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A combination strategy is a resource used by corporations or businesses to further their identified business goals at the same time. Companies generally pursue goals such as growth, consolidation, or other interests that include stability, with the goal of improving their overall performance. Some strategies that can be combined include differentiation, cost, and the system by which a company focuses on an identified market niche. All of these strategies are aimed at increasing or improving a company’s competitive advantage.
One of the components of the combination advantage is the differentiation strategy. This strategy involves a directed effort on the part of a company to make its product or service perceived as unique and innovative in a market full of similar products or services. Companies use various methods to impart this feeling or perception of uniqueness to their own brand of a product, which already exists in different forms. These methods include unique packaging, mystery ingredients, or clever promotions. The uniqueness of the product or service is the differentiating factor.
Another component of a combined strategy is the cost leadership strategy, whereby a company deliberately sets out to use all the resources at its disposal to make its products more profitable. These capabilities may include utilizing cheaper labor through outsourcing or locating factories in countries with low labor costs, as well as managing distribution costs by identifying effective distribution channels. The reduction in operating expenses is offset in terms of cost savings for consumers. This type of strategy can help the company make competitive profits while attracting customers due to its low price.
The third component that can be included in a combination strategy is the focus strategy in which the company selects a niche for concentration. This niche may be based on geographic considerations or the identification of a specific segment in the market. For example, a company that manufactures women’s clothing may choose to focus on producing products aimed exclusively at teenagers. The main reason for this segmentation is the belief that a company will perform more efficiently if it concentrates all of its resources in a single market segment.
The combination strategy is the combination of any of these strategies at the same time. In this way, a company can decide to use a differentiation and focus strategy at the same time, instead of focusing on only one. The mix can also be between cost leadership and focus, or any other mix the company deems appropriate.