Question
A small business can use the strategic orientation framework from the book "Competitive Strategy: Techniques for Analyzing Industries and Competitors" to grow by identifying its strengths and aligning them with one of the three strategic orientations: cost leadership, differentiation, or focus. Cost leadership involves becoming the low-cost producer in the industry, differentiation involves creating a unique product or service, and focus involves targeting a specific, often niche, market segment. By committing to one of these strategies and aligning resources, organizational arrangements, and skills accordingly, a small business can enhance its competitiveness and profitability.
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Each of these strategies requires sustained commitment, along with specific resources, organizational arrangements, and skills. A firm that falls in the middle without orienting in any of these three directions will suffer from low profitability. It loses high volume customers who demand low costs while losing out on top margin customers who require niche products or differentiation. The firm must clearly orient itself towards one of these approaches based on analysis of the industry and its own strengths.
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