A business strategy pertains to the decisions and actions taken by a company to achieve its goals. It guides the decision-making process for resource allocation and hiring. The process of developing a business strategy helps you assess and determine the weaknesses and strengths of your company. This allows you to create a strategy that maximises your strengths and eliminates your weaknesses.
Since you have a better understanding of the path that you’re taking, you have more control over your decisions and activities. A business strategy helps you effectively distribute resources and maximise your strengths to set your company apart from the rest. Having a clear plan about achieving your business goals also improves your efficiency.
A business strategy is composed of the following:
A business strategy guides everyone about what they should and shouldn’t do according to the core values of the company.
Business objectives and vision
Having a vision for the organisation’s direction allows you to create clear instructions about what must be done and who should do it in order to reach your goals.
Resource allocation plan
Your business strategy states the resources that are needed to complete your plan, how it will be distributed, and who will do it.
The business strategy includes the operational details about the work that must be done.
Your business strategy includes details on how to monitor the output of the company and how it is doing.
Business strategies also include an analysis of the threats, opportunities, strengths, and weaknesses of an organisation. It helps you determine your company’s weaknesses and threats and use your strengths to your advantage.
Types of Business Strategies
Product differentiation strategy
You’re allowed to maintain the prices that you consider necessary because your products have extra or unique features that other companies don’t. By using the product differentiation strategy, you can sell your products on your desired conditions or terms because the items offer superior value. For instance, you are offering handmade shoes. Customers are willing to pay more for handmade shoes due to the product’s nature.
The growth strategy is ideal for businesses that are doing well but have static revenues. You can grow your businesses by adding new product lines or products, selling the same item beyond your existing geographical reach, or improving your existing products. Another option is to allow another company to acquire yours or purchase a new business.
Cost differentiation strategy
You need to price your products right. The price shouldn’t be too high or too high. It should be attractive to customers. If the price is too low, they might think that the product is of low quality. Keeping the price low won’t generate expected profits or cover the production cost. If it is expensive, no one will pay for it. Price your products in a manner that’s favourable for your company and customers.
Cutting-edge service or products
You can distinguish yourself by offering the most innovative service or products. Define what innovative means for your company. You should also determine how innovative you are.
You have to adjust the cost of your services or products over time. For instance, you can set a high initial price for new products within the first 2 months then lower it. Expensive products are usually seen as high quality goods, which attracts well-off customers. When you drop the price, your products become attractive to budget-conscious customers. The price-skimming strategy allows you to earn as many profits as possible, boost brand awareness, and target different customer segments. It’s often used when introducing new product lines.
Cross-sell more products
Cross-selling products work well for online retailers, banks, and office supply companies. You can boost your average cart size by selling more products. The size of your cart can affect your profitability. Cross-selling products can help increase your cart size without spending money to get more new clients.
This strategy is all about positioning yourself within the industry and delivering value to your customers at the same time. It helps you obtain a competitive edge, increase profits, and get customers. A business-level strategy is composed of different strategy types like differentiation, focused low-cost, integrated low-cost differentiation, cost leadership, and focused differentiation.
Differentiation strategies allow you to position yourself as a leading provider of innovative services and products within your industry. It focuses on quality instead of cost, which is the complete opposite of cost leadership that focuses on pricing. For instance, companies that use cost leadership will purchase large quantities of products from suppliers to keep prices low and attract customers.
Integrated low-cost differentiation allows you to adapt to environmental changes and learn new skills immediately. Businesses that implement a focused differentiation strategy target a smaller specific audience to meet the demands of that market.
Having a technological advantage can boost your productivity, market domination, and sales. You can acquire a smaller business to obtain their technology, hire people with unique skills, or invest in research and development to give your organisation a technological advantage.
Better customer retention
Retaining customers is easier and cheaper than attracting new ones. That’s why improving customer retention is important. You have to determine key projects and tactics to retain customers.
Improve customer service
Some companies are known for providing excellent customer service. Creating a business strategy that focuses on delivering exceptional customer service can improve your reputation. The strategy will often focus on online support.
Businesses could implement a strategy that is designed to increase their sustainability. For instance, their goal is to reduce the footprint of the company or energy costs by using a recycling program.
Some businesses acquire another organisation or its product line to get a higher market share or obtain increased synergy. This strategy can also help businesses offer new products to customers or enter foreign markets. By acquiring another company, they get the organisation’s customer base and brand name.
You can use these strategies holistically or independently, depending on your situation and goals. There is no one-size-fits-all solution because each business has different needs. Understanding these business strategies and using them properly can help you succeed.