What is a business strategy?
A business strategy is a plan that helps a company achieve its goals. It includes tactics for marketing, finance, operations, and other areas. A business strategy aims to give the company a competitive advantage.
There are many different types of business strategies. Some common ones include cost leadership, differentiation, and focus. A company may use one or more of these strategies depending on its goals.
For example, a company that wants to expand may use a growth strategy, while a company that wants to improve its profitability may use a cost-cutting strategy. Successful businesses typically have a well-defined strategy and processes that they regularly review and update.
How to make a business strategy
Developing an effective business strategy is essential for any organization that wants to compete in today’s marketplace. While there is no one-size-fits-all approach, there are specific steps that all businesses can take to create a solid strategic foundation.
First, it’s essential to understand your company’s goals and objectives clearly. What are you trying to achieve, and how will you measure success?
Next, you must conduct a SWOT analysis to identify your company’s strengths, weaknesses, opportunities, and threats.
Once you have a good sense of your company’s position, you can develop specific strategies for achieving your goals. This may involve expanding into new markets, developing new products or services, or implementing more efficient processes.
Whatever the case, it’s crucial to have a well-thought-out plan for execution. Even the best companies will struggle to achieve their full potential without a solid strategy.
What are the levels of business strategy?
Business strategy can be divided into three levels: corporate, business, and functional.
Corporate level strategy
A corporate-level strategy is a long-term plan that a company uses to guide its business decisions and activities. The focus of a corporate-level strategy is typically on how the company will compete in its overall industry or market.
This can involve decisions about which businesses to operate in, what products or services to offer, and how to allocate resources across the company. Corporate-level strategies are usually developed by senior executives and are designed to help businesses achieve their overall goals.
When crafting a corporate strategy, businesses must consider their strengths and weaknesses and the opportunities and threats in their industry. By considering all of these factors, companies can develop a plan that will allow them to compete effectively and achieve their desired success.
Business level strategy
A business-level strategy is a plan of action to achieve a specific goal. This could be anything from increasing market share to expanding into new markets.
A business-level strategy must be aligned with the company’s overall mission and goals to succeed. It should also consider the company’s strengths and weaknesses and the threats and opportunities present in the marketplace.
Once a business-level strategy has been formulated, it is crucial to implement it in a consistent and disciplined manner. Otherwise, it will simply be another worthless piece of paper gathering dust on a shelf.
Functional level strategy
A functional level strategy is a plan that focuses on how a company will use its resources to achieve its goals in a specific business area.
For example, a company’s marketing functional level strategy might focus on how it will use its marketing budget to reach its target customers. A functional level strategy is generally created by a company’s top managers and is then implemented by lower-level managers.
While a functional level strategy is often aligned with the company’s overall business strategy, it can also be adapted to meet the needs of a specific business unit or product line. By taking into account each business unit’s unique resources and objectives, a company can develop a more targeted and practical approach to achieving its goals.
For a company to be successful, all three levels of strategy must be aligned. Otherwise, there will be confusion and conflict between different departments, leading to stagnation or even decline.
By developing a clear and concise business strategy, companies can ensure that all levels of the organization work together towards a common goal.
Examples of business strategy
A business strategy is a plan that outlines how a company will achieve its goals. There are many different business strategies, but some common examples include cost leadership, differentiation, and focus.
Cost leadership
Cost leadership creates a competitive advantage by having the lowest cost of production in their respective industry. This strategy is often used by companies that can produce their goods or services at a lower price than their competitors.
To achieve a cost leadership position, businesses must achieve economies of scale, which refers to producing goods or services at a lower unit cost as production increases.
There are several ways that businesses can achieve economies of scale, such as through vertical integration, investing in new technology, or streamlining their manufacturing process.
Once a business has achieved a cost leadership position, it can maintain it by continuously lowering its costs and/or raising its prices.
Differentiation
A differentiation strategy is where a company seeks to distinguish itself from the competition by offering unique products or services.
This can be done in terms of quality, features, design, or any other aspect that sets the company’s products or services apart from its rivals.
A differentiation strategy aims to make the company’s products or services more attractive to customers and thus gain a competitive advantage in the marketplace.
While a differentiation strategy can be an effective way to grow a business, it can also be challenging to sustain over the long term due to the constant need to innovate and remain ahead of the competition.
Focus
A focus strategy involves targeting a specific market niche or segment.
A focus strategy aims to gain a competitive advantage by catering to the target market’s unique needs. Focus strategies can be either cost-based or differentiation-based.
Focus strategies can effectively build brand loyalty and increase market share, but they can also be tricky to execute. Because focus strategies involve targeting a specific market segment, companies must be careful not to spread themselves too thin or risk losing their competitive advantage.
Each strategy has its benefits and drawbacks, and the best strategy for any given company will depend on its specific goals and situation.
However, all businesses need some strategy to be successful. Without a plan to achieve its goals, a company will likely flounder and ultimately fail.
Innovation focused business strategy of Godrej
How to measure the effectiveness of a business strategy
There are several ways to measure the effectiveness of a business strategy.
One standard method is to track changes in key performance indicators (KPIs). KPIs are quantifiable measures that can be used to track progress towards specific goals. For example, if a company’s goal is to increase sales by 10% over a year, then tracking sales figures monthly would be an effective way to measure progress.
Another standard method for measuring the effectiveness of a business strategy is to survey employees and customers. This can help to assess whether or not employees are engaged with the company’s new direction and whether or not customers see benefits from the changes.
Ultimately, the best way to measure the effectiveness of a business strategy will vary depending on the specific goals and objectives of the company. However, tracking KPIs and surveying employees and customers are two standard methods that can be used to assess progress.
IDEO’s Design Thinking Strategy – Making consumers fall in love with your products
How to implement a successful business strategy
Any business owner knows that a successful company requires a well-thought-out strategy. But what goes into a successful business strategy?
First, you need to have a clear understanding of your target market. Who are your potential customers, and what do they need or want? Once you have a good grasp of your target market, you can formulate your marketing strategy. This will involve deciding what channels to use to reach your target customers and what message you want to communicate.
It’s also important to clearly understand your company’s core competencies – what are you good at, and how can you use this to your advantage?
Finally, you need to regularly review and adjust your strategy in response to changes in the marketplace. By following these steps, you can ensure that your business has a solid foundation for success.
Difference between business strategy and corporate strategy
The terms “business strategy” and “corporate strategy” are often used interchangeably, but there is a subtle difference between the two.
Business strategy refers to the specific actions that a company takes to achieve its business goals. These goals may include expanding into new markets, developing new products, or increasing profits.
On the other hand, the corporate strategy encompasses the company’s overall direction. It includes both business strategy and financial strategy, and it sets the long-term goals for the company.
In short, business strategy is about how you achieve your goals, while the corporate design is about what your goals are.
The real challenge in crafting strategy lies in detecting subtle discontinuities that may undermine a business in the future. And for that there is no technique, no program, just a sharp mind in touch with the situation
Henry Mintzberg, management thinker and “enfant terrible” of strategic planning theory
