A business strategy is a powerful tool for helping you reach your business goals, defining the methods and tactics you need to take within your company.
The business strategy also guides many of your organizational decisions, such as hiring new employees.
Creating a business strategy that’s in line with the vision you have for your company takes time and development. In this article, we’ll discuss what a business strategy is and why it’s important, the components of a business strategy and 5 business strategies to help you generate ideas for your own company.
What is a business strategy?
A business strategy is an outline of the actions and decisions a company plans to take to reach its goals and objectives. A business strategy defines what the company needs to do to reach its goals, which can help guide the decision-making process for hiring as well as resource allocation. A business strategy helps different departments work together, ensuring departmental decisions support the overall direction of the company.
Why is a business strategy important?
There are several reasons why a business strategy is important for organizations, including:
- Efficiency: A business strategy allows you to effectively allocate resources for your business activities, which automatically makes you more efficient. It also helps you plan ahead for deadlines, allocate job roles and stay on track for your project goals.
- Competitive advantage: By identifying a clear plan for how you will reach your goals, you can focus on capitalizing on your strengths, using them as a competitive advantage that makes your company unique in the market place.
- Strengths and weaknesses: The process of creating a business strategy allows you to identify and evaluate your company’s strengths and weaknesses so you can create a strategy that optimizes your strengths and compensates for or eliminates your weaknesses.
- Planning: A business strategy helps you identify the key steps to take to reach your business goals.
- Control: Creating a business strategy gives you more control over choosing the kinds of activities that will directly help you reach your goals, as well as allows you to easily assess whether your activities are getting you closer to your goals.
Components of a business strategy
There are six key components of a business strategy. They include;
- Vision and objectives
- Core values
- SWOT Analysis
- Resource allocation plan
Here are 10 examples of great business strategies:
1. Cross-sell more products
Some organizations focus on selling additional products to the same customer. Cross-selling works well for office supply companies and banks, as well as online retailers. By increasing the amount of product sold per customer, you can increase the average cart size. Even a small increase in cart size can have a significant impact on profitability, without having to spend money to acquire more new customers.
2. Most innovative product or service
Many companies, particularly in the technology or automotive space, are distinguishing themselves by creating the most cutting-edge products. In order to use this as your business strategy, you will need to define what “innovative” will mean for your organization or how you’re innovative.
3. Grow sales from new products
Some companies like to invest in research and development in order to constantly innovate, even with their most successful products. This type of strategy involves introducing new products into the market and updated products that are able to keep up with trends.
4. Improve customer service
This can be a good business strategy if your business has had a problem delivering quality customer service. Some companies have even built a strong reputation for having exceptional customer service. Usually, companies have a problem in one specific area, so a business strategy that’s focused on improving customer service will usually have objectives that center around things like online support or a more effective call center.
5. Cornering a young market
Some large companies are buying out or merging competitors to corner a young market. This is a common strategy used by Fortune 500 companies to gain an advantage in a new or rapidly growing market. Acquiring a new company allows a larger company to compete in a market where it didn’t previously have a strong presence while retaining the users of the product or service.
6. Product differentiation
Product differentiation is a common business strategy, especially for business-to-consumer (B2C) businesses. They can differentiate their products by highlighting the fact that they have superior technology, features, pricing or styling.
7. Pricing strategies
When it comes to pricing, businesses can either keep their prices low to attract more customers or give their products aspirational value by pricing them beyond what most ordinary customers could afford. If companies plan to keep their prices low, they will need to sell a much higher volume of products, as the profit margins are usually very low. For companies who choose to price their products beyond the reach of ordinary customers, they are able to maintain the exclusivity of their product while retaining a large profit margin per product.
8. Technological advantage
Obtaining a technological advantage, you can often achieve better sales, improved productivity or even market domination. This can mean investing in research and development, acquiring a smaller company to gain access to their technology or even acquiring employees with unique skills that will give the company a technological advantage.
9. Improve customer retention
It’s generally far easier to retain a customer than spend money to attract a new one, which is why this is a great strategy if you see opportunities for improvement in customer retention. This strategy requires you to identify key tactics and projects to retain your customers.
You could launch an entire business strategy aimed at increasing the sustainability of your business. For example, the objective could be to reduce energy costs or decrease the company’s footprint by implementing a recycling program.
Article credit: indeed.com