If you know where you want to go and where you want to be in the business in a year's time, it's easier to plan tasks, deadlines and resources accordingly. This makes it more likely that you will actually reach your goal. A business strategy can help you with all of this.
What is a business strategy
A business strategy is a tool that helps businesses function, evolve and grow. It is a set of plans and actions that defines a company's business goals and the steps it needs to take to achieve them. It typically takes the form of one or more documents.
The company's business strategy includes:
- Vision and business objectives so that the firm knows where they are going and what they wants to achieve,
- core values, which set out what the company's employees should and should not do,
- a SWOT analysis identifying the strengths, weaknesses, opportunities and threats the firm needs to face,
- tactics or procedures, what must be done by whom in the firm to achieve the intended goals,
- a plan for reallocating and using resources to accomplish each step,
- the metrics by which the firm evaluates how it is doing in meeting its tasks and goals.
Why business strategy is important
Every company needs a business strategy because through it:
- plan better and is in control - know which steps will help achieve goals and can evaluate whether is meeting goals,
- increase efficiency - makes better use of resources, plans work roles and tasks, puts effort in the right direction,
- Recognises strengths and weaknesses - assesses strengths, seizes opportunities, balances weaknesses and better faces challenges and potential threats,
- secures a favourable position in the market - by developing a strategy that capitalizes on strengths, gain a competitive advantage.
Before you start creating a business strategy, find out the current business trends and think about which of them to incorporate into the strategy. We describe the most important ones in this article.
How to develop a business strategy
For a business strategy to work well, it must be based on current data. It is therefore necessary to first analyse the company's situation and find out how the company is doing, how many products it has, how many orders it has, what its profits are and so on. Based on the analysis, plans, wishes and possibilities of the company, the goals it wants to achieve are set. In the last step, the steps that everyone in the company must complete to achieve the goals are defined.
Creating a business strategy has 5 key steps:
- Define your vision – Think of it as your dream position, the market you want to be in, and the company you want to grow into. The vision is the basis of the strategy and can take the following form: "We want to be the most customer-friendly company in our market and we want to be the first company that comes to mind when customers think of dog food."
- Set Goals – While vision is rather abstract, goals are specific and measurable. They are usually related to profit, market share or business growth. One of the popular methods of setting goals is the SMART method, which we describe in this article.
- Analyze your business and market – In order to come up with a suitable path to meet your goals, you need to know the strengths and weaknesses of your business, your competition and the market in general. This is where a classic SWOT analysis will come in handy.
- Know your competitive advantages – Follow up the analysis smoothly by clearly defining your competitive advantage or USP (Unique Selling Point). Do not underestimate this step, a poorly defined competitive advantage can bury the entire strategy. If marketers base their communication on the wrong USP, the business results will be significantly lower than your potential.
- Apply the strategy to individual departments – In order for the teams to effectively implement the general strategy, you need to communicate it clearly to them. Think about how the marketing, sales or customer support departments will work with it and incorporate it into the strategy.
Once the company has a business strategy in place, it is necessary to continuously monitor the tasks and whether they are really leading the company to the goal. If somewhere the strategy is failing, the firm must adjust the strategy. In the same way, the firm responds to changes in the market or in the overall business.
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How to measure the success of a business strategy
In addition to clear goals, KPIs (Key Performance Indicators) will also help you measure the success of your strategy. These are easily measurable goals that are typically defined by each department individually. While in the business strategy you have long-term goals for the entire company, you set KPIs for a shorter period.
Here are some examples of KPIs you can focus on:
- Gross Profit,
- the net profit,
- growth compared to competition,
- website traffic,
- content readability,
- conversion rate,
- media coverage.
Companies often work with metrics by dividing the goals in their business strategy into individual KPIs. For example, if one of the goals is the gain of 500 new customers, the company can divide this goal into KPIs as a gain:
- 2 thousand new leads,
- an average of one thousand website visits per month,
- 5 thousand case study downloads etc.
How business strategy and business plan and process differ
A business plan is created by entrepreneurs before they set up their business, and it is the blueprint they follow when setting up their business. It includes the business idea, financial costs for starting the business, expected sales and profits, and customer and market analysis. How to build a business plan is described in this article.
The business strategy is used by existing companies that want to improve their business process and meet the company's goals. Strategies may already be outlined in the business plan, but as the business continues to progress and grow, the strategy is updated and modified.
A business process is an outline of specific tasks and activities leading to profit. The process is repeatable, flexible, structured and measurable. To learn how to set up a business process, read our SalesDriver chapter.