Business Strategy - Introduction

Introduction

A business strategy is a set of plans for achieving superior long-term returns on the capital invested in a business firm. A business strategy is therefore a plan for making profits in a competitive environment over tne long-term.

Profit is simply the difference between the price a firm is able to charge for its products and cost of producing and distributing goods.

Profit represents economic value. Economic value is created anytime customers are willing to pay more for a product than it costs to produce.

Why would anyone pay more for a product than it costs to produce? There are multiple answers. The product may be unique (there are no other suppliers), it may be the least costly product of its type available, consumers may be able to purchase the product anywhere in the world, or it may satisfy some unique needs that other products do not. Each of these sources of economic value defines a firm's strategy for positioning its products in the marketplace. There are four generic strategies for achieving a profitable business:

Differentiation,
Cost,
Scope, and
Focus.

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