A business strategy, in simple terms, is a documented plan on how an organisation is setting out to achieve their goals. A business strategy contains a number of key principles that outlines how a company will go about attaining these goals. For example it will explain, how to deal with your competitors, look at the needs and expectations of customers, and will examine the long term growth and sustainability of their organisation.
The reason why having a strategy is so important is because it gives business time to get a sense of how they are preforming, what their capabilities are, and if these capabilities are able to help them grow.
Not all businesses get it right straight away. There are natural weakness within all organisations for various reasons. What a business strategy does is try to remedy these weaknesses so that companies don’t trip up and suffer their impact too greatly. Strategies look at these future risks and help develop ways in which they can overcome these obstacles.
Here are some reasons why having a strategy is important:
A well defined business strategy will offer a guide on how your business is performing internally. Also, how you are performing against your competition and what you need to stay relevant into the future.
A strategy can identify trends and opportunities in the future. It can examine the broader changes in market such as political, social or technological changes, as well as consumer changes, and can develop tactics so your business can modify and develop to suit these future changes.
A business strategy creates a vision and direction for the whole organisation. It is important that all people within a company have clear goals and are following the direction, or mission of the organisation. A strategy can provide this vision and prevent individuals from losing sight of their company’s aims.
Finally, by creating a business strategy a company can create a competitive advantage and ultimately understand more about themselves and where they are going.
The Difference Between Corporate Strategy & Business Strategy"
When a business identifies opportunities outside its original industry, it might contemplate diversification. When additional businesses become part of the company, the small business owner must consider corporate-level strategy. To be effective, the umbrella company must contribute to the efficiency, profitability and competitive advantage to each business unit. The gourmet candy maker may decide to enter the dried-fruit business, for example. This corporate decision is sound only if the parent company can extend and develop a competitive advantage – say economy of scope, integrated management or procurement – over both businesses. For example, the owner may determine that her mail-order candy distribution system is perfectly suited for the dried-fruit business and that customer research indicates existing customers will purchase items from both companies. Or she may be able to negotiate volume discounts for raisins, dried cranberries and dried cherries she will use in both businesses.
The decisions a company makes on its way to creating, maintaining and using its competitive advantages are business-level strategies. After evaluating the company’s product line, target market and competition, a small business owner can better identify where her competitive advantage lies. A gourmet candy company, for example, might find that it cannot compete on price; larger corporations often enjoy economies of scale that keep costs low. Instead, the small business would choose a differentiation strategy, emphasizing freshness, quality ingredients or some other attribute consumers will value highly enough to pay extra. Business strategy will affect the small company’s functional decisions such as the selection of its promotions and distribution channels.