Markets have always been competitive. And businesses that were able to deliver the right products and services were able to make a striking presence in such a market. Moreover, these businesses were also able to increase the value for shareholders and owners.
But how did they achieve this goal?
By developing and implementing the right business strategy.
However, it is not everyone’s cup of tea.
Developing and implementing the right business strategy requires research and investigation, analysis, communication, strategic planning, futuristic thinking, implementation, and measurement.
Now, before we dive deep into understanding the importance of developing and implementing the right business strategy, let’s start from the basics.
Business Strategy: What is it?
Let’s try to understand this with the help of an example.
Take a sports coach who is formulating a team plan to win the next game. The coach will determine the strengths and weaknesses of individual players in their team. Based on that, the coach will decide the position a player would play from. The coach will also consider different play scenarios and develop different ideas on how to tackle the game in those scenarios. Moreover, the coach will study the opponent team and their play patterns. The same will be communicated to the players in the team for a successful win. Knowing all this will give the team a competitive advantage over other teams.
Similarly, a business strategy is a plan that helps managers and teams to achieve long-term goals and vision. It provides a strategic plan that will not only help the business team handle current situations but also the future. A business strategy also considers the market competitors and ways to tackle this competition.
Having a business strategy gives your team a central framework to work with and communicate the same to clients and stakeholders.
All in all, a business strategy will streamline business operations and provide a direction to achieve a strategic position in the market.
Importance of Business Strategy
Make Informed Decisions
Decision-making is critical when running a business. A good business decision can lead to success whereas a bad business decision can lead to financial and legal troubles. Hence, making an informed decision is important.
And a business strategy can help you makean informed decision. It will help you assess the merit of several business decisions you want to take.
Develop a Direction
As mentioned above, a business strategy will help you streamline the business direction. This is critical for managers and teams to achieve the said business goals and vision.
Whether you want to diversify, introduce new products, or improve your existing client base, a business strategy will give you the plan to execute to achieve these goals.
How will you determine whether your business is successful? You need metrics to measure success of the business. And a business strategy can provide you with those metrics.
For example, your business strategy states a business diversification goal. If you have successfully achieved the goal, you know that your business is moving in the right direction and achieving success. However, if your business hasn’t achieved the said goal, you need to work hard and implement new strategies to achieve the goal and success.
With a business strategy, you can compare your success based on the various goals achieved over time.
Reduce the Chances of Competitive Convergence
When a business doesn’t have a business strategy, it relies on its competitors to determine goals, vision, and direction. This causes a competitive convergence. The market becomes diluted and it becomes to differentiate between business entities. This is not an ideal situation for the market, investors, and stakeholders.
However, with a business strategy, a business will have a unique direction, goals, and vision. It will be different from the competitors. Such a business will stand out in the market and build a unique position reducing the chances of competitive convergence.
Lack of employee satisfaction is one of the major reasons why people leave the company. Employee dissatisfaction occurs due to a lack of drive to achieve goals. A lack of business strategy can be one of the driving factors for such a situation.
On the flip side, a business strategy provides the drive to achieve the goals thus increasing employee engagement and satisfaction. You can greatly reduce the employee turnover of your company thus saving time and money.
Steps to Develop a Business Strategy
Now you know why it can be detrimental to develop a business strategy. But do you know the steps to develop a business strategy?
Keep reading to find out.
Define Your Vision
To develop a business strategy that brings success, you need to define your vision. Now, this is not just about giving your mission statement, but it also includes giving business values, determining market position, ideal customer profile, value proposition, and market.
Once you have defined your vision, you will have a strong base to build the rest of the business strategy.
Define Your Objectives
The next step to develop your business strategy is to define the business objectives.
This must include objectives such as market penetration, revenue, growth prospects, and shareholder value creation. Each business will have unique objectives that must be realistic and achievable.
The business objectives must be able to answer how the business will grow, compete and prosper in real-time.
Business and Marketplace Analysis
The third step of business strategy development is to analyze your business and marketplace. This is where you develop your playground to operate your business efficiently to achieve success.
In this step, you need to conduct a SWOT analysis of your business.
Knowing your strengths allows you to know where your business excels and helps you separate from the market competition. This can include aspects such as a strong customer base, unique technology, and more.
Knowing your weaknesses will help you ensure that your business strategy isn’t focusing too much on weak areas ensuring success.
While doing a SWOT analysis, you also need to consider the external environment. Knowing market opportunities allows you to find the best ways to diversify and expand. Whereas threats allow you to determine factors that can potentially harm your business. This will allow you to have a business protection plan in place.
Determine the Competitive Advantage
As mentioned initially, having a competitive advantage allows you to stand out in the crowd and move forward in the market. This is a make-or-break step for several businesses.
When you are determining competitive advantage, try to explore and answer questions like your Unique Selling Point (USP), ways to increase sales, use the latest technologies, higher profit margins, and more.
Develop a Framework
Once a business strategy is developed, you need to develop a framework to execute the strategy. This framework must be specific to different business departments. For example, the sales team must have a business strategy framework that lets them know different ways to increase sales, customer profiles, and ways to increase profits. However, hiring qualified employees is out of the scope of the sales team.
The framework will help you execute the business strategy in a streamlined way.
Wrap it Up
Having a business strategy can greatly help you execute all the business operations smoothly. It will help your business achieve its goals and vision along with creating a strong position in the market. Without a business strategy, your business won’t have any competitive advantage over others in the market.
To learn more about business strategy, a marketing strategy plan, ways to make better financial decisions, hiring the right team, and more such business operations, get in touch with us at Keystone Executive Coaching. We are determined to help business owners and start-up founders to build a strong foundation in the market and stand out from the crowd. Our programs are highly focused on helping our clients achieve their business goals effectively.