In the business world, you always have to think ahead. Accounting for internal and external factors (plus how they’d change over time) is important in keeping your business afloat and prospering.
One of the ways by which companies plan ahead is through a business strategy. From the term itself, this can only be used by entities identified as businesses. So before we go into defining business strategy and delving into its intricacies, let’s first make clear what a business is.
The Definition of Business
A business is an organization that aims to participate in economic production. This means they’re either producing, distributing, or participating in any way to get a good or service closer to its intended consumer.
They can vary in size and purpose. But the necessary element here is it’s engaged in activities that affect the economy.
What Is a Business Strategy?
A business strategy outlines the decisions and actions that the company needs to make to reach its goals. Think of it as having a list when going to the grocery. For you to be able to say that you’ve done your grocery shopping for this week, you should buy everything on that list. If you haven’t gotten some items yet, then you’re not done.
It’s the same way with business strategies. It sets out clear parameters by which you can say that the business has reached a certain goal. Looking at it from another perspective, you can also say that it sets out a clear path from where the company is right now to where they want to be.
You’re probably wondering right now why it’s so important if it’s just a list. That’s just one part of it, and we’ll talk about the rest later in this post. Every business organization needs it to:
- Plan Ahead. What’s the next step and how do we get there? This document identifies the key steps that the organization needs to take.
- Identify Strengths and Weaknesses. Self-evaluation is also essential to success. In doing so, the strategy would better use the strength while addressing the weaknesses.
- Maximize Efficiency. Is the current direction helping the organization achieve its goals? With a business strategy, you’d be able to connect the efforts to intended outcomes.
- Establish Control. With the document, it would be easier to assess progress, determine courses of action taken, and prioritize activities based on impact.
- Identify Competitive Advantage. By knowing and banking on the organization’s strength, it would be easier to establish your competitive advantage in your industry.
All these can be done with a business strategy. With a researched-based strategy as well as a capable workforce and leadership, the organization should accomplish its goals within its intended timeline.
What Is a Company Strategy?
Many mistake competitive strategy and business strategy, even to the point of using them interchangeably. This is primarily because all strategies formulated for businesses are designed to improve the state of the organization through increased profits.
To differentiate the two, we must look at what level it’s applied. A company strategy operates at a much higher level as it covers the wide responsibility of business growth and profits. But by definition, a business strategy only focuses on maintaining (or improving) market competitiveness. Therefore, a business strategy can be part of the company strategy.
Identifying the Components: How to Develop a Business Strategy
When you’re looking at the final output that will serve as the company’s guide in improving competitiveness for the next year, you should be able to clearly identify these six components:
- Company Vision. The company vision would be the beacon of light, so to speak, when creating the strategy. This means that everything within the document should guide us closer to achieving it.
- Core Values. This reflects what the company believes in. To an extent, these are the do’s and don’ts that must be taken into account when formulating tactics.
- SWOT Analysis. Identify and analyze strengths, weaknesses, opportunities, and threats for the organization.
- Tactics. Knowing what you know now from making the first three, you can get into the details of how to accomplish the goal.
- Resource Allocation. Who will be responsible for implementing certain tactics? Would they need financial resources? How about equipment? All these would be on this part.
- Monitoring and Evaluation. This sets the metrics by which we can say that a tactic has been successfully performed. It should also include pre-strategy performance and deadlines.
There’s no specific format for this. So if it would be easier for tracking, you can also just make a table for tactics, resource allocation, and monitoring and evaluation.
See Also:
Three Tips on How to Write a Business Strategy
Knowing what to put in commercial strategies isn’t enough. If you want the strategy to reflect the best course of action for the goal, you must:
Base your writing on verifiable information
1 Its effectiveness in reaching the goals relies on it. We’re sure you have your opinions on how things should run. But how much does it reflect the truth?
To maintain the integrity of the document, all recommendations must be based on verifiable information. After all, how would you justify cutting off funding for paid advertisements on Facebook if you can’t prove that it’s not working for the industry you’re in?
Keep an open mind
2 It’s completely normal to already have a “favorite” strategy that you think would work. If you’ve been doing this for a while, you’re probably right.
But don’t rest too much on that bias. You might miss potentially more effective strategies if you don’t account for all information before determining the general course of action.
Keep the collaborative spirit alive
3 Before, it was usually the CEO or the president who writes the business strategy. But today, most big companies have a dedicated team just for creating plans.
Even if you don’t have the budget for that type of investment, it’s fine. Just don’t treat it as solo research work. There’s a lot that other members can contribute to the discussion.
Remember how we talked about basing your writing on verifiable information? Know that it just doesn’t need to come from documents and numbers. For example, the experience of the staff can help give more context to initially-identified weaknesses. Collaboration helps leave as little as possible to baseless speculation.
Examples of Business Strategies
These business strategies mentioned below are just examples of what your overarching strategy can be. Please don’t limit yourself to these because depending on the circumstances, none of these can apply to your business:
Introduce New Products
Even for companies that are successful with their current line of products, it’s still important to keep things exciting. If the trends justify it, one thing you can do is come up with new products to introduce to the market. This would help with ensuring that the company would retain its relevance.
A similar strategy would be updating the existing line of products or services. For example, the standards for website security nowadays are much higher than before. That’s why nowadays, many reputable companies offer SSL encryption as part of the package instead of as a separate product.
Cross-Sell Products
Even though client acquisition will always be important for a business, you should remember to nurture your existing clientele as well. It’s easier to sell to them because they’ve already seen your products first-hand.
Plus, even just a small increase in the average cost per order can make a huge difference. This is especially true because you’re not spending anything on lead nurturing anymore.
Improve Customer Service
For some products, the after-sale customer service can make all the difference in whether or not someone will buy from you. Because of this, you should strongly consider building a good reputation in terms of customer service responsiveness and effectiveness.
Depending on your organizational model and budget, implementing this can mean expanding your call center or setting up a live chat on your website. The specifics would depend on the information you’re working with.
Product Differentiation
In business-to-consumer businesses, it’s essential to make your product memorable and stand out. With all the options that retailers out there can offer, why would they choose you?
This would mostly boil down to great marketing research. Try to highlight various aspects of your product, whether it’s price, the technology used, or even style. As you choose which features or benefits to highlight, remember that these should resonate with the customers.
Increase Customer Retention Rate
A loyal following of customers that would purchase everything exclusively from your business is extremely profitable. In the long run, it reduces the needed budget for acquiring new clients.
It’s all a matter of identifying why they shouldn’t try a competitor’s product. Is it the prestige of owning something from your brand? Is it the quality of the products? There could be multiple reasons! Research would definitely help you identify which would work best here.
Promote Environmental Sustainability
With the increasing buzz around global warming and protecting the environment, it may help if you promote environmental sustainability as well. There are many ways to implement this, most of which can help your business save money while getting brownie points from the environment-conscious crowd.
A few tactics that may be applicable here are only using raw materials from natural and sustainable sources. Another would be going paperless or offering remote work to reduce carbon footprint.
Who Executes a Business Strategy?
There’s no single person within the organization that’s responsible for executing the business strategy. Everyone has a role in it, all of which will be detailed within the document.
The purpose of documenting the strategy is to help better monitor the coordination of efforts. Therefore, each member of the organization must do their part to improve the odds of success.
Realize the Goals of Your Business Strategy with PIRS Capital!
Creating a business strategy is just a piece of the puzzle. The next piece will be putting that plan into motion. Unfortunately, progress can take a long time if you’re working on a limited budget.
We’ve seen so many plans not come to fruition. That’s why we strive to provide funding for businesses with great potential. By having PIRS Capital as your partner, you can create a more ambitious strategy to help you get further. Let’s see what we can do together, shall we?
I work with companies that sell products on platforms such as Amazon, Shopify, Walmart, Ebay, Etsy, etc. I understand that every business is unique and thats why I form genuine relationships with owners so I can help them reach their goals and find success through our working capital solutions.
