Why Your Company Needs a Business Strategy

A business strategy is a powerful tool designed to help you define the actions and objectives necessary to reach your business goals. Its key components include core values, tactics, resource allocation and measurement. Creating an effective business strategy that's in line with your company's vision takes time and development. In this article, we discuss the definition of a business strategy and its primary components, why it's important, and list 10 business strategy examples to help you generate ideas for your own company.

What is a business strategy?

A business strategy outlines the decisions and actions a company plans to take to reach its business goals and objectives. An effective business strategy clearly defines exactly what a company needs in order to reach its goals, which then guides the decision-making process for hiring and allocating resources. It also helps create cohesion within a company that has several departments, as it defines each team's actions and ensures each departments' decisions help achieve the company's broader goals. While a business strategy should define a company's most important goals, it also needs to outline the best way to reach these objectives and provide tools to measure progress along the way. It's critical for companies to regularly assess the progress of their business strategy and realign their actions and objectives when necessary.

Why is a business strategy important?

There are several reasons every company needs to implement a business strategy:

• Planning: A business strategy's purpose is to help you define the key steps your company needs to take to reach its goals and objectives.
• Strengths and weaknesses: When creating a business strategy, you will need to identify and evaluate your company's strengths and weaknesses. Your complete strategy will then capitalise on your strengths and eliminate your weaknesses.
• Efficiency: An effective business strategy will help you allocate resources for your business activities, ensuring your processes are more efficient.
• Control: It gives you more control over what steps you choose to implement and allows you to assess whether these steps are getting you closer to achieving your objectives.

Competitive advantage: As mentioned, business strategies are important as they help identify your company's strengths and weaknesses. These strengths will become your competitive advantage, showcasing what makes your company unique.

The six key components of an effective business strategy include:

• Vision and business objectives
• Core values
• SWOT analysis
• Tactics
• Resource allocation plan
• Measurement

1. Vision and business objectives

A business strategy's principal purpose is to help you reach your business objectives, as you clearly define the vision you have of your company's future direction. To achieve this, create explicit instructions in your business strategy that explain exactly what needs completion and who is responsible for each task.

2. Core values

Workplaces thrive when employees respect and embody the company's core values. You can use your business strategy to help guide executives and employees on correct practices that are in line with the organisation's core values and overall goals.

3. SWOT analysis

SWOT stands for strengths, weaknesses, opportunities and threats and every business strategy includes a SWOT analysis. This allows a company to examine its strengths and use them to its advantage. Importantly, it also makes an organisation aware of its weaknesses and threats.

4. Tactics

Many business strategies articulate certain operational details for how to complete tasks to ensure maximum efficiency. Therefore, the people handling these tactics know exactly what to do, which saves time and effort.

5. Resource allocation plan

A business strategy includes where you will find the required resources to complete the plan, how to allocate resources efficiently and which personnel or department handle each directive.

6. Measurement

Every business strategy includes a way to track a company's output. This allows you to evaluate progress and performance intermittently and make any necessary adjustments if targets aren't being reached.

10 business strategy examples

Here are 10 examples of effective business strategies to implement at your company:

• Cross-sell more products
• Most innovative product or service
• Grow sales from new products
• Improve customer service
• Cornering a young market
• Product differentiation
• Pricing strategies
• Technological advantage
• Improve customer retention
• Sustainability

1. Cross-sell more products

Some organisations' business strategies will focus on selling more products to the same customer. This type of strategy is effective for office supply companies, banks and online retailers. By increasing the amount of product sold per customer, a business will effectively increase their average cart size. Even a small growth in cart size will have a significant impact on profitability and companies won't have to spend more money to gain new customers.

2. Most innovative product or service

Many companies in the technology and automotive space will distinguish themselves from competitors by creating the most innovative product or service. However, to use this as your business strategy, a company has to define how and what “innovative” means to their organisation and industry.

3. Grow sales from new products

Some companies prefer to invest in research and development to be consistently innovative, creating new products even when they already have many successful products.

4. Improve customer service

This is a great business strategy if your company has a problem delivering quality customer service consistently. Many companies worldwide have built strong reputations from exceptional customer service. Usually, organisations have a problem in one specific area, so a business strategy centred on improving customer service will focus its objectives on areas like online support or a more effective call centre.

5. Cornering a young market

Some large companies are buying out or merging competitors to corner a younger market. This is a common business strategy that Fortune 500 companies implement to gain a competitive advantage in a new or rapidly growing market. Gaining a new business allows larger companies to compete in a market where they previously didn't have a firm presence, while retaining the users of their existing products or services.

6. Product differentiation

This business strategy is common for business to consumer, or B2C, businesses. They can use this strategy to differentiate their products by highlighting that their company has more innovative technology, features, pricing or styling.

7. Pricing strategies

With pricing, businesses can decide to keep their prices low to attract more customers, or give their products an aspirational value by pricing them beyond what most ordinary customers can afford. If a company focuses on low prices, it will need to sell a higher volume of products, as it will have a lower profit margin. Alternatively, if a company prices its products beyond the reach of ordinary customers, it will maintain product exclusivity while retaining a large profit margin per product.

8. Technological advantage

When a company has a technological advantage, it can often achieve better sales, improved productivity and market domination. A business strategy focused on technological advantage may include objectives like investing in research and development, acquiring a smaller company to gain access to its technology, or hiring employees with unique skills that will ultimately give the organisation a technological (and often competitive) advantage.

9. Improve customer retention

It's easier to keep a customer than spend money to attract new customers, which is why this is another brilliant business strategy if you see opportunities for improvement in customer retention in your company. When implementing this strategy, you'll need to identify key tactics and projects that will help you keep customers.

10. Sustainability

Many companies could launch an entire business strategy that focuses on increasing their organisation's sustainability practices. For example, a company's aim may be to reduce energy costs, decrease its footprint, or implement a recycling program.

Business strategy mistakes to avoid

Here are five mistakes to avoid when creating and implementing a business strategy:

1. Incorrect integration. A common mistake many companies make is failing to integrate their business strategy with their current operational plans. If you can't integrate your objectives and tactics with day-to-day operations, your business strategy will struggle to succeed. A great way to combat this mistake is to ask key people within your company for their input and then ensure ongoing support is available.
2. Not focusing on sales. There are a lot of processes involved with running a business, like marketing, website maintenance and event management. But without consistent sales, there's no need for these processes. So before you direct your business strategy towards these endeavours, focus on sales.
3. Hiring the wrong people. An important aspect of your business strategy is hiring the right people to achieve your company's objectives. Hiring mistakes can derail your strategy, so ensure you recruit people who support your company's vision.
4. Incorrect data. You can't create a successful business strategy if it's based on unreliable data. Therefore, an important step should be to ask your company's finance department to collate a set of current data points that will give you an accurate business snapshot from multiple angles.

Not defining your target market. Many people make the mistake of not focusing on their target market, which is key to any good business strategy. Define your customer and identify what needs they have that your company can address.

Courtesy: best business strategy in Australia