The key component of any management process is the strategy. Within this context, strategy is viewed as a long-term, well-developed direction for the company’s development. Specifically, it pertains to the scope, forms, and means of activity; the internal relationship system among stakeholders; and the company’s position in its environment.
To clarify, it’s important to distinguish between goals and strategy: goals reflect the final destination, while strategy represents the means of achieving it in a dynamic competitive environment. In broad terms, strategy is a general course of action that a company follows to reach its long-term goals.
What Challenges Do Executives Face in Strategy Development?
At the initial stage, leaders must answer three critical questions about the company’s market position:
- What kind of business should be discontinued?
- Which area requires more attention?
- What new business should be considered?
Porter’s Generic Competitive Strategies
According to Professor Michael Porter, there are three main behavioral strategies for companies in the marketplace:
- Cost Leadership Strategy
The company minimizes production and operating costs, thereby achieving a competitive price advantage and gaining a larger market share.Characteristics:- High production and supply efficiency
- Advanced technology and engineering infrastructure
- Broad distribution network
- Minimalist marketing
- Differentiation (Specialization) Strategy
The company focuses on creating unique products or processes, often using specialized equipment and staff. Customers are willing to pay a premium due to the product’s uniqueness or quality.Features:- Strong R&D capabilities
- Highly skilled designers
- Strict quality control
- Effective marketing
- Focus Strategy
The company targets a specific market segment, tailoring either cost leadership, differentiation, or both to the needs of a niche audience rather than the entire market.
These strategies aim to provide firms with a competitive advantage over rivals and help define the best path to achieve that.
Types of Business Growth Strategies
Widely adopted in practice, basic growth strategies typically involve changes to one or more elements such as: the market, the firm’s industry position, product offerings, or technology. Each of these elements can either stay the same or be fundamentally transformed.
Group 1: Concentrated Growth Strategies
These involve changing the product and/or market:
- Market penetration – focus on marketing, horizontal integration (controlling competitors)
- Market development – seek new markets for existing products
- Product development – develop new products for existing markets
Group 2: Integrated Growth Strategies
These involve expansion through adding new structures and are used when the business is already stable:
- Backward vertical integration – expanding control over suppliers
- Forward vertical integration – gaining control over distribution and sales (especially when intermediaries are lacking or underperforming)
Group 3: Diversified Growth Strategies
Used when a firm can no longer grow in its current market or with its current products:
- Concentric diversification – create fundamentally new products while maintaining the core business
- Horizontal diversification – launch new products for the existing market using different technology, often leveraging existing resources (e.g., supply chains)
- Conglomerate diversification – enter entirely new markets and distribution systems; this is one of the most difficult strategies to implement, as it requires strong capital, skilled personnel, and market insight
Types of Strategies by Management Level
In large, divisional companies, there are three primary levels of strategic decisions:
- Corporate (Portfolio) Strategy
This defines the overall growth direction and balance between business areas. It includes:- Resource allocation through portfolio analysis
- Diversification to reduce risk and achieve synergy
- M&A activities and entry into financial-industrial groups (FIGs)
- Organizational restructuring
- Budget-based funding decisions
- Business (Competitive) Strategy
Ensures long-term competitive advantage for a specific business unit, often reflected in business plans. It covers:- Target market selection
- Pricing and marketing
- Positioning and competitive advantages
- Functional Strategy
Developed by departments like finance, marketing, and production to support higher-level strategies. For example, a marketing department may focus on increasing sales volumes compared to the previous period.
Innovation Strategies
These are behavioral models a company adopts in specific market conditions. Innovation strategy is a tool for managing organizational growth and is categorized as follows:
Active Strategies
- Technological leadership – create new products/technologies, invest in R&D, and embrace risk
- Follow-the-leader – use technologies developed by competitors
- Licensing/copying – buy licenses to replicate others’ innovations
- Imitation – mimic new products
Passive Strategies
These involve minimal innovation effort and reactionary behavior.
Innovation strategies can also be categorized by scale:
- Niche-specific
- Market-specific
- Multi-market
By content, types include:
- Technology-focused
- Information process-based
- Management model-oriented
- Social change-oriented
Innovation strategy development begins with:
- Assessing the external environment
- Analyzing internal capabilities (scientific, technical, and innovation potential)
Marketing Strategy Types
1. By Market Scope
- Market conquest – develop new products or use old ones in new ways
- Market expansion – increase output and enter new segments
- Segment monopolization – identify uncontested niches and create new products for them
- Market share retention – cover all key segments with a comprehensive product range
2. By Demand Drivers
- High-demand goods – offer essentials to a broad consumer base
- High quality – produce the best quality in the market
- Price competitiveness – offer accessible pricing
- Innovation – provide unique products
- Customer loyalty – fulfill customer needs completely
- After-sales service – focus on full-service offerings
- Monetary benefits – provide discounts, credit, and bonuses
3. By Marketing Maturity
- Demand adaptation – conduct research, identify needs, and meet them
- Demand creation – invent and promote new products to generate demand
4. By Market Response
- Reactive adaptation – monitor and respond to market changes
- Forecasting – act preemptively based on predictions
5. By Market Dynamics
- Production adjustment – increase or reduce output as needed
- Product assortment changes – refine or diversify the product line
- Price changes – adjust pricing strategy
- Distribution channel shifts – diversify sales channels
6. By Product Strategy
- Innovation – develop new products to lead the market
- Runner-up – follow the market leader
- Improving competitor products – enhance existing offerings with added features
HR Strategy Types
These are strategic decisions by leadership to achieve long-term HR goals—like building a skilled, cohesive, and responsible team aligned with the company’s broader goals.
Key HR strategies include:
- Entrepreneurial
- Dynamic growth
- Profitability
- Liquidation
- Rotation-based
Most major firms consider HR strategy a critical part of corporate strategy, directly tied to long-term economic and operational planning.
In Summary
The main types of competitive strategies are:
- Cost leadership
- Focus (niche targeting)
- Differentiation
These foundational strategies—when applied across levels of corporate, business, functional, marketing, innovation, and HR management—form a cohesive strategic framework for long-term success.
