Business strategy- What is it?
What exactly is business strategy? In simple terms, a business strategy is an articulation of the overall direction of the business. Strategies that are identical to those of your competitors can result in the failure of your objectives.
Business strategy can also be seen as a decision made at the highest levels of the company on positioning and direction. Such a decision serves to establish a clearly defined framework for subsequent decisions. Accordingly, strategy and decision-making become inseparable; without organizational competence for decision-making, the formulation of a strategy in itself does not have much meaning.
Business strategy – Need and purpose
- The reason why having a strategy is so important is because it gives business time to get a sense of how they are preforming, what their capabilities are, and if these capabilities are able to help them grow.
- Developing a good business strategy is a thoughtful process. It takes a balanced approach to come up with a strong but flexible business strategy that can absorb change without disintegrating. Just as a good topographical map is indispensable to a hiker outlining explicit geographical hazards, so is a good business strategy to a company. It encompasses information on competitors and technology, suppliers and customers and provides directional guidance.
Key principles about business strategy
- Business strategy compete to be unique, not to be the best
- Strategy is a pattern in a stream of decisions
- Business strategy compete for profit as it’s the aim of every business to make profit
- Know your industry before you develop your strategy
- Strategy is thinking about a choice and choosing to stick with your thinking
- The essence of strategy is choosing what not to do
- A good strategy requires you to keep moving because a good strategy is a sigh of success
Key Components of a winning strategy plan
The CEO and senior management likely has a focused vision for the current and future of their organizations. It’s imperative that the executives include their shared vision into a successful business strategy.
Your mission statement should embody the values of the organization, to which you will always remain true. A good mission statement should include a clear, concise expression of the company’s purpose, philosophy and commitment.
Along with your company’s short- and long-term goals, your objectives should state the specific objectives your business strategy will accomplish as well as a timeline outlining when management believes the company will reach them. In all cases, your company’s objectives should focus on achieving the broader goals as displayed in your mission statement.
This is the how you will achieve your goals and objectives. While strategic planning groups often express different ideas of how to reach the outcomes your strategies target, brainstorming and free discussion typically results in agreement on a business strategy or strategies that should work. Even in smaller organizations, CEOs should try to involve as many people as possible. This is more important than just keeping everyone on the same page. You often learn that staff members have winning ideas that need to be considered. Perhaps more important, though, is that inclusion creates buy-in, and any winning strategy will need engaged employees to be successful.
- Action Plans
Clearly, great vision and mission statements are useless if not acted upon. Action plans are the engines that make strategic plans succeed. Creating detailed action plans that include what is to be done, who is accountable for it, and when it is due, is an ingredient commonly glossed over in strategic planning. Too many organizations create outstanding strategies without attaching specific action plans, and so they gather dust until the next strategic planning meeting.
Type of strategy
- Generic or general strategy
Strategy, in general, refers to how a given objective will be achieved. Consequently, strategy in general is concerned with the relationships between ends and means, that is, between the results we seek and the resources at our disposal. Strategy and tactics are both concerned with formulating and then carrying out courses of action intended to attain particular objectives. For the most part, strategy is concerned with deploying the resources at your disposal whereas tactics is concerned with employing them. Together, strategy and tactics bridge the gap between ends and means.
2. Corporate strategy
The overall scope and direction of a corporation and the way in which its various business operations work together to achieve particular goals. Corporate strategy defines the markets and the businesses in which a company will operate. It is typically decided in the context of defining the company’s mission and vision, that is, saying what the company does, why it exists, and what it is intended to become.
3. Competitive strategy
It’s defined as the long-term plan of a particular company in order to gain competitive advantage over its competitors in the industry. It is aimed at creating defensive position in an industry and generating a superior ROI (Return on Investment). Such type of strategies plays a very important role when industry is very competitive and consumers are provided with almost similar products.
Before devising a competitive strategy, one needs to evaluate all strengths, weaknesses, opportunities, threats in the industry and then go ahead which would give one a competitive advantage.
Types of competitive strategies
a. Cost Leadership
Here, the objective of the firm is to become the lowest cost producer in the industry and is achieved by producing in large scale which enables the firm to attain economies of scale. High capacity utilization, good bargaining power, high technology implementation are some of factors necessary to achieve cost leadership.
b. Differentiation leadership
Under this strategy, firm maintains unique features of its products in the market thus creating a differentiating factor. With this differentiation leadership, firms target to achieve market leadership. Superior brand and quality, major distribution channels, consistent promotional support etc. are the attributes of such products.
c. Cost focus
Under this strategy, firm concentrates on specific market segments and keeps its products low priced in those segments. Such strategy helps firm to satisfy sufficient consumers and gain popularity.
d. Differentiation focus
Under this strategy, firm aims to differentiate itself from one or two competitors, again in specific segments only. This type of differentiation is made to meet demands of border customers who refrain from purchasing competitors’ products only due to missing of small features. It is a clear niche marketing strategy.
Without following anyone of above mentioned competitive strategies, it becomes very difficult for firms to sustain in competitive industry.
Elements of a strategy
A good business strategy should address:
- The core purpose and the aspirations of the organization
- The path chosen for further growth
- The basis for choosing the path
- The keys for execution
- The ways to constantly sense change and adjust accordingly
About the Author
Thank you for reading this article. The author, James Ndambiri is an avid Business Advisor and Consultant: A Tax Surgeon, Proficient Accountant, Skilled Auditor, a Guru in Financial and Investment management, Expert in Business Strategy Formulation, Business Transformation Wizard, Family Business Advisor, Lecturer, Business Coach and a Family Man.
James is the Founder, Team Leader, CEO & Managing Partner of MNC Consulting Group. MNC Consulting Group is your most trusted and respected professional business consulting firm recognized by our clients for delivering excellent business advisory and consulting services that create value to their ventures. With our focus set on value addition, we offer our clients the highest quality professional services in Accounting, Audit and assurance, Tax, Business Transformation, Investments and Financial Advisory, Family Business Advisory, Company Secretarial Services and Property Management that addresses their business needs through attracting, recruiting and retaining knowledgeable and passionate professionals who enable us to deliver superior results while contributing positively to the community in which we live and work.
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