No matter the sector or its area of functioning, the main purpose of a business remains generating profit. Therefore, both blue-chip companies and MSMEs alike must have an adequate business strategy to have a roadmap of how they will be operating in diverse situations to reach this end goal in a given time span.
What is a Business Strategy?
To put it in simpler words, business strategy is an umbrella term referring to all the decisions, planning, and actions of a company that it undertakes to meet its commercial commitments. This might include:
- Planning employee salary structure
- Expansion and investment plans
- Setting a timeline to complete a certain task
- Supervising the quality of products or services offered
- Marketing and advertising resolutions
- How to face and overcome challenges
As it can be apparent from the pointers above, business strategy as a whole operates as a centralised framework of a company’s working principles that every member must abide by. Therefore, such a strategy can determine the remunerative as well as ideological standpoints of an organisation.
As a result, inter-departmental collaboration in an enterprise can become comparatively easier. Additionally, no member or department will be legible to make any decision that can be detrimental to the business’s sustainable growth in the long run. Therefore, with an effective business strategy, a company can have a competitive edge in the market.
Why is a Business Strategy important?
A business strategy is important for the following reasons. Let’s have a look.
➡️A business strategy is important because it provides direction and guidance to a business.
➡️It sets the overall vision and objectives for the company and outlines the steps necessary to achieve those objectives.
➡️It helps the business to focus on the most important goals and to develop a plan for achieving them.
➡️A business strategy also helps to identify areas of opportunity and risk and provides guidance on how to allocate resources for optimal performance.
What Is the Difference Between Business Strategy and Business Tactics?
Although they are intricately related, there are some crucial differences between business strategy and tactic. These had been discussed below.
|Business Strategy||Business Tactics|
|This is a long-term vision centred around the collective vision of a company||These are short-term actions undertaken as a measure to resolve specific matters|
|Altering a business strategy will take significant time||Business tactics can be altered based on the current demands of the market|
|A company has to conduct extensive research in order to establish its strategy||Tactics are designed as a time-efficient way out regarding specific factors|
|This is conceptual by nature||This is concrete by nature|
|Contemplative reasoning is the basis of making a business strategy||Accomplishment-oriented actions are the basis of tactics|
Notably, the tactics and strategies of a business must always be in-line with each other. To elaborate, a business cannot employ any such strategy for momentary gain which contradicts its long-term strategic commitments.
Levels of Business Strategy
1. Corporate Strategy: This is the highest level of business strategy and involves making decisions about how to allocate resources, enter new markets, and develop new products or services.
2. Business Unit Strategy: This type of strategy is focused on the individual business units of the company. It outlines how each unit will compete in its market, the products or services it will offer, and the resources it will use to achieve its goals.
3. Functional Strategy: This type of strategy focuses on the individual functions within the company such as marketing, finance, production, and research and development. It outlines how each function will contribute to the overall success of the company.
4. Operational Strategy: This strategy is focused on the day–to–day operations of the company. It outlines how the company will execute its plans and achieve its goals.
Key components of Business Strategy
Let’s have a look at the key components of business strategy.
1. Corporate Vision and Mission: A vision and mission statement provide direction and purpose to the organization. They define the company’s purpose and values and provide guidance on where the organization is headed.
2. Goals and Objectives: Goals and objectives are the specific targets that an organization strives to achieve. They provide a roadmap to success and help the organization focus its efforts on the most important tasks.
3. Competitive Advantage: A competitive advantage is a way for an organization to stand out from its competitors. It could be a product or service offering, or a unique business process.
4. Market Position: Market position defines how an organization is perceived by its customers and competitors. It is important to identify the organization’s target market and the positioning of its products and services within that market.
5. Business Model: A business model is the foundation of an organization’s strategy. It defines the way the organization will create value, generate revenue, and capture profits.
6. Financial Plan: A financial plan outlines how an organization will fund its operations and activities. It includes the budget, capital expenditure plan, and cash flow forecast.
7. Organizational Structure: Organizational structure defines how the organization is structured and how resources are allocated. It also outlines the roles and responsibilities of key personnel.
8. Culture: Culture defines the values, beliefs, and behaviours that are shared by the organization’s employees. It is important to create an environment that encourages collaboration and innovation.
Key Aspects of a Successful Business Strategy
The business strategy of a company must include:
The Vision and Objective of the Company
A company must have a clear vision of the goals it wants to achieve in a specific timeframe. Therefore, an effective strategy of this organisation will lay down the pathways for its employees how they can reach that goal. Accordingly, this company can also plan proper training sessions so that the workforce can reach its full potential.
Core Values of the Company
This aspect primarily deals with the moral standpoints of a company. Even if there might be some legal loopholes, a business must properly define which kind of activities it will and will not partake in. This way, the growth of a toxic workplace culture can be largely avoided.
Some core values of a business company may undertake issues regarding:
- Mitigating bias and favouritism
- Post-sale service
- Ensuring the office is a safe space for trainees and newer employees
- Zero-tolerance policy towards bullying or discriminatory behaviour
Resource Allocation Measures
The success of a business is equally reliant on its human and fiscal capital. In order to ensure a higher Return-on-Investment [ROI], this business must have a proper plan regarding allocating its resources adequately. Therefore, if a company can eradicate the need for human interventions in day-to-day mundane repetitive tasks – such as data entry – it can utilise its employees to achieve more complicated milestones.
Notably, a number of leading start-up businesses in this country are enlisting the assistance of neo-banking platforms to automatise sections of their management procedure. For example, with the help of RazorpayX Payouts, funds can be transferred from your company’s end to the payees’ banks, cards, and digital wallets automatically within a minimal turn-around time span.
Therefore, you can save hours of effort that could have been spent for accounting purposes via conducting a one-click bulk payment. Consequently, this time can be utilised for more productive outputs.
In order to be a thriving business, a company must adequately assess the areas in which it can succeed, or what are the potential hindrances to such success. That is why an enterprise’s business strategy must include conducting a thorough SWOT analysis.
The acronym SWOT refers to Strengths, Weaknesses, Opportunities and Threats. Therefore, by conducting a proper SWOT analysis, a business can better understand which internal and external factors can affect its long-term plans.
A SWOT analysis takes into consideration three crucial aspects of a business’s success, referred to as the 3Cs – corporation, customer, and competitor. Therefore, areas under the purview of this analysis include:
- Relations with the clients
- Employees with regional expertise
- Amenities available
- Ability to acquire a greenfield or brownfield property
- Stock Holding capacity
- Bookkeeping abilities
How to Build a Business Strategy?
In order to frame a fruitful business strategy, a company must adhere to a few simple steps:
STEP 1: Clearly describe the target and purpose of the business
STEP 2: Point down the top-level marketing and communication strategies
STEP 3: Analyse the market condition and the scope of this business to succeed in this environment
STEP 4: Figure out which aspects of this business gives it an advantage over its customers
STEP 5: Translate this strategy to specific departmental objectives
Business Strategy Examples
1. Product Differentiation: Differentiating a product from competitors by offering better quality, more features or a unique design can be a powerful business strategy. For example, Apple has successfully differentiated its products from competitors by offering sleek, stylish designs and a range of features that make its products attractive to customers.
2. Price Leadership: Setting prices for a product or service at a level that is lower than competitors, while still generating a profit, can be an effective way to gain market share. Amazon is a great example of a company that has used price leadership to gain a competitive edge in the market.
3. Customer Service: Providing excellent customer service can be a great way to differentiate a business from competitors and build loyalty among customers. Zappos is a prime example of a company that has built its brand on the back of exceptional customer service.
4. Innovation: Constantly innovating and introducing new products or services can be a great way to stay ahead of the competition. Companies like Tesla and Uber are great examples of businesses that have used innovation to revolutionize their respective industries.
5. Expansion: Expanding into new markets or introducing new products or services can be a great way to generate growth. Companies such as Walmart and Starbucks have used expansion to become global brands.
How Can the Success of a Business Strategy Be Measured?
A business strategy’s success can be reflected in the following matters:
- Revenue gained
- Unrestrained cash flow
- Increase in market share
- Improved brand recognition
- Media coverage
How Can RazorpayX Improve the Business Strategy of an Organisation?
As a leading neo-banking platform, RazorpayX has caused a tectonic shift in how businesses frame out their operational route map. For instance, with the usage of vendor payments, a company can easily generate adequate invoices that can be paid off with a single click. As a result, your business flow can become significantly streamlined.
Therefore, as it is prominent in this discussion above, a business strategy is the cornerstone of a successful corporation. Both from ideological and economical point-of-views, such a concept is key to its growth and expansion potential.
Frequently Asked Questions
What are the different types of business strategies?
Some of the different types of business strategies include:
1. Corporate strategy
2. Competitive strategy
3. Functional strategy
4. Operational strategy
Which approaches are crucial in making a business strategy?
Approaches to business strategy are referred to as the 5Ps-