Everything Business Strategy
What is Business Strategy?
Both small business owners and large corporation owners need a business strategy. A business strategy is defined as the actions undertaken by a company towards the accomplishment of business goals and competitive advantage maintenance.
Business goals can revolve around everything from business growth to cost leadership objectives. Many professionals consider a business strategy as a long term business planning process.
One main objective of business strategies is the establishment of concise decision making guidelines. Decision making protocol is formed through the generation of guiding organizational principles.
Typically business strategies span over a time period of 3 to 5 years into the future. However, some business strategies are even more long term focal.
There are 3 levels of business strategy that every professional should be aware of which include the-
1. Corporate Level
A corporate level strategy is generally developed by top management professionals. The corporate level strategy is both long term focused and comprehensive.
Business objectives of corporate level strategy can range from business growth to divestment proposals. Additional business objectives may include the exploration of new products or new markets to invest in in order to promote diversification.
Note-: The corporate level strategy focuses on long term business strategies such as the exploration of new products or business growth opportunities.
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2. Business Level
A business level strategy is typically formulated by general managers. The business level strategy umbrella covers any strategies that are related to a specific company.
A common objective of business level strategy is the conversion of whatever vision business owners have into a tangible strategy. Both a business model and business plan are useful to help guide the formation of business level strategies.
3. Functional Level
A functional level strategy is generally developed by supervisors or managers. Any decision making that occurs on the operational level is encompassed under the functional level strategy umbrella.
Examples of functional areas within a business include customer service and marketing operations.
The Strategic Management Process
One definition of the strategic management process is the maintenance of competitive advantage through continual business adaptation. Another definition posits the strategic management process as the creation and implementation of operational strategies in order to secure a competitive advantage.
The strategic management process undertakes strategic objectives within an organization. Strategic management activities may involve developing the vision of business owners and business goal establishment.
The terms strategic planning and strategic management are often incorrectly used interchangeably. Although the two terms are related, they are distinctly different and should never be used interchangeably to avoid workplace miscommunications.
Ultimately, the strategic management process is focused on securing and maintaining a competitive advantage and includes 5 main steps. The primary 5 steps of strategic management are-
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1. Objective Setting
Business goals should reflect the vision business owners and employees have. Both long term and short term business objectives are created in this step.
Beyond the creation of both short term and long term business goals is the delegation of responsibilities amongst team members and processes necessary for objective completion.
Remember-: Objective setting efforts regarding the creation and accomplishment of business goals must be both short term and long term oriented.
2. Data Analysis
Both internal and external data is crucial to evaluate whenever business goals are set. Without careful consideration of data, business goals may be difficult, if not impossible, to achieve.
Data to analyze can range from SWOT analysis results to customer service survey feedback.
3. Strategy Creation
No matter how excellent short term and long term business goals are, without the proper resources available they are unachievable. During the strategy formulation stage, resource management and allocation must stay a top priority.
In the strategy creation phase, business goals need to be prioritized effectively. A failure to prioritize business goals can lead to overwhelmed team members that are spread much too thin.
4. Strategy Implementation
Even before processes are classified as viable options, an implementation plan must be established. All team members must understand the implementation plan clearly and comprehensively.
Information in the implementation plan should include task delegation and individual staff member responsibilities.
Consistent control and evaluation are necessary for the success of strategic management processes. If a strategic management process is running into issues, corrective action should be swiftly and appropriately undertaken.
Control and evaluation actions range from performance appraisals to internal issue identification.
The Importance of Business Strategy
With an ever competitive global market, business strategies are more important than ever before. Both small business and large corporation owners alike should consider business strategies a top priority.
A business strategy helps an organization better understand itself. For example, strategy answers questions ranging from employee scheduling to inventory specifics.
One crucial benefit of a well formed and purposeful business strategy is that it will likely predict future issues. Instead of operations being shut down until an unforeseen problem is resolved, business owners can plan for, and potentially even avoid both short term and long term potential issues.
There are a variety of short term and long term benefits that business strategies offer, ranging from obtaining a competitive advantage to increasing efficiency of employee onboarding processes. Several common business strategy types and their associated benefits include-
A great hiring strategy can help a business to locate and employ top talent team members. Additionally, employee turnover rates are lower when a hiring strategy is correctly utilized.
Components of a hiring strategy include crafting specialized job descriptions and vigorous screening processes.
A sales strategy is crucial for bottom line profitability as it is focused on increasing revenue generation. Additionally, a sales strategy is essential to competitive advantage maintenance.
Components of a sales strategy may include customer service training and the creation of cold calling script templates.
Make Sure-: An excellent sales strategy is absolutely crucial for bottom line profitability increases.
A marketing strategy should utilize strategic messaging for brand definition purposes. The marketing department is primarily responsible for crafting logos and strategic messaging.
The material developed through the marketing strategy is utilized for both sales and advertising purposes.
How to Write a Strategic Business Plan
A strategic business plan is an important tool for both bottom line profitability and long term business success. A business plan helps professionals to stay on track and reach their objectives.
Although it may be intimidating to start formulating a strategic business plan there are best practice tips available to assist. 6 tips to help both small business and large corporation owners get started include-
1. Collecting Facts
If a business has historical data available it should be analyzed closely. There is a lot to be learned from past mistakes and successes that can be applied to accomplish greater business growth in the future.
If a business does not have historical data available then at the bare minimum they should evaluate their current situation during this step. Closely considering the strengths and weaknesses of a business model and business strategies is crucial.
As such, utilizing techniques such as the SWOT analysis and PESTLE analysis can be immensely helpful during this step.
Framework that can assist with data collection includes the SWOT analysis and PESTLE analysis.
2. Developing Vision
A company's vision can help a business gain a competitive advantage and impress potential clients or customers. A company's vision should be focused on long term business goals and business growth strategies.
Oftentimes the vision business owners have is crafted before an official mission statement is formulated.
3. Crafting Mission Statement
A mission statement clarifies business goals and defines purposes. Unlike a long term focal vision statement, a mission statement is short term focal.
By understanding what needs to be accomplished in the short term, a mission statement helps to accomplish the long term vision statement.
4. Identifying Strategic Objectives
The development of multiple high level business objectives should occur at this stage. Strategic objectives should make sure to draw inspiration from both the mission and value statements.
Utilizing the SMART goals framework when developing business goals will help with any decision making and problem solving required. SMART, an acronym, stands for specific, measurable, achievable, realistic, and timely.
5. Creating Short Term Plans
The strategic planning that occurs during this step produces short term and detailed plans. These plans are focused on the strategic objectives, which are of course based on the mission and value statements.
Additionally, both departmental actions and organizational functions should be incorporated into these plans. These tactical short term business plan results are essential elements to long term business strategy success.
6. Managing Performance
Strategic management and monitoring are complex tasks but are necessary to make sure a business plan stays on track. Due to the complexity of strategic management and monitoring, many business professionals are often involved in the process concurrently.
Types of Business Strategy
There are many different types of business strategies available for both small business and large corporation owners to choose from. These business strategies range from acquiring other companies to new products released.
Common types of business strategies include-
1. Price Skimming
The price skimming strategy occurs when prices are intentionally raised for a period of time. Price skimming may occur when new products are first introduced in order to recover advertising and production costs.
Price skimming is generally only effective if there are no other viable competitors or new products have an outstanding brand presence. An example would be the release of a new smartphone by a well known tech giant.
An acquisition strategy occurs when one company purchases another. Although acquisitions are commonly assumed to be a large corporation activity, a small business may also participate if it is financially able to do so.
An acquisition helps companies to secure a competitive advantage and control a higher percentage of the market share.
3. New Markets
Identifying a new market for a product is a great growth strategy option. Interestingly, locating new markets can occur accidentally or purposefully.
For example, products may be utilized for uses that producers did not originally intend.
4. Product Differentiation
Product differentiation occurs when a business intentionally distinguishes the products or services it offers from its competitors. A product differentiation strategy is a great tool for maintaining a competitive advantage and building brand loyalty.
Not only does product differentiation distinguish itself from the competition but it also distinguishes itself from a business's other products or services offered.
5. Cost Leadership
Cost leadership is a business strategy that seeks to gain and sustain a competitive advantage by offering customers or clients the lowest cost option available. Cost leadership can be incredibly difficult to accomplish due to the constant need for continual cost reduction.
However, cost leadership is an effective method to secure business from thriftier or lower budget clients and customers.
- The strategies business owners and team members utilize will make a significant difference on everything from bottom line profitability to competitive advantage sustenance.
- The 5 primary steps of strategic management are objective setting, data analysis, strategy creation, strategy implementation, and evaluation.
- Steps for writing a strategic business plan include collecting facts, developing vision, crafting mission statement, identifying strategic objectives, creating short term plans, and managing performance.
- Commonly utilized types of business strategies include price skimming, acquisition, new market exploration, product differentiation, and cost leadership techniques.