A cost-leadership strategy keeps the prices of products and services lower than those of the competition to encourage customers to buy the lowest-priced products to save money. However, the complexities of most large companies require more explicit documentation of the strategies implied by phase I. A distinctive feature of phase III planning in diversified companies is the formal grouping of related companies into strategic business units (SBUs) or organizational entities large and homogeneous enough to exercise effective control over most of the factors affecting their businesses. As a complement to generic strategies, these tactics provided clearer paths as to how a company can gain a competitive advantage and, therefore, succeed within a broader generic strategy.
Business strategy encompasses all actions and approaches to compete against competitors and the ways in which management addresses various strategic issues. In the race to offer products that meet customer needs, companies design many strategies in terms of improving products, prices, values, benefits, etc. Competitive strategy can sometimes make an overanalytical company (26%) too critical and, therefore, can hinder its own growth (26% of operations) by trying to overcome the competition. A low-cost business strategy is an approach in which a company seeks to gain a competitive advantage by manufacturing its product or service at a lower price than its competitors.
The continuous improvement of the quality of both products and services (in fact, of everything a company does) is an indispensable condition for maintaining competitive advantage over a longer period of time. Successful strategies are often based on a company's existing competitive competencies or help the company develop new ones. If competitors are firmly committed to doing business in a certain way, they won't suddenly imitate a company's innovation. Despite being about to turn 40, they are still a firm commitment for digital companies when it comes to creating business models and collecting competitive intelligence.
However, once a company has innovated, it still needs strategic planning to ensure that it can execute and leverage a competitive advantage. Porter's generic strategies inspired countless case studies, in which the types of successful competitive strategies implemented by companies such as Walmart, Southwest Airlines and Ikea were recounted. In the business world, competitive strategy theories before the 20th century focused on binary outcomes, mainly on how to crush markets with monopolies and exclusivity agreements. Strategic planning easily degenerates into an overwhelming bureaucratic exercise, interrupted by formal and ritual planning meetings in which top management is not informed or company directors are not helped to do their jobs.