When I was younger… I [didn’t] you want to be pigeonholed… Basically, now you want to be pigeonholed. It’s your niche. – Joan Chen, actress

A business strategy represents the game plan your company will use to run your business, gain market share, and conduct business. This action plan determines how the company attracts and satisfies customers, competes effectively, and achieves management objectives. Developing a strategy should mean that there is a managerial dedication to pursue a specific set of actions that will improve the company’s financial market performance and increase its bottom line.

How management will grow the business while building a loyal customer base and outperforming competing rivals becomes the perspective for short- and long-term goals. To drive performance and be successful, every functional piece of the business—research and development, supply chain activities, manufacturing, sales and marketing, distribution, finance, and human resources—must be operationally unified. Clearly, management’s choice of strategy should be guided by the company’s mission and vision statement. The strategic choice made by the company and by managers speaks loudly… “Surrounded by the myriad of unique business approaches and ways of competing that we could have selected, we have decided to use this particular combination of competitive and operational approaches to drive the company forward.” … in the planned direction, increasing its market position and competitiveness, and advancing execution.” These conclusions regarding strategy are rarely simple and painless for any company, and some of the conclusions may turn out to be wrong, but that is not a justification for not making a decision on a specific course of action.

When developing a business strategy, the current situation of your company should be considered. Managers should be prompted to assess the business environment for the particular industry and the competitive forces, the company’s recent performance and status in the marketplace, its strengths and abilities, and its competitive weaknesses. Depending on the needs and vision of the company, managers are forced to establish a clear path for direction. By no means is this path absolute. Setting foot on this path of action requires that the company’s strategy evolve over time with both proactive and reactive activity. The development of the company’s strategy is intended to guide the company in the planned direction while growing the business and improving financial and market performance. Thus refining the vision of the company and strengthening the mission statement of the company.

This article describes the five basic options of competitive strategy: which of the five to use is an important and fundamental choice for any company. By developing this overall strategy, your company is beginning its quest for competitive advantage. The main differences between competitive strategies boil down to (1) whether your company sets a market goal that is broad or narrow, and (2) whether your company seeks a competitive advantage linked to product differentiation or low cost.

The five distinct competitive strategy approaches that stand out are as follows:

The five generic competitive strategies

1.A low cost vendor strategy – Strive to achieve lower overall costs than rivals and attract a broad spectrum of customers, generally below rivals’ prices.

2.A broad differentiation strategy – seek to differentiate the company’s product offering from that of rivals in a way that appeals to a broad spectrum of buyers.

3.A best cost provider strategy – give customers more value for their money by incorporating good to great product attributes at a lower cost than rivals; the goal is to have the lowest (best) costs and prices compared to rivals offering products with comparable attributes.

4.A focused (or niche market) strategy based on low costs – Focus on a narrow segment of buyers and outperform rivals by having lower costs than rivals and thus being able to serve niche members at a lower price.

5.A focused (or niche market) strategy based on differentiation – Focus on a narrow segment of buyers and outperform competitors by offering niche members personalized attributes that meet their tastes and requirements better than rivals’ products.

Each of these five generic competitive approaches establishes a different market position. The decision about which generic strategy to employ is possibly the most vital strategic commitment for your company. This commitment will drive the rest of the strategic actions your company agrees on and will set the tone for your quest for competitive advantage over competitors while “Creating Your Own Path” to business success.