The Purpose Of Business Strategy

1501 Words Jan 14th, 2015 7 Pages
1. The purpose of business strategy is to ensure that the business achieves its goals. It is the method by which goals are achieved. The business strategy helps decide how to use the resources of the firm. The strategies also lay down what a firm will produce and the manner in which it will produce. For example, a company making cars may decide to invest in a large plant to realize economies of scale and reduce costs so that either it can lower its prices to gain a large market share or it can earn higher profits and grow financially.

A differentiation strategy is one where the firm differentiates its products in some way to compete successfully. The differentiation is achieved by using expert technical expertise, talented personnel, or new manufacturing technology (Danny Miller, 1992). The strategy is effective when the elasticity of demand in the target segment is low. The customers are willing to pay a higher price for a differentiated product.

A firm can be a late mover and still use a differentiation strategy because it does not have to inform the target segment of the features of its product. The target market is already aware of the product. The later mover can add a few features and use the differentiation strategy to charge higher prices. In comparison with the first mover, the late mover does not have to incur high research and development costs. It learns from the experience of the first mover. The late mover simply focuses on producing a superior product and…
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