As a business leader, you have probably already seen a different type of strategies or read about different theories behind a different type of strategies. You have probably already made your own based on your knowledge. A business strategy is the quickest way to transform your business results. You need a strategy to start building and growing your businesses. Also, you want to be strategic, not only a small business that wants to survive for the next month.

What is a Business Strategy?

A business strategy outlines a long-term action plan designed to achieve a company’s vision. So, it is a plan of action required to achieve a specific set of goals that your business wants to achieve and, in such a way, accomplish the desired vision.

A successful business strategy is essential for scaling up a business. It provides direction and goals to aim towards. Also, it helps establish the direction of the organization and create goals to achieve success.

To implement a strategy it is necessary to have more tactics. For example, if your strategy is to build long-term business relationships with your customers, tactics that you can use can be providing additional services to regular customers, training, long-term contracts with lower prices, etc.

Each tactic contains specific activities that you must accomplish at a particular time, and you are responsible for the completion of those actions.

Definition of Your Business Strategy

The Merriam-Webster Dictionary defines a strategy as:

• a careful plan or method
• a clever stratagem
• the art of devising or employing plans or stratagems toward a goal.

However, the problem is that the term is understood differently by different people. First, the word strategy comes from the Greek word “strategos” which means leading an army. Naturally, in the past, as a term, it was mostly used for military purposes, such as military, defense, or attack strategy.

We can quickly note that the strategy is:

• The means to meet business objectives.
• A specific type of plan in which there are specified actions that you, as an entrepreneur, will need to take.
• Made of tactics that, on the other side, have activities with which you will meet the desired objectives.

Mintzberg’s 5Ps

There are many meanings of the word strategy, and sometimes, it’s really confusing for small business owners to know what strategy means and what to put in their strategic documents. To help businesses through this complexity, Mintzberg came up with his “5Ps of Strategy”—five different ways to develop a robust and actionable strategy.

Mintzberg’s 5Ps of strategy include various interpretations of the word “strategy”:

1. Plan

A plan is a series of strategically planned steps to achieve specific goals or objectives. This structured approach allows individuals or organizations to head towards desired outcomes, making intentional decisions and actions. The main question is: What will your business do in the future?

This is the traditional view of strategy, which involves setting clear goals, actions, and resource allocation. Planning is important, but a strategy goes beyond just a plan. It includes the big idea behind the plan and deals with the unexpected. Strategies are designed to handle external forces like competitors, the public, and other unpredictable stakeholders in various fields.

2. Ploy

The ploy is used to beat the competition with short-term tactics. The main question is: How will your business win over competitors fast?

These strategies focus on beating competitors through specific moves, such as ploys, used to get an edge or stop rivals. Ploys are common in concentrated industries, targeting specific competitors.

While these short-term tactics can work in many cases, a ploy-based strategy can still be too focused on beating competitors rather than succeeding independently or avoiding direct competition.

3. Pattern of behaviour

The pattern of behavior strategies that emerge from consistent actions over time, often without formal planning. The main question here is: What were the best past approaches that we can use in the future?

Patterns in strategies emerge from past successes or what works best. For example, a technical breakthrough in manufacturing can create new opportunities. By looking at your team’s action patterns, you can compare your past strategies to help you with your new ones.

4. Position

Positional strategies focus on understanding the end user, customer, or audience and how they see your work, which guides your overall strategy, including product development. The main question is: How does your organization position itself relative to competitors, market share, and reputation?

When choosing a position, think about your strengths and weaknesses and align them with your target market.

5. Perspective

Perspective strategies are about changing an organization’s internal culture and mindset and guiding employee behavior toward shared goals.

These strategies show the importance of an organization’s external market positioning and internal cultural alignment.

The Look of Your Business Strategy

I have seen various “so-called” strategies. They seem more like a textbook with 50-80 pages or more and refer to the period of 3-5 years without any specifics that the company must accomplish. As you can note from above if you want to implement your strategies effectively, it is necessary to determine specific tactics and define all activities for each tactic.

My recommendation is before you continue with the reading, as a first look at the definitions in these subtitles. Then, look at your business actions and see whether you have tactics that you accomplish from time to time or you are using a long-term strategy.

Key Components of a Business Strategy

A business strategy typically includes a company’s vision, mission, objectives, and plan of execution. It is a roadmap that guides the organization towards its goals and helps to align all aspects of the business towards a common purpose. The key components of a business strategy include the following:

1. Vision statement

Vision is a statement that outlines the long-term aspirations and goals of the company. It provides direction for the organization and helps to motivate employees towards achieving a common vision.

2. Company’s mission statement

Mission statement defines the purpose of the company and its reason for existence. It should be concise, clear, and easy to understand by both internal and external stakeholders.

3. Objectives

Objectives are specific, measurable, achievable, relevant, and time-bound goals that support the overall vision and mission of the company. They provide focus and help to track progress toward achieving the desired results.

4. Current state

The current state part requires conducting different analyses of the company and its environment. The reason for this component is that you want to know where you are now so that you can use this information to find the difference between your business goals and your current state.

Simply this part will respond to the question where is my business now and what is the difference between where it is now and where you want it to be in the future (vision).

To find the answers to these questions, you must conduct:

1. SWOT analysis. This is an assessment of the company’s strengths, weaknesses, opportunities, and threats. It helps to identify internal and external factors that could impact the success of the business.
2. Market research. Knowing your target market is crucial for developing a successful business strategy. This includes understanding your customers’ needs, preferences, and behaviors so that you can adjust your offerings accordingly.
3. Competitive analysis. Understanding the competitive landscape is essential for identifying your own competitive advantage and potential threats and opportunities in the market. It involves analyzing competitors’ strengths, weaknesses, strategies, and positioning.

5. Tactics

Tactics are typically defined as the smaller strategies consisted with specific action steps that will be used to execute a tactic to move towards business goals. These can include marketing tactics, sales tactics, operational tactics, etc.

6. Action Plan

This component is your business plan related to the action steps you must conduct for all tactics from the previous component.

You can also use the business strategy canvas we have developed to help you align all the different elements of your strategy and ensure effective execution of the strategy. You can see how it works in practice for a local bakery company here:

Why is a Business Strategy Important?

One of the main reasons a business strategy is important is that it helps align all aspects of the organization toward a common goal. By clearly defining objectives and outlining how they will be achieved, everyone within the company can work together towards the same purpose. This fosters collaboration, boosts morale, and increases overall efficiency.

A business strategy also helps to identify potential opportunities and threats in the market. Companies can better understand their position and make strategic decisions to stay ahead of the curve by analyzing competitors, industry trends, and customer needs.

Moreover, having a well-defined business strategy will guide your company’s decision-making processes. When faced with tough choices, you can refer back to your strategy and choose the option that best aligns with your long-term goals. This eliminates any ambiguity or confusion and promotes consistency in decision-making.

How Strategy Differs from Tactics

As we already said, a business strategy refers to an organization’s long-term goals and how it plans to achieve them. On the other hand, a tactic refers to the specific actions taken to achieve the set goals by the strategy.

While business strategy focuses on the big picture and involves high-level decision-making, tactics are more detailed and involve implementing specific actions to achieve short-term objectives.

Think of it this way: Your strategy is like the blueprint for building a house. It outlines the overall vision and plan for the house, while tactics are like the individual tasks that must be completed to construct the house according to the blueprint.

Levels of Business Strategy

There are three levels of business strategy, and let’s look at each of them.

Corporate-Level Strategy

Whether a small, medium, or large company or a startup, everyone needs to officialize their vision through a corporate-level strategy that will answer which business the company will be in, in which market it will perform, and how to allocate resources between the different business units or sectors. This level of strategy involves decision-making at the highest level of the organization and sets the direction for the entire company.

A corporate-level strategy is typically developed by top-level management.

Business-Level Strategy

This strategy refers to the strategy of a specific business unit or division within a company. Each business unit will have its own business-level strategy that is adjusted based on the corporate strategy. This strategic document directs the business in relation to customers, the market, and the competition but also ensures that it is in line with the corporate strategy.

Business-level strategies are typically developed by middle-level management.

Functional-Level Strategy

Furthermore, in each business unit, the functional units or specific departments should develop functional-level strategies that will answer how each function will contribute to the realization of the business-level strategy and, thus, to the corporate-level strategy. The operations function, marketing, sales, finance, and other functions, depending on how the company’s business unit is organized, must determine how best to organize themselves to help in the realization of the whole corporation’s goals.

Departmental managers typically develop a functional-level strategy.

Corporate VS Business VS Functional-Level Strategies

One example is the best way to explain the difference between these strategies.

For example, the corporate strategy of a chain of fast food shops requires specialization in healthy food and becoming the main supplier in all major cities of the country.

Now, the question is how to implement these directions derived from the corporate strategy. Naturally, through a business-level strategy that requires rapid growth in sales, maintaining a high level of profit, and ensuring that the process of preparing healthy food is realized in front of the eyes of customers.

Furthermore, the functional strategy, i.e., in this case, the operational strategy, will provide guidance for the expansion of the chain in major cities across the country, optimization of the supply chain, design of unique processes, and optimization of operating costs to enable rapid sales growth, maintaining a high level of profit and ensuring that the process of preparing healthy food is realized in front of the eyes of buyers, which is part of the business strategy.

How to Formulate a Successful Business Strategy?

Let’s formulate the key elements of a business strategy:

1. Start with your core values, vision and mission

The first step in formulating a successful business strategy is clearly defining your vision and mission. Your vision should be your business’s ultimate goal, while your mission should outline your company’s purpose and core values.

Related: 15 Simple Questions to Define Core Values of Business

Next, translate your vision and mission into objectives you want to achieve. For example, if your vision and mission is to provide healthy and affordable food to customers, your objectives may include increasing sales by a certain percentage or expanding into new markets.

2. Conduct internal and external analyses of your business

The second step is to conduct a comprehensive internal and external analysis where you will analyze your competencies, resources, performances, etc.

An analysis of your business resources and competencies aims to identify the possible need to adapt your business’s existing competencies and potential sources of competence and ensure that the core of your current or new competencies will remain focused on your customer needs.

Internal Analysis

You can start with your business model and the value chain analysis, a strategic management tool developed by Harvard Business School Professor Michael Porter. This analysis will give you a holistic view of your value chain activities and link them to the value chains of other organizations, particularly those of suppliers and distributors.

Measuring performance and making sense of the financial situation is an important part of strategic analysis. However, financial performance is only one way of measuring the current state or success of the company. In the next steps, you will define key performance indicators that will include financial and other performances, such as an increase in market share, reputation, reductions in customer complaints, attracting a key human resource, etc. Many of them will be analyzed through value chain analysis, and now you will add some current financial performances. What is important here is to analyze and know your current financial performance. I will not go into the details of financial analysis, but it will be covered in some of the next articles.

The next internal analysis you must conduct is related to productivity indicators to assess your current utilization of resources.

Also, you must conduct product analysis, and here, you can use product life cycle and value stream mapping. Also, it is good to relate the results of this analysis with technology evaluation using technology readiness level and technology adoption curve.

External Analysis

You can start analyzing your business environment when you understand everything related to your company’s resources, competencies, products, and performances.

The primary analysis includes analysis of the PESTLE analysis (Political, Economic, Socio-demographic, Technological, Legal and Environmental analysis).

Next, you can conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to identify your company’s strengths and weaknesses, as well as opportunities and threats in the market.

So, now you can conduct market research to define your target audience (potential customers) and industry analysis, including competitive research, because you want your strategic initiatives to help you achieve a competitive advantage.

3. Define Your Objectives

I have seen that many times, objectives are set by entrepreneurs and managers after they define their vision and mission. However, for the purpose of creating a business strategy canvas, I put them after internal and external analysis.

Why?

The main reason is that objectives can be much more realistic when you first conduct all the necessary analyses we talked about in the previous step. For example, now you will know where you stand according to competition, and you can develop objectives that can be achieved through the implementation of, let’s say, marketing strategies or tactics and action steps.

Remember that a good business strategy must have SMART goals: Specific, Measurable, Achievable, Relevant, and Time-bound.

Some common business objectives can be to increase sales or revenue, expand into new markets, improve customer satisfaction and retention rates, gain a competitive advantage, reduce costs, or increase profitability.

Example of Strategic Objective

Let’s take an example. If you have a service company that repairs specific appliances and wants to increase profitability by 20%, you can calculate the income to generate the desired profit. Let’s say that in this year you have $300.000,00 profit generated by $1.000.000,00 income. You know that if you want 360.000$ profit, you must generate $1.200.000,00 income next year. This calculation will bring several questions as follows:

• Can I increase my profit margin from 30% to 36% to achieve my goals?
• What must I do to increase my profit margin from 30% to 36%?
• What do I need to do to increase my income by 20%?

You can see what you must do to achieve your goals by answering these questions.

It is important to set a mix of short-term and long-term objectives that align with your overall vision and mission and consider the analysis results from the previous step.

Objectives Can be Interrelated

I want to express this here, even though you have already seen that in our previous example, increasing profits and revenue are interrelated because increasing revenue can increase profit (if increasing revenue doesn’t increase costs).

Related: Business Goals Questions to Develop SMART Goals

Let’s say that your main objective is to increase your profitability. So, to achieve this objective, you don’t need to make a new one, like increasing revenue. You will increase revenue and profitability through the following key objectives:

• Improve processes to reduce costs and achieve cost leadership to gain competitive edge in the next three years (if I reduce costs, I will increase profitability)
• Expand on new markets in the next three years (if I expand on the new market, I will increase my customer base and revenue, so the profitability)
• Become a customer-centric company (as a customer-centric company, I will generate and create demand, improve customer satisfaction and retention rates, so I will increase revenue and profitability)

There can be more than these three objectives, but I don’t want a strategy with hundreds of objectives because it is not possible to manage the execution. Based on the best business strategies I have developed and seen, I recommend going with three to five different objectives.

4. Define Tactics

At this step, you have set strategy objectives, and now you want to define specific tactics that will help you achieve each objective you set in the previous step.

Some people call the tactics as different strategies that will be used to achieve organizational goals. For example, competitive advantage strategies, marketing strategies, sales strategies (sales strategic plan), etc. This is not wrong approach because you can have multiple strategies to achieve different goals. However, when we talk about an overall business strategy, we think about an umbrella strategy that will cover all other strategies as a specific tactic inside it.

Simply, for each objective here, you must define several tactics that will help you achieve the objectives:

• Objective #1
  • Tactic #1
  • Tactic #2
  • Tactic #3
• Objective #2
  • Tactic #1…

Let’s take the first objective: Improve processes to reduce costs and achieve cost leadership to gain a competitive edge from our example objectives.

• Objective #1: Improve processes to reduce costs and achieve cost leadership in the next three years
  • Discover and reduce waste in all critical processes for value creation.
  • Implement Lean Six Sigma methodology to minimize process defects.
  • Automate crucial processes with advanced technology.

5. Action Plan

So, this part of your business strategy will be like an simple business plan, or a table that will consist of the following columns divided according to tactics.

1. Action steps. This column should include specific tasks to be completed in order to execute the tactics. For our example for the first objective and the tactic to discover and reduce wastes in all critical processes for value creation, your action steps will be:
   • Conduct value stream mapping to define, analyze, and find wastes of all crucial processes
   • Use 7 wastes, or Muda, from lean manufacturing to eliminate all identified wastes.
   • Test and measure the performance of improved processes
   • Implement new, improved processes in SOPs using some of the change management frameworks.
2. Deadline. This column should include a realistic deadline for each action step to be completed. So, you need to define exact date when the action step must be done.
3. Define key performance indicators (KPIs). KPIs are measurable metrics used to track progress toward achieving business goals. They can include financial metrics such as revenue and profit, as well as non-financial metrics like customer satisfaction and brand recognition. In our case, we can say that we want to reduce time in manufacturing processes by 40% and costs by 20%.
4. Resource allocation. Resources refer to the assets and capabilities that you have at your disposal, and that will be required to implement the strategy. These can include physical resources like equipment and facilities, human resources such as employees and their skills, and intangible resources like patents or intellectual property. To execute your business strategy successfully, you must allocate resources effectively and master the 4 core elements necessary for strategic execution.

Business Strategies for Competitive Advantage

As you know strategic planning is important process when it comes competitiveness and beating your competition on the market. This means that implementing your business strategy you want to build a sustainable competitive advantage.

For example, Harvard Business School professor Michael Porter popularized generic strategies as a framework used to develop competitive strategies. Let’s quickly look at them:

Cost Leadership Strategy

A cost leadership strategy involves becoming the lowest-cost producer in an industry. This allows you to offer products or services to your target audience at lower prices than your competitors while maintaining stable profitability. Companies achieve this by focusing on efficient operations, cutting costs, and streamlining processes.

Differentiation Strategy

A differentiation strategy is essential for competitive industries because it involves creating unique products or services that customers perceive as valuable. This allows a company to charge higher prices for its offerings and create brand loyalty among customers who value the differentiated features. Companies often achieve this through product design, marketing, and customer service innovations.

Focus Strategy

A focus strategy involves targeting a specific market segment and tailoring products or services to meet their needs. This allows a company to become an expert in serving a niche market and differentiate itself from larger competitors who may not be able to cater to the specific needs of this segment. This can also be cost-effective, allowing your company to focus its resources on a smaller target or niche market.

Strategy Implementation and Adaptation Tips

1. Delegate Roles

Since role delegation can help employees perform their jobs, effective strategy execution needs buy-in from everyone, so you must personalize tasks. For example, if the main objective of the company is to retain its existing clients, it must ask its marketing to handle its customer relationship management (CRM) system. Then, they must label the day-to-day duties of these employees, like personalizing experiences, sending a company newsletter, and implementing a feedback loop.

Related: Real-life Organizational Decision-Making Examples

2. Communicate Your Business Strategy

Communicating your strategy to all employees is important to ensure that everyone within the organization is working towards the same goals. This includes providing training and development opportunities to ensure everyone understands their role and how it interacts with the overall business strategy. 

3. Monitor KPIs

Key performance indicators (KPIs) are the targets you monitor to receive the most impact on your strategic planning results. Since monitoring KPIs is valuable in making informed business decisions, you must identify relevant KPIs that affect your business strategies.

4. Promote Accountability

Workplace accountability is when every employee is responsible for their behaviors, actions, and decisions toward their jobs. Business leaders must formulate this attribute to implement business strategy effectively.

5. Prepare To Adjust

Since most business strategies aren’t initially effective, you must adapt to mid-year adjustments that will allow you to review the performance of your strategic action plans. Doing so will help you keep all details up to date, which may require you to shift your business goals.

6. Align Your Organizational Design with Your Business Strategy

Organizational design is a critical factor in the success of any business. Business leaders must create an organization that is well-aligned with their strategic objectives. To do this, you must understand the benefits of organizational design and how it can be used to create a successful organization.

Organizational design creates a structure and culture within an organization that enables it to achieve its goals and objectives. The framework defines the roles, responsibilities, and relationships between individuals, departments, and functions within the organization.

Related: Organizational Design: A Comprehensive Framework for Success