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It’s no secret that it takes hard work to be successful in business, but hard work alone is often not enough, which is why we develop our business strategies to be more effective. So, what is a business strategy? Below, we’ll outline a definition, the different components of a business strategy and also provide some examples.
What is a business strategy?
A business strategy is a long-term plan that outlines how your company will grow and compete within a market. While this is an easy concept to grasp, there is a considerable amount of depth to understand when learning how to build a business strategy.
Difference between a business strategy vs tactics
You may have thought they were one in the same, but there is a distinct difference between a business strategy and business tactics. Your business strategy outlines the big picture of where your business is heading (the ‘what’), whereas your tactics specifically outline the methods and manoeuvres you will implement in order to get there (the ‘how’).
In more detail, tactics are practices and direct actions that take small steps towards realising a greater goal. When starting a business you’ll have a few things in mind that originally sparked the idea behind your business, but fleshing these out into a fully-fledged business plan (namely your strategy) will let you build an overarching picture of how your business can find success, and can therefore develop tactics to take you on the journey.
5 key components of a successful business strategy
It’s integral for business strategies to be multifaceted. They can’t be one dimensional andreliant on a few small factors, so here are 5 key business strategy components that are essential for finding success.
1. Vision/Mission
This is the direction you want to take your business. Developing principles, values and objectives will create a clear-cut path for your company that everyone can look at to make sure they’re all on the same page as you. By having direction, your business strategies have an end goal, and guidance for the tactics you want to employ to get there.
2. Progress tracking
Everyone always has a rough idea of how well their business is performing. However, having tangible data to quantify the effectiveness of your tactics makes all the difference when evaluating how your business strategy is performing. Not all business strategy components will be working as hard as the other, therefore it’s worth being thorough, by tracking all the moving parts implemented in your strategy.
3. Financial forecasting
Let’s face the facts. Business operations can be costly, so anticipating how much money is coming in can give us a better idea of how to spend on our long-term business strategies. Expenditure records, past profit and loss statements and other financial records can give you an idea of where you should be targeting your efforts, and what areas to strategise around.
4. SWOT analysis
Give yourself a great overall look at your business and how it works within its market by conducting a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. By analysing these 4 important factors, you’re preparing your company for openings to prosper, and potential destructive pain points. When putting together a business strategy, this is all valuable information for those times when you need to pivot to avoid failure or take up opportunities when they present themself.
5. Competitive analysis
While you may have some ideas about your competition from SWOT analysis, you’ll most likely need to dig deeper into the specifics of what your competition is doing. The people, the products and the objectives of the companies occupying the same market as yours. All of these things will influence the effectiveness of your strategies. Keeping your core values and objectives top of mind will always be a priority, but you’ll also need a deep understanding of the environment around you if you wish to achieve your goals.
10 Examples of effective business strategies
Below, we’ll outline some business strategy examples you can consider when developing your own long-term goals.
1. Technological advantage
Having a technological advantage can lead to more sales, increased productivity, and a competitive edge in your market. Whether you’re using it to innovate your point of sale systems, or improve your research and development areas, there are always ways to use technology to get ahead of the game.
2. Improve customer retention
It’s widely known that keeping a loyal customer compared to attracting new ones saves time and money on marketing efforts. By focussing your business strategy on customer retention and valuing their experience with your company, you can minimise costs on marketing campaigns for customer acquisition – making it a very effective business strategy for long term operation.
3. Improve customer service
Customer service improvements do a lot for your reputation. This strategy works on a lot of levels because it increases customer acquisition by word of mouth, which then lowers advertising costs, but it also complements any customer retention strategies you’ve already implemented too.
4. Cross-selling products
You may find some businesses that have already developed a large customer base will spend time double-dipping on them and try to market new products to those same customers. Some companies are better than others at it, but at the end of the day it’s actually a great way of increasing sales as once again, you’ll see savings from not having to rely on costly customer acquisition campaigns, which results in quite a hefty increase in profitability.
5. Increase sales from new products
Regardless of how well current products are performing, keeping a constant flow of new products keeps your brand relevant, and under the spotlight. There is always extra attention paid to new and shiny things, and business strategies built around a continual rollout of products can also have a positive effect on brand reputation.
6. Innovation and pushing boundaries
The new and shiny factor extends to innovation in products too. Extra media attention is often paid to these boundary-pushing products, but word of mouth can also somewhat carry these products further as creative and ground-breaking ideas are often popular talking points for those within related communities and industries.
7. Product diversity
Stale brand imagery is terrible for businesses, therefore keeping a wide variety of products is a strategy companies use to keep a fresh look in the eyes of consumers. Updating pricing, features and aesthetics of existing products is another way companies create the illusion of diversity without necessarily having to diversify very much at all.
8. Price point strategising
One of the most important parts of a customer’s journey is the research phase, and pricing has a lot to do with how valuable a customer perceives your product. A common strategy is to simply undercut the market, making your product instantly stand out amongst the crowd.
9. Sustainability
If you’re in it for the long haul, you’ll want to focus on your organisation’s sustainability. Implementing environmentally friendly and financially sound practices while avoiding short-term, high-risk procedures are great at ensuring longevity and building trust from your employees and customers – showing them that you’re a brand that can be relied upon in the long run.
10. Targeting youth markets
Companies going through rapid growth periods love this strategy due to how fast word of mouth travels amongst younger generations. Social media is more popular in younger markets, and both the influential factors and the ability for word of mouth to spread incredibly fast on these platforms makes youth markets very effective for business growth.
3 business strategy mistakes to avoid
1. Poor implementation
What is a business strategy without correct implementation? Having the right plan is one thing, but one must always keep in mind that without the proper tactics in place to execute these plans, achieving the goals set in your business plan may not ever be realised.
2. Inaccurate data
Just like everything in life, making decisions based on incorrect information is a sure-fire way to get yourself in trouble, and in business, it’s no different. Taking the extra effort to compile a more comprehensive set of data that allows you to cross-check the accuracy of your information ensures you’re not being misinformed by misleading data.
3. Forgetting the basics of sales
With all this knowledge of strategy, you must remember the importance of sales. It’s easy to get caught up with marketing, management, branding and different ways of implementing all of these, but at the end of the day, if your inventory isn’t moving, there’s no way for your business to grow.
