6 Elements of an Effective Business Strategy

June 27, 2020
184
Views
Share this

Whenever you see some companies successful and implementing hard-to-beat business practices, then one of their secrets is a good and sound business strategy.

Companies, such as Amazon, are successfully implementing customer-centrism, enabling shoppers to locate, explore, and buy seamlessly from their website.

A strategy, also known as a roadmap, is what businesses use to ensure their everyday activities are aligned to their mission, vision, or long-term goals. It contains your company’s products and services, plans, and target customers and markets.

A business strategy is a crucial tool for both startups and established organizations, whether they are expanding or just planning their investment options. 

Benefits of a business strategy

Business strategy is a master plan of how your business will secure competitive advantages, conduct its operations, serve customers, and realize specific goals and objectives.

Why are many businesses using strategies? Because entering the market without one is equivalent to gambling your way through, hoping that one or two moves will win you the game.

As a long-range sketch of how and where you want your organization to be, the business strategy serves the following purpose:

The importance of a business strategy
The importance of a business strategy – Image Credit: freepik.com
  • Planning

It helps you execute or fulfill the business plan.

  • Ensures business effectiveness and efficiency 

It helps to mobilize and allocate resources through a step-by-step guide.

  • Strengths & weaknesses 

It highlights your strengths and weaknesses and helps you capitalize on your strong points to overshadow the weak ones.

  • Competitive position 

A business strategy helps your business focus on the strengths, enabling you to position your brand in a unique and competitive way. Customers are attracted to businesses with a unique identity.

  • Control

It helps the business to anticipate and handle challenges and threats. It helps you to control activities and events in your environment to ensure everything is going as planned, and the business is achieving its interim goals.

  • Direction

A business strategy directs the organization’s efforts and behavior towards specific goals and objectives.

In a nutshell, a business strategy should answer the following questions:

  • Why am I in business?
  • What is my company’s core strength?
  • Which target market should we be serving?
  • Which products or services should we continue offering or stop offering?
  • Why have we settled for these strategic action plans and objectives? 

Also Read: Business Continuity Planning Steps

Types of business strategy

Different times, different strategies
Different times, different strategies – Image Credit: pixabay.com

Are you wondering which type of strategy to work with? Then you don’t have to because businesses use different strategies depending on circumstances.

When you’re introducing new products or services or new features, you can use the growth strategy. You can also use this business strategy when seeking new markets for your goods, new target customers, or new product packaging.

Another business strategy type to consider is the product development strategy, whose focus is on research and development. You can use this roadmap when creating new and innovative products and services aimed at improving your company’s competitiveness, sales, and customer base.

The marketing strategy enables you to determine the best markets for your products and services. It also outlines the best approach to implement to reach the target markets.

When your business life cycle is at the decline stage or when undergoing a crisis, consider using the turnaround strategy. It will help you to reverse the downward trend in sales and market reach.

The acquisition strategy helps your business remain competitive by laying out how and what to do to purchase another firm, its division, or product line.

An exit strategy enables the business to plan on how to exit the market and how investors will recover equity during this period.

Business strategy levels

Business strategy levels
Business strategy levels: Image Credit: relivingmbadays.wordpress.com

1. The corporate level 

This is the highest and most comprehensive business strategy level. It is a long-range, integrated, and action-oriented plan designed by the top management.

It is equivalent to the business plan and outlines what and how your business is set to achieve its goals. It contains corporate objectives, mission, and vision.

You can use this strategy in your business to ascertain business growth and expansion, product lines, mergers and acquisitions, integration, and diversification. It will also help you to outline new ways to invest and divest.

2. The business unit level

Developed by general managers, this road map is specific to a business unit. The goal is to convert the company’s mission and vision into tangible strategies.

Business units differ in terms of products, channels, or the nature of operations. Therefore, every unit in your organization can create a strategy that distinguishes its competitive strategies while aligning its objectives with corporate level goals. 

3. The functional unit level

Supervisors or first-line managers develop the functional level strategy. It outlines the decision-making processes and procedures for the execution of the day-to-day corporate- and business-level strategies at the operational or departmental level.

Each unit in your company can have different departments. Organizational units include research and development, operations, technology, manufacturing, and marketing, etc.

Departments may include human resource, production, sales, finance, and customer service. Therefore, depending on your organization’s nature, you can create a marketing strategy, financial strategy, human resource strategy, production strategy, or research and development strategy.

When developing a functional unit level business strategy, keep in mind that it should have daily actions and decisions to meet the unit and corporate-level strategies.

This approach ensures that all business activities are in sync, leading to sustainable relationships, effective service delivery, and overall business growth.

What is in a business strategy?

The process of business strategy development requires an ability to answer the whats, whys, wheres, hows, and whens of achieving the organization’s mission, vision, and goals.

The following are 6 key components that make up an effective business strategy:

1. Mission, vision, and business objectives

The business strategy should tell you what to do, how to do it, who will do it, and what value to bring to the market in order to reach the desired objectives, goals, mission, and vision in your business. 

2. Critical values

An effective business strategy gives a clear direction to your functional-level and business-level units. It tells them the core values to abide by to eliminate ambiguity and time wastage.

3. Strengths, weaknesses, opportunities, and threats (SWOT) analysis

Image Credit: freepik.com

A SWOT analysis informs the managers and supervisors of which strengths and opportunities to take advantage of to reach the unit level objectives on time. It also tells them what weaknesses and threats to be aware of to mitigate against risks or to adopt other strategies, such as differentiation, mergers and acquisition, etc.

4. Operational-level strategies 

When developing functional- and unit-level business strategies, managers can draft detailed plans on how and what work needs to be done to ensure effective and efficient allocation of duties and responsibilities.

5. Resource allocation & procurement master plan

The business strategy should outline how and where your organization will procure resources to meet day-day operational needs.

It also indicates how the resources will be allocated and who will oversee this process.

6. Measurement

Implement controls at the functional levels to keep track of the company’s performance and output against monthly, quarterly, and annual targets.

Details on how the control measures are to be implemented should be outlined in unit-level business strategies.

You should also add some or all of the following core elements in your business strategy:

A shelf demonstrating the core elements of a business strategy
Image Credit: freepik.com
  • Opportunity – gather data and facts to analyze future events and how they might change over time. You can use a SWOT analysis tool to determine areas that worked well in the business, what to improve on, and what opportunities to look out for.
  • Innovation – let your plan consist of unique and differentiated products and services, and align with the nature of your business.
  • Economies of scale – adopt innovative ways to keep your prices low. Supplement this approach with unique product features and quality customer service.
  • Time to market – decide whether it is more cost-effective to build or buy a product or service. You can save costs by buying an existing product and modifying it, or by outsourcing services to a third-party provider.
  • Tests/performance management – keep reviewing and updating your business strategy to ensure it is relevant to your company’s mission, vision, objectives, and action plans, and market needs.
Business strategy test checklist
Test checklist- Image Credit: freepik.com
  • Risks and failures – consider risks likely to affect your business and make provisions for failures. You can use past successes and failures to anticipate opportunities and threats and prepare yourself for the future.
  • Stakeholders – share your business strategy with employees to ensure they understand what is required of them. Explain to them how the strategy relates to their work and the firm. You can also share a separate plan with your partners, investors, suppliers, and customers.

Also Read: A Guide to Entrepreneurship

5 Business strategy examples

The following are examples of business strategies and how they have been implemented:

1. Mergers and acquisitions

Facebook has been keeping competition at bay, not mainly through innovation, but by acquiring upcoming tech companies. To do this successfully, Facebook has been employing effective acquisition strategies to buy-out rival companies, such as Instagram, WhatsApp, Oculus VR, FriendFeed, and Ascenta

2. Product differentiation

To stand out in the market, your business should have a product development or differentiation strategy. Apple has been using this approach to gain a loyal clientele for its iOS operating system, distinguishing it from other players using Android.

3. Improve customer experience

Happy customers
Happy customers – Image Credit: freepik.com

You can develop a business strategy to improve customer satisfaction. Quality customer experience drives long-term business success as it promotes customer retention and sales.

4. Pricing strategies

Cost leadership is an effective approach, which can enable your business to make more sales through increased demand. Companies, such as Southwest Airlines and Amazon, use different cost leadership business strategies to gain competitive advantages.

5. Cross selling and upselling

Cross selling additional, related, or complementary products and services and upselling premium versions of an existing item are effective sales tactics. As a business owner, you should develop a marketing strategy to ensure that your firm’s day-to-day sales and marketing activities are aligned with the corporate-level goals.

Business Strategy Samples

Sample business strategy 1 

The following business strategy is for a company called Pinnacle Performance Group, specializing in providing performance improvement strategies and other services to financial advisors and accounting firms.

Sample business strategy 1 – Image Credit: fasttrac.org

Sample business strategy 2

The following strategy is for O-Foods, a firm that provides organic foods through three retail stores and the company’s website.

Sample business strategy 2 – Image Credit: fasttrac.org

Conclusion

A business strategy enables companies to align their day-to-day-activities with their mission, vision, and objectives. It guides the business journey to secure competitive advantages, serve customers satisfactorily, and realize specific growth goals.

An effective business strategy, whether for marketing, product development, or customer service, can set your company apart from the competition. It can give your business meaning and direction.

Intellini Business Consultants helps companies to develop comprehensive, action-oriented business strategies. Would you like to give your business a clearer purpose, borrowing from your business plan? Then feel free to contact us.  

Free Email Updates On New Posts
We respect your privacy.
Share this

Leave a Reply

Your email address will not be published. Required fields are marked *