Starting and running a business involves multiple factors and a great business strategy is one of them. It is a master plan that dictates the goals, core values, and functionality of any organization.
As a leader and owner of a business, you need to build a key plan that is designed to benefit your customers, stakeholders, and employees. Coming up with such a complex plan can be hectic. But worry not.
So, I am here to help you understand what a business strategy is and its key components, benefits, formation process and examples from top leading businesses.
What is a Business Strategy?
A business strategy is a master plan that an organization follows to streamline its production and delivery and benefit its customers, employees, and stakeholders. It is a set of defined initiatives that each person within the organization is bound to follow.
The main purpose of a business strategy is to offer guidance for teams and individuals to meet up with the company’s goals and make profits. It also dictates the direction in which a company will head in the future.
According to Harvard Business School Online, a perfect strategy determines key factors of a company that are:
- Product price
- Employee recruitment
- Resource allocation
- Supplier sustainability
Besides these basic factors, a proper business plan also helps determine the inner dynamics of a business. In other words, it acts like a lighthouse for employees to help them put their efforts in a certain direction.
A business strategy consists of different levels. These levels are based on the scope and purpose of long-term goals. These levels are discussed below:
i) Corporate Level
The corporate-level strategy is the plan that implies the overall company. It is usually formulated by management members sitting at the top tables. This level determines the long-term goals of an organization. It also dictates how a company’s mission, resources, and vision will integrate with each other for competitive advantages.
ii) Business Level
A business-level strategy focuses on how a specific business unit is going to operate in order to achieve its goals. This strategy is devised by general managers with a focus on allocating resources and employee struggle to stay ahead in the market. These strategies consist of clear and concise plans that employees follow to get things done.
iii) Functional Level
The functional-level plan is all about making strategies for certain departments. It can be the marketing department, sales department, IT department, and so on. Supervisors or first-line managers are responsible for formulating these strategies and helping teams perform specific tasks while adopting the latest technology trends.
Key Components of a Business Strategy
To understand a business strategy properly, you have to comprehend its key components. I’ve described the basic components below:
Vision and Mission:
Vision and mission are two of the primary components of a great business strategy. Although both are interlinked, there are certain differences between them. The vision helps the company comprehend the level that it has to reach in the future. It includes clear guidelines about a company’s ultimate vision.
The mission, on the other hand, explains a company’s reason for existence. It acts like the North Star, giving directions to the employees, management, and stakeholders.
Core Values and Principles:
Core values and principles are also important components of a strategy. They help people understand the values and beliefs a company follows. Understanding these principles is essential for better decision-making. It also explains how a company would behave while solving a situation under different circumstances.
Goals and Objectives:
Goals and objectives are clarified components of the strategy. They clearly and blatantly define the end result a company wants to achieve. They are a roadmap that each business unit follows while pursuing success in the market.
SWOT Analysis:
SWOT analysis is a component of a strategy that explains a company’s self-awareness about its strengths, weaknesses, opportunities, and threats. Analyzing each of these factors allows companies to understand their current position, the challenges they’re facing, and potential opportunities that can help them achieve their end results.
Key Benefits of a Business Strategy
A proper business strategy benefits an organization in many ways. Each company, no matter how small or big, can enjoy the following benefits by defining a clear plan:
- A business strategy defines a clear path they have to follow for success.
- A strategy helps get a better understanding of the current state of a business.
- It clarifies values and goals that people of the company must follow for a better output.
- When working and roles are clarified, people can work with clarity which enhances productivity.
- A strategy helps in better source allocation. It benefits the company’s income in the long run.
- It allows employees and management to follow a certain set of guidelines and work without facing any confusion.
- Factors like core value-defining help management make data-driven and clear decisions without getting double-minded.
How to Develop a Strong Business Strategy? Key Steps:
Developing a strong business strategy requires careful consideration of different factors. However, following certain steps can make things smoother. So, here are some clear and key steps you can follow while coming up with a proper plan for your company’s functionality:
1. Define Your Vision:
Start off with defining a clear vision. By vision, I mean identifying a certain position where you’d like to see your company in the upcoming years. The vision can be varied according to your business nature.
Perhaps, you’d want to work around a profit-driven vision, such as increasing sales, or brand building, such as being the best brand in the industry. Whatever your goal is, make it a proper vision so that following it becomes easier. It will also help you out in the rest of the strategy-making procedures.
2. Conduct a SWOT Analysis:
As I mentioned above, self-awareness is important for a company while devising strategies. So, the next thing you need to do is conduct a comprehensive SWOT analysis.
- Strength: Understand what your company is good at. Your company might have great public relations, abundant resources, a better workforce, etc.
- Weaknesses: Understand the points your company is struggling with. Is it less productivity? Bad hiring? Inappropriate work environment?
- Opportunities: Opportunities usually are related to external business factors. Analyze things that can act as an opportunity for your growth. For example, a lack of product in the market can be your opportunity to increase sales by making the product available to the audience.
- Threats: Threats, too, are external factors that can harm your overall progress. It can be a bad economy, poor government policies, etc.
3. Set SMART Goals:
Setting SMART (specific, measurable, achievable, relevant, time-bound) goals is an important step you need to focus on. SMART goals are more defined and have more clarity in them.
It is beneficial to set goals that are realistic, and can be achieved within time. Try to allocate certain deadlines for each goal to streamline the efforts of your employees. A detailed explanation of SMART goals factors is given below:
- Specific: The end-goal should be specific and clearly defined.
- Measurable: Set goals that can easily be measured and counted in real-time.
- Achievable: The goals should be realistic and achievable according to the market conditions.
- Relevant: Set goals that are actually relevant and aligned with your overall business vision.
- Time-bound: Keep the goals attached with a deadline to make them time-bound.
4. Create an Action Plan:
Strategy is useless without execution. You need to create a proper action plan in order to execute the perfect strategy that you’re building for the business. The action plan varies according to the nature of companies as well as the strategy itself. However, the following general key points can help you understand it better:
- Allocate resources to each business unit.
- Announce the strategy for each department clearly.
- Assign roles and responsibilities to each individual.
- Break down plans for better understanding and execution.
5. Monitor and Adjust:
After executing the strategy, keep monitoring it closely. Look at different aspects to see if they’re working according to the requirements. Analyze strategy performance regularly to ensure productivity. See if the KPI’s are aligned with the company’s overall productivity standard or not.
In case things aren’t going your way, don’t shy away from making adjustments to the plan. Markets and clients are always unpredictable. Their requirements can change and you might mess up the whole progress by following a compact strategy. So, it is important to adjust to the circumstances and keep on making changes in the strategy as required.
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Top Examples of Business Strategy from Successful Ventures
Many leading companies in the world build business strategies to overcome difficulties and achieve their end goals. In fact, 71% of fast-growing organizations usually follow a proper strategic plan for their operations. I’ve mentioned 5 of these examples below:
1. Starbucks’ Valued Customer Engagement:
Starbucks, one of the biggest coffee brands, was struggling financially years ago. It was when their CEO Howard Schultz came up with the valued customer engagement business strategy.
It was focused on engaging customers with the company itself for increased value. As a result, they launched the “MY Starbucks Idea” campaign which helped them make the required sales. They also offered other things like free Wi-Fi for a better customer experience.
2. Alibaba’s Online Marketplace Dominance:
Alibaba is one of the leading online marketplaces that is helping people access wholesale sellers and manufacturers around the world. This company has a business strategy that focuses on dominating the online marketplace.
Their plan revolves around using platforms like Tmall and Taobao which contribute 85% in its revenue. Another way they’re executing this plan is by investing in cloud computing and digital media.
3. Big W’s Operational Efficiency:
Big W is Australia’s one of the most successful retail chains. It believes in streamlined working and customer satisfaction. So, the company has devised a business strategy revolving around operational efficiency.
According to this plan, the company is focusing on utilizing innovative tools and machines for better business functionality. They’ve integrated Visa payWave for better customer service.
4. Amazon’s E-Commerce Dominance:
The Amazon company doesn’t need an introduction anymore. This e-commerce giant believes in dominating the market by providing a diverse range of products and services to people.
Their business model revolves around creating multiple services for the betterment of their employees. That’s the reason why they’re involved in e-commerce, entertainment, and product manufacturing businesses frequently.
5. Apple’s Integrated Ecosystem:
Apple is known for manufacturing products that only work best within a certain ecosystem. For example, the Apple TV will work the same if you use it with an iPhone. The company’s model is all about using the Razer and Blade approach.
It makes products that offer great performance when combined with other Apple products. As a result, the customer has to purchase more devices which boosts their sales.
