Developing a business strategy is a process that involves analysing the external and internal factors that can impact the organisation. These factors include the competitive environment, market trends, and the organisation's strengths and weaknesses.
Business strategy is a crucial part of any business, large or small. It is the plan for achieving a company’s goals and objectives. It is the long-term direction of the business and its overall scope of operations. Business strategy helps a business to identify and maximise opportunities, identify and manage risks, and develop a plan for achieving its goals.
In this article, we will look at diverse business strategies companies can use to stay competitive in their markets. We will also discuss the importance of incorporating business strategy into a company’s operations and how it can drive successful business outcomes.
Did You Know? A business strategy is a long-term plan that helps companies achieve their goals.
What is Business Strategy?
Business strategy refers to an organisation's actions and decisions to achieve its goals and objectives. Business strategy also defines the organisation's competitive advantage or the unique value proposition it offers customers.
It involves
- Choosing the types of products or services the organisation will offer,
- The target markets it will serve, and
- The resources it will use to achieve its goals.
Implementing a business strategy involves allocating resources, such as finances, human capital, and technology, to support the chosen course of action. It may also involve changing the organisation's operations, such as adopting modern technologies or entering new markets.
Effective business strategy requires ongoing evaluation and adjustment in response to changes, internal and external.
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Business Strategy Examples
Based on this analysis, the organisation can identify its long-term goals and objectives and develop a plan to achieve them.
1. Increase Market Share
Many businesses use this strategy to expand their operations and increase their profits. This involves expanding into new markets, developing new products, and investing in marketing and advertising campaigns.
2. Acquisition
Acquiring other businesses or assets can be a wonderful way to expand a company's operations and add to its customer base and revenue.
3. Diversification
By diversifying into new markets, products, and services, a business can reduce risk and increase its chances of success.
4. Cost Reduction
Cutting costs is one of the best ways to increase profits and keep prices competitive.
5. Customer Focus
Developing a customer-centric strategy can help a business build loyalty and increase sales. This includes providing excellent customer service, understanding customer needs, and creating customised products and services.
The Importance of Business Strategy
Business strategy is important for several reasons:
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Achieving Long-term Goals
Business strategy helps an organisation define its long-term goals and objectives and develop a plan to achieve them. Without a clear strategy, an organisation may lack direction and struggle to achieve its goals.
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Improving Competitiveness
Business strategy helps an organisation assess its strengths and weaknesses and determine how to use its resources to gain a competitive advantage in the market. An organisation can stand out from its competitors by identifying its unique value proposition and targeting the right markets.
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Allocating Resources Effectively
Business strategy helps an organisation allocate its resources, such as finances, human capital, and technology, in a way that supports its goals and objectives. This helps the organisation get the most value from its resources and avoid wasting them on unproductive activities.
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Responding to Change
Business strategy helps an organisation anticipate and respond to changes in the internal and external environment. Regularly reviewing and adjusting its strategy, an organisation can stay ahead of the curve and adapt to new market conditions.
Overall, business strategy is essential for the long-term success of an organisation. It helps the organisation define its goals, allocate resources effectively, and stay competitive in a constantly changing business environment.
Levels of Business Strategy
There are typically three levels of business strategy:
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Corporate Level Strategy
Corporate level strategy involves making decisions about the organisation's overall direction and how it will compete in the market. This includes decisions about the types of businesses the organisation will be involved in and how it will allocate resources among its various divisions or units.
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Business level strategy:
Business level strategy involves deciding how a specific business unit or division will compete in a specific market. This includes decisions about the products or services the business unit will offer, the target market it will serve, and the resources it will use to achieve its goals.
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Functional Level Strategy
The functional-level strategy involves making decisions about how specific departments or functions within the organisation will support the overall goals and objectives of the business. This includes decisions about allocating resources, such as finances and human capital, within a specific department or function.
Each level of strategy is interdependent and affects the others. The corporate-level strategy might influence the business-level strategy, which may then influence the functional-level strategy, for example. Effective strategic management requires aligning strategies at all levels of the organisation to ensure they are consistent and support the business's overall goals.
Types of Business Strategy
There are several types of business strategies that an organisation can adopt:
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Cost Leadership
A company that adopts a cost leadership strategy aims to be the lowest-cost producer in its industry. To achieve this, the company may focus on operational efficiency, economies of scale, and minimising waste.
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Differentiation
A company that adopts a differentiation strategy aims to offer unique products or services that are perceived as superior to those of its competitors. This can be achieved through innovation, high-quality products, or excellent customer service.
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Niche Market Focus
A company that focuses on a niche market targets a specific, narrow segment of the market and aims to be the best at serving the needs of that segment. This can involve offering specialised products or services that meet the unique needs of the target market.
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Customer Intimacy
A company that focuses on customer intimacy aims to build close relationships with its customers and tailor its products or services to meet their specific needs. This can involve personalised service, custom products, or an important level of customer engagement.
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Product Innovation
A company that focuses on product or service innovation aims to constantly introduce new and improved products or services to the market. This can involve investing in research and development, collaborating with external partners, or adopting modern technologies.
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Diversification
A company that adopts a diversification strategy expands into new markets or industries that are unrelated to its current business. This can involve entering new geographical markets, launching new product lines, or acquiring new businesses.
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Integrated Low-Cost Differentiation
A company that adopts an integrated low-cost/differentiation strategy aims to offer low-cost products or services that are also differentiated from those of its competitors. This can involve using low-cost production methods while also focusing on innovation and customer intimacy.
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Steps to Developing a Successful Business Strategy
Developing a successful business strategy involves several steps:
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Define the Organisation's Vision, Mission, and Values
The first step in developing a business strategy is to define the organisation's vision, mission, and values. These should be based on the organisation's long-term goals and objectives and provide clear direction.
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Analyse the Internal and External Environment
The next step is to analyse the internal and external environment in which the organisation operates. This includes conducting a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to identify the organisation's strengths and weaknesses and the opportunities and threats it faces in the market.
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Set Goals and Objectives
Based on the analysis of the internal and external environment, the organisation can set specific, measurable, achievable, relevant, and time-bound (SMART) goals and objectives. These should align with the organisation's vision, mission, and values and provide clear direction for the organisation.
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Identify a Competitive Advantage
The organisation should identify its unique value proposition or the unique benefits it offers customers.
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Develop a Plan of Action
Based on the analysis of the internal and external environment, the organisation's goals and objectives, and its competitive advantage, the organisation can develop a plan of action to achieve its goals. This plan should outline the organisation's steps to achieve its goals and the resources it will need to do so.
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Implement and Evaluate the Strategy
The final step is to implement the business strategy and regularly evaluate its effectiveness. This may involve adjusting the strategy based on the organisation's progress as well as changes within and outside the organiaation.
Conclusion:
Business strategy is an essential tool for businesses of all sizes to succeed. It is a plan that helps executives and other decision-makers focus their efforts and resources on achieving their goals and objectives.
A successful business strategy will identify an organisation’s competitive advantages, target market, and strategy for differentiation. It will also provide the framework for making sound decisions, setting priorities, and developing plans and strategies.
A well-defined business strategy can help maximise a company’s potential and lead to long-term success.
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