A business strategy is a blueprint for building your company. And aclearstrategy helps businesses achieve their goals, collaborate efficiently, and stay on message.
In this article, we’ll walk you through the ideal outline for a business strategy, as well as examples to guide you as you craft your own.
Table of Contents
What is a business strategy?
A business strategy is a high-level outline of how a company plans to achieve its goals. Developing a business strategy is a multi-part process that requires research, analysis, and decision-making. It requires an upfront time investment, with the possibility of improving communication and efficiency down the line.
An effective business strategy helps companies operate smoothly by providing a framework for organizational initiatives, such asbranding,marketing campaigns, product development, and expansion and acquisitions. Communicating information about the strategic direction of your company can empower team leaders to develop tactics that support the overarchingbusiness goals.
Business strategy vs. business model vs. business plan
These terms describe different levels of organizational planning. Successful businesses use all three of these elements to create a clear structure.
- Business model.A business model defines the operational structure of your business—it explains what the business offers and how it delivers products and services to customers. Selecting or developing a business model is the first step toward planning a new business.
- Business plan.Abusiness planadds detail to the business model. Business plans are developed before a company is launched to describe the company’svalue proposition, how it will position itself within the market, and its business objectives. Startups may deliver a business plan as part of a pitch to investors.
- Business strategy.A business strategy introduces the methods a business will use to achieve its goals. Business strategies include more operational details than business plans and business models.
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Employees at almost every level of the organization will rely on your business strategy to guide their work. Management, in particular, will refer to the strategy and use it to inform important decisions, including:
- Product pricing.Depending on the goals outlined in the strategy, your team may choose alower price to increase sales, or a higher price to enter into a luxury market.
- Marketing strategy.The marketing team will develop campaigns to reach the target market defined in thestrategy.
- Hiring.New roles are created based on the available resources and corporate objectives set forth by the strategy.
- Growth.The business strategy guides how your company expects to grow. It can instruct your team to develop a new product, target new customers, or look for companies to acquire.
Different business strategies include varying levels of detail, but a good business strategy will provide employees with enough information to guide their work. A business strategy should answer these questions:
- What value does the company provide to consumers?Defining the unique benefit of your product will help your marketing team create a differentiation strategy.
- How will the business achieve its goals?In addition to goals, describe the strategies that you will use to achieve them. Including specific methods in your business strategy will provide employees with a clear roadmap for execution.
- What will it take to get there?Identify obstacles your company will need to overcome and the resources it will need to meet its goals.
To address these questions, it’s necessary to include the following key components in your business strategy:
- Company vision and core values.This is the foundation you’ll use to build your strategy. Drafting amission statementthat expresses the values of your company will tell employees what they’re working toward.
- High-level goals.Make it clear what you’re trying to achieve by setting clear, measurable goals. Business goals could include profit targets, increasing shareholder value, or gaining market share.
- SWOT analysis.Every business strategy should include aSWOT (strengths, weaknesses, opportunities, and threats) analysis. Understanding your company's strengths and weaknesses helps set realistic goals and identify areas for improvement.
- Tactics.Tactics are the methods used for strategy implementation. If the strategy suggests increasingprofit margin, a tactic could be entering an exclusive contract with a supplier in exchange for discounted materials.
- Resources.Include a section in the strategy that explains resource procurement and allocation. This lets managers understand what tools are available to help them meet their goals.
- Analysis.Setting a plan for measurement and analysis helps hold your managers and employees accountable. This section of the strategy explains how you will evaluate the success of your strategy.
3 levels of business strategy
Developing and communicating multiple levels of business strategy creates a clear and transparent workplace. Business strategy is classified into the following three levels.
1. Corporate level
Corporate strategy determines the overall mission, direction, and key objectives of the organization. Examples of corporate level strategy include diversification, horizontal integration, and market penetration.
2. Business-unit level
The focus here is on individual subsidiaries and divisions of a larger business, or with specific product lines within a single company. Business-unit level strategies are more specific and are tied directly to the company’s product. For example, a packaged-baked goods company with multiple products may develop different business-unit level strategies for the cake division and the cookie division.
3. Functional level
Functional level business strategy refers to the daily operations of a company. At this level, strategy is set by the leaders of different departments. Managers createkey performance indicators (KPIs)that support the broader corporate strategies.
Common business strategy examples
Businesses can employ different strategies to support the goal of creating value. The best strategy for your business depends on the industry and your individual business goals. These are examples of common business strategies:
- Cost leadership.A business uses this pricing strategy to appeal to customers by offering the lowest price on the market. Other pricing strategies may call for setting a high price to market an aspirational product, or pricing to achieve a specific profit margin.
- IP。Owningintellectual propertysuch as a trade secret or copyright can give businesses a competitive advantage. To pursue this strategy, a business may hire researchers and engineers, apply for patents, or acquire another company to gain access to its technology.
- Focused differentiation.This strategy involves focusing efforts on a small group of target customers to create a niche market.
- Customer retention.If a SWOT analysis reveals a high churn rate, a business may choose to focus on customer retention over new-customer acquisition. Retention tactics may include offering new products, creating aloyalty program, or improvingcustomer serviceto create a customer centric company.
Business strategy FAQ
What role does competition play in developing a business strategy?
Assessing the competition is essential for developing a good business strategy. The market position of your competitors may influence how you price your product and the customer segment you choose to target. Understanding the competition will also help you develop a differentiation strategy—in competitive industries, it’s important to set your business apart.
How often should a business review and update its strategy?
Businesses should review and update strategies regularly to compete effectively. Updating your strategy helps your business stay nimble and keep up with changes in the market. Consider reviewing your business strategy if a competitor releases a new product or if you change how your product is manufactured. Even absent significant changes in the market, it’s a good idea to update your strategy at least once a year—changing cultural attitudes and new technology may create new marketing opportunities.
How can a company determine which business strategy is right?
To determine the right strategy for your business, set organizational goals, conduct a SWOT analysis, and review market research. Goals establish what you’re trying to achieve, while market research and SWOT analysis help you understand the obstacles you need to overcome. Choose strategies that align with your goals and play to your strengths.