We’re in the busiest and most profitable season of the year for businesses. Profitability is not by magic, it’s the outcome of deliberate business strategy. By strategy, we mean an integrated set of plans and actions designed to enable a business gain advantage over its competitors, thereby maximizing profits. You should have one this season. The market is open for you to play in, but you have to adopt one of the basic two business strategies.
Low Cost Strategy or
To explain the two, we will use a clothing business (boutiques).
Mr. Appiah decides that he wants to sell more than his competitors with similar brands and quality this season. He plans that if others are selling a Shirt for Ghs400, he will sell for Ghs350 or Ghs300. The same quality, the same product. With that, what he has adopted is a “low cost strategy”. Which tends to draw a certain class of customers to him. His objective is to make more sales by lowering price thereby make profit by volume. Most successful businesses use the strategy like Wal-Mart. But it has limitations too.
But Madam Boaduwaa comes up with a different plan. She understands that her customers is the increasing Middle class of young men who constantly design to look rich. Value for them is based on the amount they pay. She wants to meet their taste of value and maximize profit. Instead of selling just Shirt for Ghs400 to them, she adds a Turkey tie, cliff link and pocket square; which cost Ghs700 in all. She then package it together as a single product and call it: “That Look or Pressure Boy’s Looks” priced at Ghs1,000 but discounted price of Ghs 900. It’s put out on social media and other platforms, and it becomes a hit.
By just bringing independent products together and branding them, she has not only created a market for herself but she has made it inaccessible for competition.
Mr. Appiah will start asking his suppliers about “Pressure Boys Looks Collection “, without knowing it was created by Madam Boaduwaa
For differentiation to be successful, the product must be truly unique or perceived to be unique in quality, image, design, etc.
There is also a hybrid that combines low cost and differentiation to produce a business strategy. It’s just like Africa’s mixed economy that adopts socialism and capitalism.
What strategy will you adopt this and next season?