What Is BUSINESS STRATEGY: Definition and How To Develop One

Business Strategy
Image Credit: Inc. Magazine

What determines the success of a business is not necessarily its product or service but the value it tends to create over time. If it’s value and not the excellency of its product, service, or even ability to generate revenue over time, then there’s a need for a strategy, an intentional plan that will point towards this goal. A business strategy is much more than the objectives of an organization because it determines the outcome of the company’s future. What is a business strategy, how important is it to every business, what are the levels and components involved in it, and how do I develop one? The following questions are what this guide tends to address!

What is Business Strategy?

The business strategy of a company lays out the steps that need to be taken to make the organization’s vision come true and reach its goals. Whenever a business presents its strategy, it appears simple once the implementation steps are duly followed, but the process of developing it is not that easy. It involves a whole lot of critical analysis

and evaluation to arrive at a concrete end. It takes a lot of time, effort, and brainstorming to develop a company strategy that reflects your goals.

Levels of Business Strategy

Generally, there are three main levels of business strategy. The strategic framework of an organization is made up of all three parts. At any given time, a company may use more than one strategy, depending on what it needs. 

#1. Corporate Level

Strategy at the corporate level is the long-term vision of the company’s leadership, by which I mean the organization’s top management team. They are the bedrock of a company’s existence and serves as the basis for major decision such as investment, diversification, merger, expansion, and so on. At the corporate level of business strategies, a company’s overall success or basis of existence is formed. 

#2. Business Level

The business level of a business strategy is centered on designating a concrete plan using the vision, mission, and objective of the corporate level. Here, the breakdown of the various steps that will be used in achieving the corporate organization’s vision will be outlined. These plans if followed duly result in success in the competitive market. 

#3. Functional Level

The last level of a business strategy is the functional level. This level seeks to explain how the various functional departments within an organization can contribute to the company’s overall business and corporate goals.

How to Develop a Business Strategy

While the definition of what a business strategy is about may appear seemingly simple, developing one involves key steps that clearly define what the organization is about, including its market, target, value proposition, competitive advantage, and so on. Believe me when I say that this requires in-depth analysis and critical evaluation. 

The following steps will help anyone successfully design a compelling business strategy in no time;

#1. Defining Your Vision

Defining the vision statement for your company is the first step in developing a successful business strategy.

Having vision means having a crystal-clear picture of what the company wants in the future. A company’s mission reflects its highest ideals and concerns. In other words, the ultimate goal of the company. A vision is a basis for existence, and the rest of the company’s strategy can be built upon this foundation. A vision is more than just a statement; it describes the core market, the people you want to reach, and the value you offer.

This is an important step in coming up with a strategy because it makes sure that the end product will meet the needs of the target market.

In Terms Of Value Proposition

A good business vision expands upon the core competencies of the company’s value. This simply means that what the company intends to offer will be highlighted in its vision. It must explain what you offer and how you differ from your competitors.

Target Market

Every business has a target market, and your vision must take this into consideration too. You must know for sure which market their offering and value proposition are aimed at.

The factors to consider when determining your target market depend on who your target market is. If you are dealing with B2B customers, you must consider factors like industry, business, or sales model. Whereas if you are dealing with B2C, you’ll have to consider factors like gender, age, occupation, geographic location, and so on.  

Customers

The second thing a good business vision must address is its customers. Identifying the company’s target demographic is a crucial part of developing a winning business strategy. Depending on your products or services, your customers can be consumers (B2C) or businesses (B2B).

#2. Setting Your Objectives

Next on our list of things to do to make a good business plan is to set your goals. When it comes to business objectives, they differ from one business to the next.

However, it will definitely center on certain metrics like revenue, market share, growth, and return on investment for shareholders. Your goals and objectives must be reliable, practicable, and achievable  

When it comes to setting objectives, this is better done at the corporate level of business strategy. 

#3. Analyzing Your Business and Your Marketplace

The emphasis has always been on analysis because of its huge role in the success or failure of any goal. When developing a business strategy, nothing is left to chance; every goal must be critically examined. So, the next step in making a successful business plan is to use a SWOT analysis to do a thorough analysis of your company. To be a good leader, you need to be able to figure out what your company’s strengths and weaknesses are, as well as opportunities and threats. Because this determines the success of your business over time. Knowing this will help you avoid focusing too heavily on areas where you’re weak, increasing your chances of success.

Evaluating your business using the SWOT analysis involves considering the internal and external factors that directly or indirectly influence it. 

#4. Defining Your Competitive Advantage

The fourth and crucial phase of business strategy is defining your competitive advantage. Reddit, Slack, Discord, and so on compete with Facebook. To a great extent, each of these has succeeded in getting a share of the market by introducing diverse features that make life easier for users. Before they achieved that, they defined their competitive advantage. For Discord, it was moving beyond a gaming platform to a messaging gaming platform; Reddit was building a community; and Slack was enhancing a workplace community to enhance teamwork. 

In a competitive market, it’s important to figure out your competitive advantage, which is your Unique Selling Point (USP).

At this stage, you’ll look at things like how to make people want your products or services, how to boost sales, how to use new technologies, and how to make your margins higher.

Questions like “How can we get more people interested in our products?” “How can we use new technologies to increase sales?” and “How can we improve our processes?” will assist you in clearly defining these concepts. 

#5. Building a Framework

Building a business structure or framework comes immediately after defining your competitive market. It could also be seen as concretizing the overall strategy for a given unit. 

The strategy framework takes into account the goals and objectives of all divisions within an organization and then, sets about bringing them into harmony with those of the enterprise as a whole.

How is Strategy Different From Tactics?

Oftentimes, these two words can be used interchangeably, but in reality, they differ, especially in regard to a business strategy. 

A strategy refers to an organization’s long-term goals and how it plans to reach them. In other words, it shows the path to achieving the defined vision.

On the other hand, the word “tactics” is used to talk about the actual steps that are taken to get the desired results based on the overall strategy. This simply means strategy comes before tactics.

Why Is Having a Business Strategy Important?

Businesses only achieve lasting success with a well-developed plan of action, and that’s what a business strategy is about. 

First, it reveals the business’s SWOT level. A business strategy will always highlight the strengths, opportunities, weaknesses, and threats of a business. With that, they are better able to build a thick skin against the competition by making the most of their strengths and working on their weaknesses. 

Then there’s also the issue of resources. In order to achieve its goals, a strategy takes into account the available resources and determines how best to put them to use. Thereby, ensuring efficiency and effectiveness. 

How to Measure Business Strategy Success

the success of a business strategy. On the contrary, revenue alone is not enough; there are other key performance indicators that should measure success. These include but are not limited to growth, competitive advantage, and financial performance. 

What Are the Principal Components of Business Strategies?

Vision and objectives, core values, SWOT, tactics, resource and resource allocation, and evaluation are the principal components of a business strategy. Every company has a different business strategy because each one focuses on what is most important to them. However, they mostly have something in common. 

#1. Vision and Objectives

You need a business strategy to guide the steps toward your intended goals. Under a vision, there is clarity and direction. It certainly gives the company purpose and meaning. If your business strategy includes a vision, you’ll be able to make framework-specific instructions for how to do each task with the resources you have.

#2. Core Values

A company’s business plan lays out the rules for what departments and their respective leaders should and should not do in light of the company’s mission and values. Making sure that everyone in an organization is working toward the same goals is easier if the values that serve as the basis for that work are clear.

#3. SWOT (strengths, weaknesses, opportunities, and threats)

Any company’s success depends on how well it can figure out its SWOT, which stands for strengths, weaknesses, opportunities, and threats. This is fundamental to any effective business strategy. As Socrates rightly puts it, “Man know thyself,” and knowing this helps pinpoint the organization’s strengths and the weaknesses that need fixing.

#4. Tactics and Operational Delivery

Tactics are crucial to the success of any business strategy. It’s not enough to come up with a business plan; you also need to put in place detailed steps for putting it into action. Managers in charge of tactics know what needs to be done to make sure that any business strategy is carried out well. This prevents time and energy from being wasted.

#5. Resources and Resource Allocation

Resources are an integral part of business strategies, and as such, deserves keen attention at all time. A business resource includes people, technology, physical resources, and even financial resources. The part of a business plan that talks about resources usually talks about how they will be used and how best to use them. When leaders have a clear picture of both current and future needs, they can better use their resources to get their jobs done.

#6. Evaluation and Analysis

Evaluation and analysis are as important as vision and objectives. A company’s progress toward the goals set out in its business strategy is a primary focus during the evaluation stage. Measuring progress helps you define milestones and goals, as well as address issues like budget constraints. 

What Are the Types of Business Strategies?

  • Organizational (corporate and competitive strategy)
  • Functional Strategy.
  • Operating Strategy.

What Are the Three Basic Business Strategies?

There are three basic business strategies. These are cost strategy, differentiation strategy, and a focus on a niche strategy.

FAQs

What are the three basic business strategies?

There are three basic business strategies. These are cost strategy, differentiation strategy, and a focus on a niche strategy.

What Are the Most Effective Business Strategies?

Assess your current standing and know exactly how far you have to go.
Have Some Grit — Grit means being persistent over a long period of time.
Clarity —Assess Your Current Standing and Know Exactly How Far You Have to Go.

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