Strategy: Focuses on how a business can outperform its competitors. A company can choose one of these four paths:

  • Cost leadership: Be the cheapest provider in the market.
  • Differentiation: Offer unique products or services that customers value.
  • Focused strategy: Cater to a specific niche or target market.
  • Integrated cost leadership/differentiation: Combine elements of both cost leadership and differentiation.

2. Cooperative Strategy: This is all about collaboration, where businesses team up with partners to gain a competitive advantage. It includes:

  • Strategic alliances: Partnering with other businesses for mutual benefit.
  • Joint ventures: Combining forces and resources to create a new business entity.

A solid business-level strategy ensures your units thrive and outshine competitors. So, get strategic and watch your business soar.

Functional Level Strategy

Last but not least is the functional strategy. This strategy delves into the nitty-gritty details of each department within a business unit. From marketing to operations, it's all about fine-tuning processes to ensure top-notch performance. Here's what you need to know:

  • Focus on excellence: Each department should provide quality customer service and continuously improve its operations.
  • Align with higher-level strategies: Functional strategies should align with business-level strategies and the overarching corporate strategy.
  • Flexibility is key: Departments must be ready to adapt and evolve as market conditions change.

You'll create a well-oiled machine primed for success by mastering functional strategy. So, pay attention to the details – they matter.

To sum it up, understanding the levels of business strategy – corporate, business, and functional – is crucial for success in today's competitive landscape.

These organizational-level strategies work together like a finely tuned orchestra, harmonizing your efforts and propelling your company to new heights. So, take the time to learn the ropes and make strategic decisions to pave the way for a prosperous future.

Types of Business Strategies

Cost Leadership

The cost leadership strategy is all about becoming the lowest-cost provider in your industry. This can be achieved through economies of scale, efficient resource allocation, and tight control of expenses.

A company can increase market share and potentially achieve market domination by offering products or services at a lower price than competitors.


  • Increased market share: Offering lower prices can attract more customers and increase market share.
  • Price competitiveness: A cost leadership strategy can make it difficult for competitors to match your prices without sacrificing their profit margins.
  • Economies of scale: By producing goods or services on a large scale, businesses can achieve cost savings and pass them on to customers.
  • Stronger negotiation power: A cost leadership position can give businesses greater leverage when negotiating with suppliers or partners.

Differentiation Strategy

A differentiation strategy aims to differentiate a company from its competitors by offering a unique product or service. This can be achieved through innovation, superior quality, exceptional customer service, or a combination of these factors.

The goal is to create customer loyalty by delivering a product or service perceived as valuable and distinct from competitors.


  • Higher customer loyalty: Customers who perceive your product or service as unique are likelier to become loyal and continue to choose your brand.
  • Premium pricing: Differentiation allows businesses to charge a premium for their products or services, potentially increasing profit margins.
  • Stronger brand image: A differentiated product or service can help create a stronger brand image, making it more difficult for competitors to imitate or replicate.
  • Less price sensitivity: Customers may be willing to pay more for a differentiated product or service, making your business less susceptible to price competition.
  • Increased customer satisfaction: By offering a product or service that stands out from the competition, you can provide a superior customer experience. This leads to increased customer satisfaction and positive word-of-mouth.
  • Better positioning: A differentiated offering can help businesses target a specific customer segment or niche, positioning the company more effectively in the market.

Focused Differentiation

Overlap of The way you Want people to perceive you and the way people actually perceive you is Your Brand
Source: Awware

Focused differentiation combines elements of both cost leadership and differentiation strategies by targeting a specific, narrow market segment.

Companies pursuing this strategy aim to deliver a unique product or service tailored to the needs and preferences of a select group of customers.

This organizational-level strategy requires an apt identification of your target market and effective human resources and marketing efforts to cater to the niche.


  • Niche focus: Focused differentiation allows businesses to cater to the specific needs of a niche market, making the product or service more appealing to the target customers.
  • Less competition: By targeting a narrow market segment, companies can avoid direct competition with larger players, potentially giving them a competitive advantage.
  • Higher customer loyalty: Similar to the differentiation strategy, a focused differentiation approach can increase customer loyalty within the target market.
  • Premium pricing: Businesses can charge premium prices for their specialized offerings, potentially leading to higher profit margins.
  • Efficient resource allocation: Companies can allocate resources more efficiently by focusing on a specific market segment, allowing them to serve the target audience better.

Focused Low-Cost

The Focused Low-Cost strategy focuses on a specific market niche, targeting cost-conscious customers. Businesses that employ this approach aim to offer products or services at competitive prices while maintaining quality.


  • Attracts Price-Sensitive Customers: The main attraction of this strategy is the lower cost. Cost-conscious consumers are drawn to businesses that provide value without breaking the bank.
  • Streamlined Operations: By focusing on a single niche, businesses can concentrate their efforts on refining production processes and cutting costs. This leads to greater efficiency and reduced overheads.
  • Less Competition: Targeting a niche market means less competition, allowing businesses to carve out a strong position in that specific segment.
  • Brand Loyalty: Offering good quality products at competitive prices can foster brand loyalty, as customers will appreciate the value they receive.
  • Growth Potential: A successful focused low-cost strategy can be a stepping stone for further growth, expanding the business into new markets or product lines.

Integrated Low-Cost Differentiation

Integrated Low-Cost Differentiation
Source: One Strategy

The Integrated Low-Cost Differentiation strategy combines elements of both cost leadership and differentiation. Businesses employing this approach aim to deliver unique, high-quality products or services at a lower price than competitors, making them stand out in the market.


  • Value Creation: By offering a unique product or service at a competitive price, businesses can create value for their customers, translating into higher sales and profits.
  • Brand Recognition: The combination of quality and affordability can make a brand stand out, leading to increased brand recognition and customer loyalty.
  • Flexibility: This strategy allows businesses to adjust their pricing strategies for profit, either adopting a price skimming strategy or a more competitive price approach, depending on market conditions and demand.
  • Innovation: Pursuing differentiation requires businesses to be innovative, ensuring they stay ahead of competitors and continuously improve their products and services.
  • Market Expansion: Successfully implementing an integrated low-cost differentiation strategy can open up new market opportunities, as businesses can appeal to a broader range of customers seeking quality and value.

Other Types of Business Strategies

Cutting right to the chase, let's dive into three more types of business strategies: Business Strategy, Operational Strategy, and Transformational Strategy.

Business Strategy

Developing a Business Strategy
Source: HubSpot

A business strategy focuses on creating a competitive advantage in the market. It defines a company's overall direction, including its goals, objectives, strategies, tactics, and steps to achieve them. A well-defined business strategy can significantly impact a company's success and growth.


  • Growth Strategy: Businesses can use various growth strategies to increase market share or revenue. They can expand existing products, develop new ones, or enter new markets. Another option is to acquire or merge with other businesses to expand the company's reach.
  • Price Differentiation: Businesses can compete by offering unique products or services that justify a higher price. This strategy relies on product innovation, quality, or branding to create a premium perception in customers' minds.
  • Market Penetration: This strategy aims to increase market share by focusing on existing products and markets. Companies can lower prices, increase marketing efforts, or improve customer service to capture market share.

Operational Strategy

Key Elements of an Operations Strategy
Source: Edureka

The operational or operating strategy outlines how a company plans to conduct its business activities to achieve its objectives. It includes essential elements like production, distribution, and quality control to ensure the business runs efficiently and effectively.


  • Supply Chain Management: A well-organized supply chain ensures that products are manufactured and delivered to customers on time and within budget. Efficient supply chain management minimizes costs, reduces waste, and improves customer satisfaction.
  • Lean Operations: This strategy minimizes waste and maximizes efficiency in business activities. By streamlining processes, businesses can reduce costs, improve quality, and increase customer satisfaction.
  • Quality Management: Ensuring high-quality products and services is crucial for building a strong brand reputation and customer loyalty. You should follow the principles of total quality management (TQM) to maintain consistency, identify areas for improvement, and implement corrective actions.

Transformational Strategy

The transformational strategy involves fundamentally changing a company's business model, culture, or operations to adapt to a changing market or improve overall performance. This type of strategy often requires a significant shift in mindset and resources.


  • Digital Transformation: Embracing digital technologies can create new revenue streams, improve customer experiences, and optimize business operations. Companies can implement digital solutions like automation, data analytics, or e-commerce platforms to stay competitive in an increasingly digital world.
  • Organizational Restructuring: This strategy involves reorganizing a company's structure to improve efficiency, communication, or decision-making. It may involve merging departments, creating new roles, or changing reporting lines.
  • Cultural Change: A company's culture can significantly impact its success. Businesses can implement cultural change initiatives to foster a more positive, inclusive, and innovative work environment. This may involve promoting diversity, encouraging open communication, or rewarding innovation.

To summarize, the right strategy for a small business depends on its goals, industry, and unique circumstances.

By understanding the different business strategies, companies can make informed decisions about which approach will best position them for success.

A well-executed business, operational, or transformational strategy can significantly impact a company's growth and long-term success.

Consider the essential elements of each strategy and how they apply to your business to create a tailored approach that drives results.

Key Components of a Business Strategy

1. Define Your Mission and Vision

Start by crafting a clear mission statement, articulating your company's purpose and values. Envision where you want to be – that's your vision. Small businesses can create a significant impact by having a strong sense of identity and direction.

If you need help crafting a solid mission statement, check out our guide on the best free mission and vision statement generators.

2. Understand Your Target Market

Dive deep into your customer base. Identify their preferences, pain points, and desires. Cater to a small group or niche and expand as you grow.

Understand different types of market segmentation, such as demographic, geographic, and psychographic factors affecting your customers.

3. Identify Your Competitive Advantage

What sets you apart from the competition? Unique features, exceptional service, or low prices can create a compelling advantage. Emphasize your strengths and exploit competitors' weaknesses.

4. Develop Your Unique Selling Proposition (USP)

Craft a USP that highlights your competitive advantage. Make it memorable and persuasive. A strong USP attracts your target market and differentiates your company.

5. Establish SMART Goals

Set Specific, Measurable, Achievable, Relevant, and Time-bound (SMART) goals. They provide direction, motivation, and a sense of accomplishment.

Small businesses benefit from setting realistic, short-term objectives and periodically reassessing them.

6. Determine Your Pricing Strategy

Choose a pricing strategy that aligns with your goals and target market. Consider cost-based, value-based, or competitor-based pricing. Lowest pricing isn't always the best strategy – focus on delivering value and quality.

7. Create a Marketing and Sales Strategy

Design a marketing strategy with a plan that targets your ideal customers, maximizes your reach, and generates leads.

Choose the right marketing channels, create compelling content, identify marketing KPIs, and optimize for conversions. Develop a sales strategy that nurtures leads, closes deals, and retains customers.

8. Monitor Your Financials

Track and analyze your financial performance. Understand your revenue streams, profit margins, and expenses.

Maintain a healthy cash flow, and don't hesitate to make tough decisions to cut costs or invest in growth opportunities.

9. Foster a Strong Company Culture

Cultivate an environment where employees feel valued, motivated, and engaged. Invest in professional development and encourage open communication.

A strong company culture attracts top talent and boosts productivity.

10. Adapt to Changes

Stay agile and responsive to market and environmental changes. Continuously assess your business strategy and make adjustments as needed. Embrace innovation and new technologies to stay ahead of the curve.

Putting It All Together

Creating a robust business strategy involves understanding your mission and vision, knowing your target market, and identifying your competitive advantage. Keep these components in mind:

  • Mission and Vision: Define your company's purpose and long-term goals.
  • Target Market: Dive deep into your customer base, focusing on their preferences and pain points.
  • Competitive Advantage: Determine what sets your company apart, such as unique features, exceptional service, or low prices.
  • Unique Selling Proposition: Develop a memorable and persuasive USP highlighting your competitive advantage.
  • SMART Goals: Set specific, measurable, achievable, relevant, and time-bound objectives.
  • Pricing Strategy: Choose a pricing approach that aligns with your goals and target market.
  • Marketing and Sales Strategy: Design a comprehensive plan for reaching and converting your ideal customers.
  • Financial Monitoring: Keep a close eye on your financial performance and make necessary adjustments.
  • Company Culture: Foster a positive work environment that encourages growth and productivity.
  • Adaptability: Stay agile and responsive to market and environmental changes.

Incorporating these key components into your business strategy gives you a solid foundation for growth and success.

Remember, a great strategy is flexible and adapts to changes in the market and environment. Don't be afraid to revise and refine your approach as new information and opportunities arise.

Use These Business Strategies to Grow Your Competitive Advantage

Now that you're equipped with eight powerful business strategies, it's time to seize the day and amplify your competitive edge.

Remember, success isn't just handed to you – it's earned. So, put these strategies to work and watch your business soar.

  • Experiment: Mix strategies to find the perfect blend that complements your unique business goals.
  • Adapt: Be ready to pivot when the winds of change blow and always watch for new opportunities.
  • Listen: Stay in tune with your customer's needs and let their feedback guide your growth.
  • Innovate: Push the boundaries of what's possible and never settle for mediocrity.
  • Collaborate: Forge alliances and synergize your strengths with others, creating a formidable force in the market.

Ultimately, your business's success hinges on your ability to stay ahead of the curve and outpace your rivals. The strategies outlined in this post serve as a roadmap to guide you toward unparalleled growth and prosperity. So, go forth and conquer – the world is yours for the taking!

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Anastasia Belyh

Editor at FounderJar

Anastasia has been a professional blogger and researcher since 2014. She loves to perform in-depth software reviews to help software buyers make informed decisions when choosing project management software, CRM tools, website builders, and everything around growing a startup business.

Anastasia worked in management consulting and tech startups, so she has lots of experience in helping professionals choosing the right business software.