A Brief Guide to Business Strategy
The Executive Headlines
In this fast-paced era of technology and development, businesses are ensuring to maintain pace with the latest and emerging trends. In the strive to be ahead in the race, major companies are incorporating latest business strategies for optimum results. In this blog, we will discuss what exactly a business strategy is and why it is vital for businesses (big or small).
Creating a business strategy is not a cakewalk. The strategy should align with the organizational vision as well as its mission. Moreover, creating a business strategy for long-term success takes time and development. Therefore, we will also discuss the components of a business strategy to help you generate ideas for your own business, irrespective of its size.
So, what is a business strategy?
A business strategy is a powerful tool for helping you reach your business goals, defining the methods and tactics you need to take within your company. The business strategy also guides many of your organizational decisions, such as hiring new employees.
Generating specific business strategies is an absolute necessity to increase the odds of success. Its importance quickly becomes imperative over the course of time. Moreover, several business owners tend to seek or hire outside consultants to assist with forming and carrying out strategies.
In laymen, business strategy is the collective term for all the steps a company takes to reach its goals and achieve its mission and vision. It involves understanding what the business does, what it needs to have, and what it needs to do to reach those goals. That information drives decisions about how to allocate resources, both human and material. The strategy also helps set priorities when resources aren’t available to do everything at once.
When everyone within the organization understands the strategy, it creates a framework to keep everyone working in the same direction. Though it is critically important to any business that wants to survive and thrive, business strategy is just one component. The business strategy definition is different from the company’s mission. The mission is what management wants the business to accomplish, while strategy is how it will achieve that mission. The company strategy is also different from business relationships with customers, employees, vendors, and others that create value within the economy. A strategy is also not the vision, which is a picture of what the world would look like if it truly achieved the mission.
Why business strategy is vital?
A business strategy paves way for the success of a business by aligning its operations with its vision and mission. However, there are several other reasons that define the importance of a business strategy:
- Business strategy helps identify the key steps for reaching your business goals.
- Creating a business strategy allows to identify and evaluate the company’s strengths and weaknesses for further developing a strategy that optimizes strengths and compensates for weaknesses.
- It also allows effective allocation of resources for business activities that automatically increases efficiency. Moreover, implementation of a business strategy allows planning for activities deadlines, job roles, and staying on track with project goals.
- Creating a business strategy gives more control over choosing the kinds of activities that will directly help reach goals while easily assessing closer.
- By identifying a clear plan for reaching goals, a business strategy helps focus on capitalizing strengths by using them as a competitive advantage that makes the company unique in the marketplace.
What are the various parts of a business strategy?
There are several components of a business strategy. They are as follows:
1. Vision and business objectives
A business strategy is intended to help you reach your business objectives. With a vision for the direction of the business, you can create clear instructions in the business strategy for what needs to be done and who is responsible for completing each step.
2. Core values
A business strategy guides top-level executives, as well as departments, about what should and should not be done, according to the organization's core values. It helps everyone stay on the same page and with the same goals.
3. SWOT analysis
SWOT stands for strengths, weaknesses, opportunities and threats. This analysis is included in every business strategy, as it allows the company to rely upon its strengths and use them as an advantage. It also makes the company aware of any weaknesses or threats.
Many business strategies articulate the operational details for how the work should be done in order to maximize efficiency. People who are responsible for tactics understand what needs to be done, saving time and effort.
5. Resource allocation plan
A business strategy includes where you will find the required resources to complete the plan, how the resources will be allocated and who is responsible for doing so. In this regard, you will be able to see where you need to add more resources in order to complete your projects.
The business strategy also includes a way to track the company's output, evaluating how it is performing in relation to the targets that were set prior to launch the strategy. This helps you to stay on track with deadlines and goals, as well as budgetary concerns.
Examples of Business Strategy
For a majority of the companies, a complete business strategy is based on a framework built on targeted types of strategies aimed at a particular keen area of the business. The following are some of the best examples of a successful business strategy.
By adopting a structuralist strategy, you’ll be building your business operations around the current market conditions and using the industry structure to your advantage. That might mean that you order products or supplies using your vendors’ established processes, or you take barriers to entry into consideration.
If you’re choosing a growth strategy, it means you’re focused on introducing new products or features or expanding into new markets. Looking for a competitive edge by offering a unique experience your potential customers won’t find anywhere else? Found a new customer base through market research or professional networking? That’s when to consider a growth strategy for your business.
3. Cost Leadership
Becoming a cost leader is a way to set your business apart by offering a competitive price for your product or service. If you have a unique strategy to lower costs without sacrificing quality, use that to set yourself apart in your industry. There are many benefits to being a cost leader including:
With a truly unique product or service that you can offer to potential customers, you can stand out in the market. Differentiation allows a business to take a creative approach and charge premium prices for products or services. For example, Starbucks® goes beyond selling coffee by providing a unique coffee experience in their stores. Strategies to drive brand differentiation include:
Price-skimming strategies involve charging a high price for your product or service at the start to cover initial costs like production, manufacturing, and marketing. Usually, this approach makes sense for a business introducing something that hasn’t been done before and that’s worth a higher price. The advantages of a pricing policy are the ability to make your product appealing to customers, while covering costs. The disadvantages of pricing strategies that do not sufficiently appeal to customers will not provide the income you need to operate successfully.