What is a business strategy and why is it important to have one?

What is a Business Strategy

A business strategy is a tool that helps companies operate, develop, and grow. It consists of a set of plans and activities that define the company's business goals and the steps required to achieve them. Typically, it is in the form of one or more documents.

Key components of a company's business strategy include:

• vision and business goals to ensure the company knows where it is heading and what it aims to achieve,
• core values that define what employees should and shouldn’t do,
• SWOT analysis identifying the company’s strengths, weaknesses, opportunities, and threats,
• tactics or procedures outlining what each person in the company must do to meet the planned goals,
• resource redistribution and utilization plan for fulfilling individual steps,
• metrics that allow the company to evaluate its progress in achieving tasks and goals.

Why is Business Strategy Important

Every company needs a business strategy because it:

• improves planning and control – It knows which steps will help achieve goals and can evaluate whether those goals are being met,
• increases efficiency – It makes better use of resources, plans work roles and tasks, and directs efforts in the right direction,
• identifies strengths and weaknesses – It evaluates strengths, takes advantage of opportunities, balances weaknesses, and is better prepared to face challenges and potential threats,
• secures a competitive position in the market – By creating a strategy that assesses strengths, it gains a competitive advantage.
  
  

Before diving into creating a business strategy, research current business trends and consider which ones to incorporate into your strategy. We describe the most important ones in this article.

How to Create a Business Strategy

For a business strategy to work properly, it must be based on current data. Therefore, it’s necessary to first analyze the company’s situation and assess its performance—how many products it has, the volume of orders, profits, and so on. Based on the analysis, plans, wishes, and capabilities of the company, goals are set to be achieved. In the final step, the actions that each team member must take to achieve these goals are defined.

Creating a business strategy involves 5 key steps:

1. Define your vision – Think of it as the ideal position you want to have in the market and the company you want to grow into. The vision is the foundation of the strategy and could look something like this: “We want to be the most customer-oriented company in our market and the first company customers think of when they hear ‘dog food.’”

2. Set goals – While the vision is more abstract, goals are specific and measurable. They typically focus on profits, market share, or business growth. One popular method for setting goals is the SMART method, which we describe in this article.

3. Analyze your business and market – To come up with the right path to achieve your goals, you need to understand the strengths and weaknesses of your company, competitors, and the market in general. A classic SWOT analysis will help with this.

4. Identify your competitive advantages – Building on the analysis, clearly define your unique selling proposition (USP). Don’t underestimate this step—poorly defined competitive advantages can ruin the entire strategy. If salespeople base their communication on a flawed USP, the business results will be significantly lower than your potential.

5. Apply the strategy to each department – For teams to effectively implement the overall strategy, it needs to be communicated clearly. Think about how marketing, sales, and customer support teams will use the strategy and incorporate it into their plans.

Once the company has the business strategy in place, it’s essential to continuously monitor progress toward the goals. If something isn’t working, the strategy must be adjusted. Similarly, the company should respond to market or business changes by updating the strategy accordingly.

How to Measure the Success of a Business Strategy

In addition to clear goals, KPIs (Key Performance Indicators) will help you measure the success of your strategy. These are easily measurable goals, typically defined by each department individually. While business strategy includes long-term goals for the entire company, KPIs are set for shorter periods.

Here are some examples of KPIs you can focus on:

• Gross profit
• Net profit
• Growth compared to competitors
• Website traffic
• Content readership
• Conversion rate
• Media coverage
  
  

Companies often use metrics by breaking down business strategy goals into individual KPIs. For example, if one of the goals is to gain 500 new customers, the company can break this down into KPIs such as:

• 2,000 new leads,
• An average of 1,000 website visits per month,
• 5,000 case study downloads, etc.

How Business Strategy, Business Plan, and Business Process Differ

A business plan is created by entrepreneurs before starting their business and serves as a guide for setting up the company. It includes the business idea, financial startup costs, expected sales and profits, and an analysis of customers and the market. We describe how to create a business plan in this article.

A business strategy is used by companies that are already operating and want to improve their sales process and achieve their company goals. The strategy may have been outlined in the business plan, but as the company progresses and grows, the strategy is updated and adjusted.

A business process is a framework of specific tasks and activities leading to profit. It is repeatable, flexible, structured, and measurable. Learn how to set up a business process in the SalesDriver chapter.