The Business Level Strategy for Ranch
The business level strategy of a business is extremely important. Understanding if your business should focus on a cost leadership or a differentiation strategy will help understand what your brand image, product pricing, and marketing strategy should be. Little Bite of Everything commissary will focus on a differentiation strategy with their products. When looking at the different companies that sell ranch in grocery stores, it shows that the majority of them focus on a cost leadership strategy. This leaves little room for competition on that level of the spectrum.
Focusing on the differentiation sector of the market will allow for Little Bite of Everything to make large corporations just strategic groups. Little Bite of Everything will focus on making their product better quality than their competitors. Consumers will spend more to receive a better product. This will decrease the volume of sales for Little Bite of Everything but increase the profit margins per product. Manufacturing the company’s products in a commissary with employees that have an expertise in making these products will minimize the risk of quality decreasing. This will also help to ensure that customers that eat at different locations of the restaurant will receive the same product every time.
Pricing Differentiation
The average price of ranch in grocery stores is around $3. Little Bite of Everything will sell their ranch for $6. However, the cost of goods sold will be around 60% higher than the average competitor in this industry. This increase may seem substantial, but the trend of consumers wanting higher quality products will help the company. The company projects that 35% of the market would be willing to pay more for this type of product. People value homemade and family owned products. With the level of competition being much lower on this side of the spectrum, the company is willing to take the risk of decreasing the size of their target market.
Brand Image Differentiation
The brand image of Little Bite of Everything will be high quality and unique. The company believes that this brand image will be able to create a brand loyalty with a large portion of our market. The company strives to create an image in consumer’s minds that our ranch is the only ranch they can buy. The consumers will then spread the word to their friends and families allowing our image of high quality to spread exponentially. Our recipe is one of a kind making it a sustainable competitive advantage. The majority of ranch sold in stores is very similar and lacks product differentiation. Little Bite of Everything’s goal is to ensure that when consumers try our ranch, it is impossible to mistake our product for one of our competitors. This helps build on our brand image of being unique.
Conclusion
When entering a market, a company needs to understand which side of the business level strategy spectrum gives them the most growth potential. Little Bite of Everything understands that the company does not have the economies of scale, brand recognition, or marketing budget to compete with already established companies. That is why it was a no brainer to work with differentiation.
