A comprehensive business strategy creates a structure for companies to carry out their organisational goals. It helps them remain relevant in the market and identify growth opportunities. The business strategy weeds out threats and weaknesses, allowing organisations to prosper on their strengths. It acts as a guide for major decisions, such as hiring practices and training needs.
Different businesses have different goals and take different routes to fulfil those goals. These routes constitute the business strategies of these businesses.
While it is easy to understand the definition of business strategy, sometimes it’s an uphill task to form and execute a successful one.
A business strategy is a business document that describes a course of action to help leaders achieve organisational objectives. The detailed plan defines business needs to guide the hiring process and inform the allocation of company resources. It provides a clear direction for different teams to pool together their talents to support the company’s goals. As a result, businesses secure a competitive position in the market, improve customer satisfaction and mobilise their business operations.
Importance
There are several reasons why a business strategy is important, including:
Trends
A business strategy allows decision-makers to identify trends and opportunities for future growth. For businesses to remain competitive, they need to adjust and reevaluate their tactics frequently. Thus, a business strategy is a dynamic resource that businesses can modify and develop to address social and technological changes in the market. It safeguards them from complacency.
Vision
A business strategy is important because it creates a vision for the whole organisation to follow. You can lead and motivate your coworkers more effectively when they have clearly defined roles and responsibilities. A strategy gives large groups of people a shared purpose. It ensures that no individual loses sight of the organisational mission.
Competitive advantage
A business strategy encourages businesses to introspect. It offers a guide on how your business is performing internally and externally. Businesses that can identify their strengths and weaknesses understand themselves better. This is crucial to gaining a competitive advantage and securing future profitability.
Levels of business strategy
Business strategy facilitates smooth operations at different levels of a business. It’s a tool not just for top management but also for leaders across different business functions to use. A business strategy can promote cohesion to business ideals and collaboration among coworkers at every level. Here’s a detailed look at the three levels of business strategy:
Business level strategy
General managers develop and implement business-level strategies. They translate the direction of the business into more actionable goals. At this level, leaders plan how to achieve the organisational mission rather than what the mission should be. For example, if the corporate level strategy is to diversify business operations, a business level strategy would be to rebrand a product for a new demographic.
Corporate level strategy
The corporate-level strategy is at the top of the planning pyramid. It’s concerned with the destination towards which your business is moving. Business strategy at this level is a comprehensive plan that impacts every level of an organisation. It’s formulated by top management, such as board members, investors and c-suite executives. They structure their goals around expansion plans, takeovers and mergers, diversification and new areas of investment.
Functional level strategy
Functional level strategies are the roles and responsibilities assigned to teams to support business-level strategy. At this level, supervisors and line-managers delegate larger projects through smaller tasks among individual coworkers. These directives are specific and catered to the skills and qualifications of individual employees. For example, a functional level strategy would be to task a graphic designer with designing new product packaging.
Major components of a business strategy
There are five key components to help you build an effective business strategy. They include:
Core values
According to the organisation’s core values, your business strategy should communicate clear guidelines on what people should and should not do. Articulating these values on paper encourages coworkers to hold themselves accountable to the organisation’s standards.
Business objective
Your business objective or mission statement identifies a gap in the market that your business hopes to address. Any business strategy you set out to implement should always link back to this vision. Think of a business strategy as an action plan with detailed instructions on how those responsible should achieve the organisational goal.
SWOT analysis
SWOT stands for strengths, weaknesses, opportunities and threats. This analysis is integral to your business strategy, as it represents a snapshot of the company’s current situation. Identifying these four key areas prepares you for challenges you may encounter along the way. It shows what strengths you can use to your advantage and exposes weaknesses you need to address.
Measurement
To evaluate your business strategy’s effectiveness, you need to incorporate a means of tracking your performance. A business strategy works best when you divide your objective into smaller targets that you can measure regularly. For example, you can measure your output through smaller financial milestones.
Operational tactics
A business strategy needs to transform a vision and plan into action. Once you identify your resources through a SWOT analysis, you can then allocate them accordingly. Operational tactics prioritise what needs to get done now and what can wait for later. It helps you manage your time and resources efficiently.
Importance Of Business Strategy
A business objective without a strategy is just a dream. It is no less than a gamble if you enter into the market without a well-planned strategy.
With the increase in the competition, the importance of business strategy is becoming apparent and there’s a huge increase in the types of business strategies used by the businesses. Here are five reasons why a strategy is necessary for your business.
Strengths and Weaknesses: Most of the times, you get to know about your real strengths and weaknesses while formulating a strategy. Moreover, it also helps you capitalise on what you’re good at and use that to overshadow your weaknesses (or eliminate them).
Planning: Business strategy is a part of a business plan. While the business plan sets the goals and objectives, the strategy gives you a way to fulfil those goals. It is a plan to reach where you intend to.
Efficiency and Effectiveness: When every step is planned, every resource is allocated, and everyone knows what is to be done, business activities become more efficient and effective automatically.
Control: It also decides the path to be followed and interim goals to be achieved. This makes it easy to control the activities and see if they are going as planned.
Competitive Advantage: A business strategy focuses on capitalising on the strengths of the business and using it as a competitive advantage to position the brand in a unique way. This gives an identity to business and makes it unique in the eyes of the customer.
