A business strategy is a plan of action or an outline of steps developed by an entrepreneur to achieve certain business goals and objectives. It can also be referred as to the set of decisions that a person takes to meet the objectives of his firm within a certain time. Business strategy is a master plan developed by a company to set its foot in the competitive market and take its firm or company to new heights.
As a powerful tool, it helps businesses in reaching their business goals by defining the methods and tactics to accomplish business goals. Your business strategic plan guides many of your organizational decisions, such as financial performance, SWOT analysis, hiring new employees, etc.
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What is Business Strategy?
Definition: A business strategy is defined as a set of plans that enables a company or firm to meet its business goals and withstand the high competition of the market. A business with a competitive strategy assists the company by formulation a plan of action. It makes the company ready to make a secure position in the competitive market so that company can carry out its activities in a very efficient manner to please its customer and get desired results in the end.
With a business strategy, a customer-centric company defines what it needs to do to reach its goals. Corporate level strategies along with functional level strategies and generic strategies guide the decision-making process to channel all business operations effectively. Business strategic planning assists different departments of an organization to work together and optimize the overall direction of the company.
Why is Business Strategy Important?
Business strategy helps achieve desired goals and objectives for the company by designing a plan of action.
Business strategy is important for ensuring that the companies achieve the effect. Business strategies are used to ensure that the opportunities are utilized and perceived efficiently, plus it is also channelized to facilitate the mobility of resources.
Businesses make strategies for ensuring the advantage position of the firm in every situation. It is used for coping with different challenges and threatening scenarios. Business strategies suggest plans about the operational details for directing the efforts made and behavior. They also assist in gaining command over the situation, channelizing resource allocation to manage business activities and the company’s output.
There is a very need for business strategy for achieving the future goals and objectives of a business. A business with no business strategy is not less than a dream. Therefore, an excellent business strategy is required to execute the plan stepwise to achieve the objectives and goals in business.
With increasing competition, a business strategy also begins to rise so that the business is executed in the desired manner and achieves its future goals.
The reasons for the necessity of business strategy are listed below-
1. Planning
Planning is the key requirement of any business plan. Since business strategy is considered a unit of a business plan, the goals of any business are met only by the formulation of a plan which is then executed step by step. To reach the place where the company is intended to reach, there is a need for a plan of action.
2. Strengths – weaknesses
During the formulation of strategy, one gets an estimation of their strengths and weaknesses and focuses on them to achieve the goal and make a good stand-in market. Moreover, it makes one aware of their plus points, which ultimately helps eliminate weakness.
3. Efficiency and effectiveness
A well-planned strategy will ultimately help the firm and enterprise work effectively with its full efficiency. When every plan is formulated and the use of resources is assigned accurately, the efficiency and effectiveness of the work will be increased.
4. Competitive advantage
A business strategy with an effective plan helps the firm or company withstand the high competition in the market. Since a business strategy focuses on their plus points and strengths, which eventually helps them eliminate their weakness, it makes them capable of setting their foot in a competitive market, making them stronger to bear the high competition. This makes them unique for the customers.
5. Control
Formulation of business strategy is a blueprint of plan that a company or firm follows to achieve their goals shortly. Moreover, it also allows to interim the goals that are set. This makes the process simple for an entrepreneur to control activities and check if things are working on this behalf, as planned to work.
Levels of a Good Business Strategy
A business strategy works in three basic levels, which are as follows:
1. Corporate level strategy
This type of strategy is effective and action-oriented in the long run. This strategy is an integrated plan formulated by the people sitting at top positions in management. This business plan is a vision of business lines, growth, and development of the firm in the future, diversification, integration, etc.
2. Business level strategy
This type of strategy is the strategy that is formulated for a specific business. These strategies are generally designed by the general manager of the business who aims to convert the mission and vision of the firm into a plan of action. These strategies are the blueprint of the entire business.
3. Functional level strategy
This type of strategy is developed by the first-line managers or supervisors of the firm. They have a role in decision-making for the company at the operational level. Their role is to make decisions in marketing, production, human resources, etc. Therefore they design the blueprint of strategies for these related fields.
Concept of Business strategy, Business Plan, And Business Model
These three concepts are used several times interchangeably. However, all three have different meanings and have their role in achieving business goals. Business strategy is just a small part of a business plan. A business plan is an integral part of a much bigger conceptual structure called a business model.
- A business model is a structure of concept that tells about a company’s working or operation. It tells how a company can make money and how it intends to reach its future goals.
- A business plan is defined as a goal that the business model intends to achieve.
- Business strategy is a formulation of an outline or blueprint of how to achieve a goal or future objectives.
Key Elements of Business Strategy
The whole plan to achieve the objectives is defined in a business strategy. A business strategy can answer all the what, how, who, when, where of fulfilling the objectives. The main components of a business strategy are discussed below:
1. Mission, Vision, and business objectives
A business strategy that emphasizes meeting the objectives of the business. It provides direction to business and helps in achieving its mission. Moreover, an entrepreneur’s vision plays a vital role in developing the mission of the company and the design planned to reach the goal.
2. Core Values
Core values are the company’s values that describe ‘must’ and ‘must not’, which ultimately helps in clearing the doubts that would otherwise hinder the growth of the enterprise to its full extent. The core values help give an apparent vision to the high-level units and departments of the company.
3. SWOT ( Strength, weakness, opportunities, and threat analysis)
These features are the rundown of the company’s present situation. It is a very important component that decides the company’s strengths, weaknesses, opportunities, and threats and helps the company formulate a backup to deal with it when required.
4. Operational Tactics
A unit business strategy deals with the details of the workings and operations of the company that tell what approach a company is going to take to reach its goal. Operational Tactics play a very important role in the long run, giving detailed information on every functional unit of the company.
5. Resource Procurement and Allocation Plan
A well-designed business strategy also can tell how the company is going to procure the available resources and how the resources will be allocated. Moreover, it will also tell who is responsible for handling it.
6. Measure
A well-defined measure technique is a key requirement of any business strategy. Unless there is any measure control, the working of the business strategy cannot be evaluated. A well-structured business strategy involves the measurements of company outputs and comparing them with the set target.
Business Strategy Examples
Different types of business strategies come into play for accomplishing a variety of key objectives. Let us have a look at some of the examples of business strategies
1. Creating a new type of market
Hub spot company developed a perfect business strategy by creating a new type of market, i.e., inbound marketing. This market did not exist before and is an excellent business strategy. This company developed an online platform of marketing that explained the drawbacks of interruption marketing. On the other hand, it told the positive aspects of the online market.
2. Buying its competition
This business strategy was adopted by Facebook, where the company bought all its competition. Companies like WhatsApp, Instagram which were the main competition was bought by the owner of Facebook in place of creating its technology to compete with these companies.
3. Product differentiation
The product differentiation market strategy was adopted by Apple company where it differentiated the operating system of its smartphones called iOS by designing it in such a way that it became very simple and user friendly in comparison to Android phones. This strategy helped the company to get differentiated in the market, thus building its followership.
4. Leadership Cost
OnePlus used this business strategy in which it launched the flagship product named OnePlus 6T, which is similar to the features of the iPhone X. However, the price difference was a key factor in this strategy. The price of the OnePlus was half the price of the iPhone X.; as a result, OnePlus gained a lot of profit and secured good reach in the world.
5. Cross-sell more products
With the help of this business strategy, businesses can focus on selling additional products to the same and existing customers. It works effectively in the cases of office supply companies, banks, online retailers, etc. When businesses increase the amount of product sold per customer, they started increasing the average cart size.
6. Innovative product or service
Businesses involved in the technology or automotive sectors should opt for such business strategies, as this will help them in distinguishing themselves by creating the most innovative products. It is important for businesses to be clear about what “innovative” will mean for the organization.
7. Grow sales from new products
This business strategy helps companies in investing in research and development for constantly innovating, creating new products, or improving their successful products. It refers to introducing new products into the market and updating existing products to optimize the profits of the company.
8. Improve customer service
By using this business strategy, businesses can optimize their customer services to improve customer satisfaction and loyalty. Exceptional customer service helps in optimizing business reputation. For this, key components of effective customer service are having an efficient online support system or a more effective call center.
9. Product differentiation
It is one of the most common business strategies, mainly for b2c businesses. Businesses need to differentiate their products by describing how superior they are in terms of technology, pricing, features, styling, etc.
10. Pricing strategies
This is one of the most crucial business strategies that let businesses either keep their prices low to pull in more customers. They may also offer their products aspirational value by opting for pricing strategies that place their products beyond what most ordinary customers could afford.
Conclusion!
On the concluding note, it is clear that business strategies are important for channelizing company plans and business operations in a result-driven manner and optimizing profit margins.
In addition to the strategies mentioned above, a few other strategies that can help businesses are using cost leadership, obtaining a technological advantage, improving customer retention, sustainability, etc can also help you optimize your business operations, lead generations, sales, conversions, and profits.
What are business strategies would you suggest to have a competitive advantage over other businesses functioning in the same target market?
Looking to gain a competitive advantage over others in your market?
Enhance Employee Engagement: Engaged employees can significantly impact your bottom line. According to Gallup, companies with highly engaged workforces outperform their peers by 21% in profitability (Gallup, 2019). Investing in employee satisfaction and development can lead to higher productivity and innovation.
Improve Customer Experience: Exceptional customer service can set you apart. A report by PwC indicates that 73% of consumers cite customer experience as an important factor in their purchasing decisions, and 43% would pay more for greater convenience (PwC, 2018). Focusing on customer needs can lead to increased loyalty and market share.
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