What is a business strategy?

A business strategy outlines the specific ways in which an organisation plans to position itself, achieve its short-term and long-term goals, and grow over a period of time. It draws on other important business resources, such as the organisation’s mission, its vision, and its values, to help chart its direction forward and deliver on its objectives.

A business strategy helps underpin an organisation’s other important strategies – for example, functional operational strategies – and helps staff, customers, investors, and other stakeholders better understand how it plans to achieve its goals.

A successful business strategy also ensures that an organisation – regardless of whether it’s a startup, a small business, or a global corporation– maintains a competitive advantage in its market. It’s there to help guide decision-making, particularly on matters such as business priorities, and resource allocation.

Where business strategies sit within organisations

A business strategy typically comes second to an organisation’s corporate strategy. The corporate strategy looks at the bigger picture – the market a business is operating in, new markets that may be profitable to enter, and how best to ensure company growth. 

The business strategy helps feed into the corporate strategy, and acts as a roadmap to help deliver on the corporate strategy. Sometimes, it may also feed into a competitive strategy, which outlines methods for strengthening an organisation’s market position, attracting clients away from competitors, and defining the unique selling points within the brand as well as its products and services.

At the same time, the functional and operating strategies feed into the business strategy. These two frameworks are responsible for effectively and efficiently delivering on the organisation’s objectives as outlined in the corporate, competitive, and business strategies.

It’s also worth noting that there are a number of other strategies that typically sit under an organisation’s business strategy. These can include the:

  • marketing strategy
  • pricing strategy
  • brand strategy
  • sales strategy
  • communications strategy
  • advertising strategy
  • PR and media strategy
  • social media strategy
  • promotion strategy

What is the difference between a business strategy and a business plan?

While a business strategy acts as an overarching strategic framework within an organisation, a business plan is more granular, outlining day-to-day activities and work. Effectively, a business plan is one of the tools that helps deliver the business strategy.

Business strategies are also separate to business models, which are the methods used to generate sales and growth within a business. Examples of business models include direct sales, subscriptions, and franchises.

Five questions a business strategy should answer

Global employment network Indeed suggests that there are five main questions a business strategy needs to answer in order to be useful to its business.

  1. Why is the organisation in business?
  2. What are its key selling points or core strengths?
  3. Who are its ideal customers?
  4. Which offers provide the best results for its customers and its company bottom-line?
  5. Will this strategic framework help the business achieve its goals and objectives?

Adequately answering these questions can help a business create or improve its market value, establish or enhance its reputation, and acquire customers in greater numbers.

What makes a good business strategy?

A lot of work goes on behind the scenes during business strategy formulation. 

Strategic management, including CEOs and business leaders, need to be on board and help drive the new strategy forward. 

This requires extensive analysis – in everything from the supply chain to market research –, as well as a thorough understanding of the organisation’s competitive position and competencies. This can be better understood through simple tools, such as a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis or template.

Stakeholders – such as staff groups – should also be brought into the development process to help ensure its success.

The Chartered Management Institute (CMI) recommends that a good strategy is developed to be:

  • flexible
  • responsive
  • creative
  • challenging
  • realistic
  • focused
  • engaging

And in order to be effective, strategic planning also needs to be implemented appropriately. The CMI recommends implementation techniques such as: 

  • ensuring that plans are aligned with the organisation’s mission, vision and values
  • building an effective leadership team
  • creating a dedicated implementation plan
  • allocating sufficient budgetary resources
  • assigning objectives and responsibilities to the appropriate people
  • aligning structures, processes, and people throughout the organisation
  • communicating the strategy
  • reviewing and reporting on progress
  • making strategic adjustments as necessary
  • developing an organisational culture that supports the strategy

Types of business strategies

There are a number of different business strategies used within the business world.

Common business strategy examples include:

  • Cost leadership. Cost leadership business strategies focus on beating competitors’ prices. For example, businesses such as Amazon look for ways to increase efficiencies or reduce production costs so that their prices are lower than their competitors’ prices. They often rely on economies of scale.
  • Differentiation. Differentiation business strategies highlight the unique features of products and services to stand out from competitors.
  • Focused differentiation. Focused differentiation is typically used by businesses that target niche markets. For example, an eco-friendly child toy company might market itself specifically to environmentally conscious parents. 
  • Focused low-cost. Focused low-cost business strategies are similar to focused differentiation strategies, but their point of differentiation is specifically lower-cost products and services. 
  • Integrated low-cost/differentiation. An integrated low-cost/differentiation strategy is the middle ground between focused differentiation and focused low-cost business strategies. It’s effectively a hybrid model where differentiated products are sold at a lower-than-average price point.
  • Structuralist. A structuralist business strategy is one that is built around current market and industry norms. Everything from products to processes is structured around current market conditions and industry standards, and the business strategy is developed around this structure.
  • Growth. Growth strategies are suitable for businesses that want to actively expand into new markets and introduce new products or services. Their focus is on continual growth, increased revenue, and new business.
  • Price-skimming. Price-skimming strategies aim to quickly recoup initial expenses for things like production, manufacturing, and marketing. Businesses charge a higher-than-average price for their product or service to swiftly recover costs, and is commonly employed for organisations launching unique and innovative products to market for the first time.
  • Acquisition. An acquisition strategy relies on business purchases and mergers to grow an organisation. Benefits can include gaining valuable skills and staff – in addition to new funding pools and assets – as well as increasing market share, reducing competition, and diversification of products and services.

What is the main difference between a defensive and offensive strategy?

An offensive business strategy targets an organisation’s competitors. Whether it’s through lower, more competitive prices, new enhancements to products or services, or even marketing plans that directly attack the competition, an offensive strategy aims to take on a bigger share of the market.

A defensive business strategy, meanwhile, protects an organisation from its competitors. It aims to inspire customer loyalty and safeguard its market share, and will use tactics such as incentives, exclusive products – or exclusive arrangements with suppliers or partners – as well as above-average customer service, to entice and retain customers and maintain its competitive position.

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