In today’s world, the number of stressed and over-caffeinated business executives making hasty decisions can be pretty surprising. Many heed ill-advised plans and easy-to-use templates promoting short-sighted and poorly executed strategies while expecting good results. This short and easy route can adversely impact a business’s enterprise value, which every CEO wouldn’t want.
However, having an effective business strategy is essential if you’re going to get anywhere near your overall business goal. Business author and known futurist Patrick Dixon once said, “Business strategy is the battle plan for a better future”.
But while strategic planning is vital, many of today’s leaders neglect its proper implementation. This is why 90 percent of businesses fail to execute their strategies, and only two percent of leaders have the confidence of achieving 100 percent success.
The definition of business strategy outlines the actions and decisions a company plans to take to reach its business goals and objectives. This is primarily a master plan to maintain a competitive advantage and operate efficiently while achieving a company’s desired ends of the business.
This shouldn’t be confused with the concept of a business model, which are great tools to execute a business strategy. Business strategies can be implemented through many possible business models. However, effective business strategies rely on carefully planned long-range visions that define the direction of the company. And well-developed business plans are useless if they only end up gathering dust on a shelf.
So if you want to steer your business in the right direction, having a good blueprint, and effectively implementing it, is the only way to go.
Why a Business Strategy is Important
Establishing an effective business strategy allows leaders to spot, evaluate and utilize relevant business opportunities while optimizing means of execution. This enables a company to understand how they perform, assess capabilities, and set standards for further growth. Relying on business strategies is essential for these reasons:
- As a Guide. Having a well-defined business strategy provides an internal guide on how your business is performing. This allows you to assess how you are faring against your competition and what you need to stay relevant in the long term.
- To Identify Trends. A strategy helps to identify trends and future opportunities for your business—this aids in understanding the broader changes in the market. Developing strategic business decisions on these changes can modify your business plans to suit future shifts. Like the 15 percent increase in social media ad spending in 2021, identifying trends gives you insight into business strategy examples to effectively align with your marketing plan.
- To Create Vision. A business strategy creates a vision and direction for your company. Having clear goals for everyone to attain means you’re all following the same path. A clear mission, guided by your strategy, provides more structure to your business activities. As a result, you are making it easier for your people to fulfill their functions optimally.
- To Create a Competitive Advantage. An effective business strategy can create a competitive advantage for your company allowing you to understand where you stand in the market. Understanding your competition and where they’re headed gives you insight into competitive strategies to implement and maintain your company’s edge.
Elements Of A Business Strategy
There are six critical elements of a Business Strategy. They include:
- Vision & Business Objectives – The primary purpose of a business strategy is to help you reach your business objectives. Identifying your company’s vision allows your organization to place a clear path towards bringing that vision to life. Many strategy planning processes start by reaffirming the founders’ vision for the company. With this vision in mind, company leadership can stay true to the intended direction. This is because clear instructions are already indicated within the business strategy on what needs to be done.
- Core Values – The company’s core values identify what is acceptable and what is not in pursuing the organization’s vision. This includes ethical standards, legal requirements and codes of conduct that all must abide by. These core values are often prominently placed as a reminder within the office and other facilities. With these core values in mind, company leadership and employees are well aware of what should and should not be done.
- SWOT Analysis – SWOT stands for Strengths, Weaknesses, Opportunities and Threats. A carefully developed analysis of these is a vital part of every business strategy. This allows the company to identify its strengths and use them as an advantage. This exercise provides plenty of insight to notice details that might otherwise be missed. It also gives the company awareness of possible weaknesses and threats that need to be addressed. The SWOT analysis is often revised and reconsidered as market factors change.
- Tactics – Planning the right business tactics allows companies to get the necessary work done most efficiently. Effective business strategies integrate the operational details for how the work should be done to maximize efficiency. Having these plans save time and money by achieving tasks in the least amount of time, energy and budget. People responsible for tactics usually operate day-to-day tasks and are an essential part of the overall business strategy. These workers know how to maximize efficiency doing repetitive work and set a standard system for better operation.
- Resource Allocation Plan – Every business strategy includes finding the needed resources to complete the plan. These also include how these resources are allocated and who is responsible for implementing them. Identifying the people, money, equipment and materials needed to distribute resources drives the vital parts of the operation. Knowing this can help drive staffing to be more efficient. This aspect can be one of the most challenging, especially when working with scarce resources. However, being critical in allocating resources wisely allows you to work better with what you have.
- Measurable Success – Every business strategy needs to have quantifiable data points to measure the strategy’s success. A business strategy is only valuable if it works, with objective measures to monitor its success. Having a clear definition of what success looks like will lay down the path to attaining it. This allows management to know when and how to make adjustments in the strategy. Tracking the company’s output by evaluating how it’s performing regarding targets set provides ground for assessment. These data points should follow SMART goals, specific, measurable, achievable, relevant and time-bound. These measurements include gauges of market share, profitability, and relative competitiveness.
Levels Of A Business Strategy
To align your company-wide goals, understanding these three primary levels of a business strategy is essential:
The corporate level is the highest and most broad level of strategy in business. This strategy defines the business areas in which your company will operate. The corporate-level strategy is developed by top levels of company management, is far-reaching, comprehensive and action-oriented.
It establishes business lines, growth, mergers and acquisitions, integration, diversification, and investment opportunities. It deals with aligning resource deployments and managing diverse businesses to achieve full cooperation at the corporate level. The corporate strategy defines your organization’s primary purpose.
This strategy is vital for organizations with multiple lines of business. An example of this would be one arm of your business manufacturing a product while another component sells it. Despite each having a separate business unit strategy, one single corporate-level strategy identifies how those businesses interact as part of the whole business.
Business level strategies are made for specific strategic business units involved in a particular area of the business. These are planned out by general managers who turn the company’s vision into a blueprint for the whole company. This level also involves defining the competitive position of each business unit in the company.
It’s essential to have a strategy for each business unit to see which units excel and have room for improvement. Business level strategies allow you to weigh the costs and benefits of each business unit and efficiently decide on resource management.
Analyzing your goals and the market provides the option of whether to divest or even sell some of your business units. This can allow you to focus on the most critical areas to achieve your company’s corporate strategy.
The functional level of your strategy focuses on each department within the business. This allows a more specific look into the departments’ day-to-day operations to see if they support the overall corporate goals. These different functional areas in a business unit include marketing, production and operations, finance and human resources. Department heads usually develop functional strategies along with their teams that align with the business-level strategy.
12 Business Strategies You Can Try
1. Supply Chain Strategy
A supply chain is defined as the sequence of processes involved in producing and distributing a product. This consists of the start to finish of information, resources, money, etc., involved in bringing a product to a market. A supply chain strategy is a plan that a business develops to organize this process.
A good supply chain means that customers get the products they want when they want them while being as cost-efficient as possible. This strategy is what electric vehicle producer Tesla, Inc. focused on when they played the long game. When Tesla released their first Electric Vehicle, the 2008 Roadster, its price tag was above the market average at $109,000.
The company under Elon Musk had the vision of being the most prominent car company in the world. But, instead of introducing itself into the market with a reasonably low starting price, it put out an EV sports car and focused on its custom-built world-class supply chain.
Tesla took complete ownership of the supply chain, from its company vision of technological innovation to the overall end consumer experience. Tesla designs, manufactures, sells, and services the whole network. Now, Tesla Inc is the biggest and the most impactful company in the automotive industry.
2. Cross-Selling Products
Cross-selling is the practice of marketing additional products to existing customers. Prospective customers are persuaded to purchase complementary add-on products after buying the original product as a marketing strategy. Cross-selling to existing clients is a known method of generating new revenue since the relationship with the client is already established.
This is often practiced in the financial services industry, banks and office supply companies. Increasing the amount of product sold per customer significantly increases profitability without spending much on acquiring new customers.
3. New Innovations
Companies use this strategy as a way to distinguish themselves by creating the most cutting-edge products. Particularly common in the technology and automotive industries, new technologies provide new value products that people are willing to pay for. Innovation strategy focuses on basic research and development to achieve innovation, deliver value and build competitive advantage. This strategy includes analyzing a business’s competitive and technological edge to guide resource allocation and meet company objectives.
4. Product Development
Product development is a growth strategy that focuses on increasing your market share by developing new products that serve the market. This can also be done by modifying existing products to appear fresh and offering those products to new markets.
This strategy is usually done when there is no more room for growth in a company’s current market. Adding a unique or new feature to improve your product gives you a new product altogether. Product development can also be achieved by collaborating with another industry that your product can serve. An example of this is Spotify teaming up with Uber to provide a better user transportation experience.
5. Improving Customer Service
A great way to increase customer loyalty and satisfaction is by improving customer service. This is a good business strategy if your business has encountered a problem of delivering quality customer service. Companies build strong reputations on having exceptional customer service, and one viral instance of failing this can be quite damaging.
So a strategy focused on improving customer service will usually focus its objectives on providing more avenues for feedback. Examples of these can be improving online support or a more effective direct customer line. Having good customer service programs means loyal customers who can provide more positive endorsements to others.
This helps your businesses strengthen their brand more organically. Up to 97 percent of global customers say customer service is the key differentiator on whether to use or abandon a certain brand. Building business strategies that can address this important aspect is vital to keeping your business in a more positive light.
6. Cornering A Young Market
This is a standard business strategy for larger firms to corner a young market. It is done mainly by Fortune 500 companies to gain an advantage in a new or rapidly growing market. Acquiring a new company allows a larger company to compete in a market where it didn’t have any presence before.
An example of this was when Facebook acquired the photo-sharing startup Instagram for $1 Billion. At the time, Instagram already had 30 Million users but shot up past 150 million after Facebook’s acquisition. Facebook maintained its user base while adding a new one through Instagram.
7. Product Differentiation
An essential requirement to business success is to stand out from the competition. Having your product muddled out by the competition’s nearly same specs will mean a hard time making sales.
Instead, you can stand out by highlighting your product’s superior technology, features, styling, heritage and price. This is a common strategy in business, especially for Business-To-Consumer or B2C businesses.
An excellent reference to this is how Apple put out its product, the iPad Air. While competing tablets cost nearly $200 less, Apple iPad can retail a $499 price with its undeniable quality. Apple can command such premiums as it has successfully differentiated its products from known competitors.
Its marketing strategy focused on the iPad’s lightness, display quality, software, engineering and ease of use. By highlighting its superior features, Apple made the iPad Air an aspirational product that consumers would want more.
8. Pricing Strategies
Pricing Strategies refer to the process of setting prices for products and services. Businesses can either keep their prices low to attract more customers or price products beyond what most ordinary customers can afford to attain aspirational value. Maintaining low prices would mean a company would need to sell a higher volume because profit margins are usually low.
On the other hand, a small company may use price-skimming, which involves charging high prices for products, especially in the introductory phase. This helps to recover production and advertising costs much faster. Examples of pricing strategies are Walmart and Ikea’s low prices. Walmart and Ikea have outstanding market shares, and as giant retailers, sell at low bargain prices. This allows these companies to sell huge volumes to turn a more significant profit.
On the other hand, Italian luxury sports car manufacturer Ferrari prices its vehicles for exclusivity. By pricing its products beyond the reach of ordinary customers, Ferrari can claim exclusivity for its brand. This provides a huge profit margin for each car sold.
9. Technological Advantage
Technology can have significant strategic implications for individual companies. Using technological innovation, a company can achieve better sales, improved productivity and even market domination. This can be done by investing in research and development and innovative systems to help your company earn more efficient work. This can also be done by acquiring a smaller company to gain access to their technology and personnel with specific skills to attain a technological advantage.
10. Improve Customer Retention
Improving customer retention is a strategy that focuses on increasing the number of repeat customers. This means ensuring that customers have a great experience with you and continue to get value from your products. Customer retention is as profitable, if not even more so, than acquiring new customers. This is why it’s far easier to retain customers than to spend money to attract new ones.
Of course, receiving new leads is always great, but retaining your existing customer base should be your primary focus. A SAS and Loyalty survey states that 68 percent of sales come from existing customers. Therefore, identifying key tactics, activities and projects to retain your customers is essential for this strategy.
A Sustainability strategy is aimed at increasing the sustainability of your business. Sustainability in business can be defined as the capacity to change in global, economic, environmental and public trends through mechanisms that reflect societal requirements. This also ensures that your company’s impact on the environment is either neutral or positive.
Transforming an unsustainable company into a sustainable one means implementing a plan for action relevant to contextual pressures effectively. An example of this would be implementing a program that could significantly reduce energy costs or enact ways to decrease your company’s carbon footprint.
Acquisition strategy involves the acquisition of target companies that generate value for the acquirer. This is done when one company purchases most or all of another company’s shares to gain control of that company. Having an effective business strategy focused on the acquisition can keep a management team from buying businesses with no clear path of achieving a profitable outcome.
One of the biggest companies to enact growth through acquisition strategies has been Amazon. While it started as an online bookstore and retailer, Amazon has rapidly grown into one of the largest businesses in the world. Amazon has closed more than thirty deals in the past five years using its aggressive merger and acquisition strategy. Amazon has made multiple acquisitions to strengthen its core eCommerce operations while modifying specific business units.
In 2021, Amazon acquired MGM for $8.45 Billion to boost its own Amazon Prime Video streaming service. MGM owns more than 4,000 movie titles and 17,000 TV series that are now streaming on Amazon’s platform. Amazon continues to acquire more companies and initiate mergers that open more opportunities for the company.
For every entrepreneur, having strong business strategies means being one step closer to achieving business success. Establishing your company’s road map will make it easier for you and your employees to achieve targets, fulfill your client’s needs and remain a competitive force in your industry. In addition, effective business strategies provide a more precise means of executing the different plans you need to attain your company’s goals and objectives.