What is a Business Strategy? [5 Steps for Creating a Strong Strategy]
What is a business strategy and how do you create one? In this guide, you’ll find real-world tactics and business strategy examples to help you get growing.
17 Actionable Business Strategy Tips You Can Actually Use
A business strategy clearly defines how a company will compete in the marketplace. With a strategy based on goal-setting, planning, and taking the right action, companies make a mark on their industries with high-quality, imaginative products and services that benefit their customers and create value for the organizations.
Research shows companies that create and execute a sound business strategy have a 30% greater chance of achieving growth. They also have a chance to double their ability to create value in the marketplace.
In today's economy, business strategies need to be flexible, based on the latest research, and better able to adapt to change. A company business strategy should answer these questions:
- Why are we in business?
- What is our core strength?
- Which products and services speak to that strength and our purpose?
- Who are the people we should serve, and how should we attract, inspire and retain them?
- What's the reason for taking these strategic directions?
"What is a business strategy (with examples)?"
A business strategy is the overall action plan that a company uses to create a mission and achieve its vision. The business strategy guides a company's decision-making processes to improve the way they create value for their customers and achieve a competitive advantage in the marketplace.
While the business strategy drives overall goals and the way to reach them, business tactics are the specific actions aligned with the strategy that will achieve overall goals.
Examples of a business strategy include:
Product or Service Differentiation
- Elevating your product or service in the industry by highlighting its superior qualities.
- Differentiated products and services answer consumer questions and solve their challenges better than the rest.
- Differentiating features could include ease of use, attractive price points, modern styling, unique design, innovative technology, etc.
- Pricing that attracts more customers to sell a higher volume. Usually, the cost is lower than competitors' pricing without affecting the company's ability to create value.
- Pricing that's perceived as aspirational value, which means the cost creates a level of exclusivity with buyers. It renders the product or service out of reach for ordinary customers without affecting the company's ability to create value.
Capturing Niche Markets
- Acquiring a new company to gain a stronger presence with target consumers while retaining current market share.
- Merging with a competitor to attract a new audience or growth market.
- Investing in research and development to create proprietary software.
- Hiring team members with unique skills and expert industry knowledge to improve productivity.
- Acquiring another company's technology to achieve market domination.
- Offering remote and/or hybrid work.
- Making energy-efficient upgrades and "reduce, reuse, recycle."
- Partnering with green companies.
Quality Customer Service and Retention
- Running an efficient call center with trained expert team members.
- Upgrading online and virtual support for customers.
- Seizing opportunities to retain loyal customers with special offers and rewards.
Innovation for a Better World
- Updating current products and services to keep up with the market and consumer trends.
- Introducing new products and services on a set schedule that solves more consumer challenges and helps them live great lives.
The Importance of a Company Business Strategy
Understanding what is a business strategy and having a comprehensive plan helps organizations in the following ways.
- Planning to determine the key steps for reaching company goals.
- Allocating resources to plan efficiently, communicate roles and responsibilities effectively and stay on track with project goals.
- Responding to opportunities by identifying strengths and weaknesses, using strengths to build the company, and knowing how to compensate for (or eliminate) weak areas of the organization.
- Enabling better outcomes, choosing the actions that directly help with reaching goals.
For a company to benefit from its business strategy, both leaders and teams must be held accountable for getting strategic actions done and get rewarded for them. Harvard Business Review studies show that 70% of leaders and more than 90% of team members do not have any value incentives linked to strategic execution or success.
For people to actively contribute to strategic initiatives, companies should develop a culture of accountability and execution. Here are the first (and most important) steps you can take to develop an accountable company culture right now:
- Make the Vision accessible to all.
- Clearly communicate roles, responsibilities, and how performance is measured.
- Set clear goals.
- Conduct efficient meetings.
- Stay up-to-date on To-Dos.
- Prioritize Issues.
- Track relevant performance metrics.
- Be consistent about giving and getting feedback.
- Document core processes so everyone knows how to do them and how to do them correctly.
"What is a business strategy (and what does it include)?"
A business strategy typically includes six elements:
- Company Vision
Your company strategy outlines the direction of the company with clear instructions for how to get there and who is responsible for completing each step.
- Core Values
A good business strategy uses the organization's core values to guide the actions of leaders and team members, so they’re motivated by the same goals and stay on the same page.
- SWOT Analysis
Your strategy identifies strengths, weaknesses, opportunities and threats (SWOT) for the company. While leaders and team members need to be aware of weaknesses and threats and how to mitigate them, they use their strengths as an advantage when competing in their industry.
- Key Tactics for Success
A well-defined strategy plans the specific operational activities that align with the strategy to help achieve overall goals efficiently and effectively.
- Resource Requirements
An effective business strategy explains how to allocate and use required resources, who is responsible for doing so and how to include or replenish resources when needed.
- Results Measurement
A clear business strategy includes a way to track progress and evaluate performance, which helps companies stay focused on targeted goals and create new ones, if applicable.
5 Steps For Creating A Business Strategy
Step 1: Define company vision
To define company vision:
- Review your company’s core values for insight into what matters.
- Determine where you see the company moving in the future.
- Review your product and service offerings and the value proposition, and why people should buy them. This helps define how your company is different, and how to create demand and effectively compete in the market.
- Identify the type of prospects your company wants to serve, either consumers (B2C) or other companies and organizations (B2B). Then, determine your target market. Make sure you address each group’s different motivations and specific needs. The B2C market can be defined by demographic and socio-economic factors like gender, age, occupation, education, income, wealth and location. Whereas a B2B market can be defined by industry, type of business and sales model of targeted customer groups.
Step 2: Set goals for creating value
Decide how your company can compete with these specific goals in mind:
- To grow revenue.
- To improve your financial position within the market.
- To increase the company’s economic value for owners or shareholders.
Step 3: Analyze company and market attributes
This is where SWOT analysis comes in (strengths, weaknesses, opportunities, threats). SWOT analysis ensures that the company’s strengths are utilized in making the most of market opportunities. Potential weaknesses and threats can also be addressed so they won’t limit long-term success.
Step 4: Identify competitive advantage
To identify competitive advantage:
- Define how company leaders and teams want to compete in the market.
- Create demand for your company’s unique products and services.
- Improve how your company creates value to increase sales margins.
Step 5: Build a business strategy framework
A strategy framework involves elements that support the overall business strategy and contribute to its success. These include:
- Company culture: A key driver to implementing a successful business strategy.
- Strategic marketing: A clear plan to build a brand, promote products and services and support sales initiatives.
- Leadership: A team that includes all stakeholders who believe in and are ready to execute every element of the business strategy.
- Resources: A workforce that includes all the people and materials to lead, prioritize and set expectations for the work outlined in the business strategy.
- Strategy implementation: A set of documented operational processes and procedures to help implement your business strategy successfully.
For most companies, strategy implementation is a big deal. The majority of leaders (98%) think strategy implementation takes more time than creating the strategy. In fact, 61% say their companies “struggle to bridge the gap between strategy formulation and its day-to-day implementation.” What’s more, experts say 4.5% of a business strategy's “potential” is not actualized due to poor action planning.
"What are the 4 types of business strategies?"
When people refer to the four types of business strategies, they’re usually talking about strategies that are determined based on the kind of decisions a company needs to make to achieve predetermined goals. The four types of business strategies are:
- Cost leadership strategy — offering a better price for products and services in the market.
- Differentiation strategy — offering products and services unique to the industry.
- Focused cost leadership strategy — offering a better price for products and services to a specific audience or niche customer group.
- Focused differentiation strategy — offering unique products and services that appeal to a specific audience or niche customer group.
8 Actionable Business Strategy Tips You Can Actually Use
Set realistic objectives
Think long-term when creating a business strategy that clearly addresses realistic goals. Be practical when developing or identifying solutions for:
- The types of products and services you want to build.
- The customers and markets you want to serve.
- The actions you want to take that will help you make the strategy a success.
Get real about opportunities and threats
- Carefully analyze your company’s current opportunities in the market and how they might evolve over time.
- Anticipate the risks and challenges of reaching for opportunities with the benefit of clear thinking.
- Gather concrete data, check sources and confirm information before finalizing decisions and action plans.
- Devise a plan to mitigate potential roadblocks from achieving goals.
Lean toward differentiation
In recent years, companies like Apple, Amazon and others have not only been successful at bringing quality products and unique services to market. They’ve also been outrageously successful in creating whole new ways of living, working and finding happiness for consumers. This can only happen with timely dedication to building clearly differentiated products and services that align with their brands.
- Make sure your business strategy stays focused on competition.
- Choose a market with little competition or one that’s not served at all.
- Get there first.
- Get busy capturing market share and building your brand.
- Position your company so it’s more difficult for others to enter the market.
Do more with economies of scale
- In today’s market, it’s not enough to lower the cost of products and services through economies of scale.
- Always be imaginative with unique product features and new updates.
- Offer high-quality customer service (read: agile, proven, trusted).
Share strategy both internally and externally
- Sharing your company’s business strategy with leaders and teams at all levels of the organization helps to solidify its guidance on strategic initiatives. Explain how the strategy and its implementation relate to each employee and how it relates back to the company.
- Share the plan with stakeholders like investors, partners, suppliers, industry analysts and your customers.
- When you let everyone know what you’re doing, why you’re doing it and how it creates value for everyone, you build trust.
Focus on strategy execution
Over half of leaders (61%) think they’re not doing a good job implementing their company’s business strategy, and only 40% of team members think leaders understand their company’s strategy or goals. For your business strategy to succeed, it’s critical to align the entire organization. Sharing the business strategy with people at all levels will provide great clarity on what actions need to happen at their level and how those to-dos relate to the overall success of the strategy.
Be diligent about tracking progress and measuring success
- 92% of organizations report they do not track how well they are competing in the marketplace.
- 85% of leaders spend less than one hour per month on business strategy.
- 50% of leaders spend no time at all on business strategy.
- 25% say measuring implementation is a tough challenge.
However, in companies that consistently meet their strategic goals, leaders meet at least once a month for four to eight hours. There, they review and measure strategy success and know what’s working, what’s not and where to focus.
One way to evaluate the success of a business strategy is to track Key Performance Indicators (KPIs), but there are plenty of formalized tracking processes you can (and should) try. 70% of companies that say they use a formal process to track and review strategy also out-performed their competitors.
Find out how Ninety can help you easily plan and implement your business strategy right now with a comprehensive system of tools. Ninety helps you create, implement, and track your business strategy.
"What is meant by business strategy?"
Companies use strategy to refine their mission, goals and operation to deliver better value to their customers. When they use their resources to gain a better advantage in the market, companies create a competitive edge over other organizations and perform at a higher level. Companies use these approaches to achieve success to write a better strategic plan for their business.
In 1985, Michael E. Porter, a Harvard Business School professor known for his theories on economics, business strategy, and social causes, developed three highly-effective business strategies for gaining competitive advantage that is still used today. Porter's Generic Strategies were first published in his book, Competitive Advantage: Creating and Sustaining Superior Performance. They are:
Cost Leadership – producing products and services at a lower cost than industry competitors while charging industry-average prices. Companies create a cost-benefit through proprietary technologies and economies of scale, meaning they gain a cost-saving by increasing production levels.
Differentiation – offering unique products and services that are more highly valued by customers than other products and services in the industry. Companies are able to get higher prices for differentiated products and services.
Focus – having either a cost focus or a differentiation focus strategy to attract specific or niche segments of the market. To gain a cost advantage, companies offer low-cost alternatives to leading products and services in the industry that appeal to a target audience of buyers. To gain a differentiation advantage, companies offer unique products and services that are highly valued by niche audiences and fulfill their specific needs.
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