Setting up and taking a business from break-even point to profitability is no easy feat. Research suggests that 90% of startups are likely to fail. Even though the reasons for failure can vary, the lack of an efficient and comprehensive business strategy is definitely one of the reasons.
The term “business strategy” is not new to most of us. But what is a business strategy, and how can it help an organization become profitable?
Follow along as we will discuss what is a business strategy, why it is essential, how it can benefit your company in different ways, and some common examples of business strategy.
What is Business Strategy?
In simple words, business strategy is a plan that guides a company to growth and success. However, the concept is much more complex in practice.
A business strategy covers all the actions and decisions a company needs to take to reach its desired objectives. It includes everything from pricing, marketing, resource allocation, and everything that is connected to a business’s goal.
An effective business strategy also brings different departments together as they work on common goals to lead the company to success.
Why is a Business Strategy Important?
A comprehensive business strategy is vital for companies for the following reasons:
- Effective Planning. Without a business strategy, an organization will have no plan to outline the necessary steps to reach its business goals.
- Knowledge of Strengths and Weaknesses. When a company brainstorms its goals, it realizes its strengths and weaknesses. Creating a business strategy helps utilize these strengths and eliminates the weaknesses to optimize the journey toward success.
- Improved Efficiency. When a company develops a business strategy, it determines how many resources to allocate to each goal to maximize the rate of success. It improves the organization’s efficiency, helps it track progress, assign roles, and plan ahead.
- Better Control. Developing a business strategy also clarifies which activities bring you closer to your goals and which activities waste resources. This helps bring more control throughout your organization as you seek to focus only on the tangible steps that help you achieve success faster.
- Competitive Edge. All the reasons that make it important to have a business strategy ultimately come together to give you a competitive edge. Once you have a plan, knowledge of strengths and weaknesses, improved efficiency, and better control, you are closer to making your name in the market.
10 Examples of Effective Business Strategies
Business strategies can help a company in different ways. Here are some examples of how an organization can benefit through effective business strategies.
Business strategies can help a company become more technologically advanced. A company can tap into the latest business trends, analyze its weak areas, and use innovation to address those weaknesses.
For example, a traditional brick-and-mortar shoe store can become more profitable by reshaping or repurposing its business strategy and selling its products online.
Better Customer Retention
An effective business strategy can also help address the customer side of a business vis-a-vis customer experience.
For example, if a business lacks in customer retention rather than acquisition, it can plan a strategy accordingly to address that issue. This will not only make the current customers more loyal but will also help reduce expenditures on marketing campaigns for nonessential customer acquisition.
Customer Servicing Goals
A business strategy will help you set goals to address customer service issues that might negatively affect your brand reputation and sales.
For instance, if you know that your business is lacking in prompt customer complaint handling, you can revise your business strategy and guide teams on how to better handle unhappy customers. It will consequently improve other business areas like product quality and brand loyalty.
New Product Lineup
An effective strategy also helps scale the business for consistent growth and market penetration.
Let’s say if some of your products are already doing well, you might want to introduce a new product as a part of your business strategy. A consistent flow of new products will make you relevant and help you keep up with the latest industry trends.
Cross-selling is the process of selling additional products to complement existing products. For successful businesses with a large customer base, a business strategy can include cross-selling for more profits and marketing new products through word-of-mouth marketing.
It is an excellent example of an efficient business strategy as it will reduce marketing/acquisition costs and yield greater returns through existing customers.
New Ideas and Creativity
Creativity, groundbreaking ideas, and innovation may seem risky, but they are also part of a business strategy.
If you can successfully innovate in your industry, you’ll be considered an industry leader, bringing remarkable benefits to your brand and business. This level of innovation takes planning and risk-benefit analysis, which is only possible through a comprehensive and expert-driven business strategy.
People love the change if it benefits them. To consistently stay in the eyes and minds of customers, businesses devise a strategy that guides them toward diversification. This diversification can be in the product packaging, features, price, special sales, or the product itself. This consistent but welcomed change allows a business to keep the customers happy and loyal to the brand.
Price Point Strategy
A critical aspect of a customer’s journey is setting the price point. It is covered in an effective business strategy, as it greatly influences how people perceive a product. Generally speaking, the goal is to undercut the existing market while maintaining a Unique Selling Point(USP).
More and more people are looking for businesses that are sustainable and good for the community, environment, and society as a whole. As a result, modern organizations are developing business strategies that help them become more sustainable. Some examples may include using environmentally friendly packaging, sourcing, or manufacturing processes.
Targeting Young Consumers
Social media and other popular platforms are a gold mine for targeting younger customers. Social media marketing is a crucial part of a business strategy today, as more than 4.62 billion people use social media regularly. It is an excellent way to bring growth and higher returns.
Business strategy is an all-encompassing process that plans, guides, and analyzes everything a business does. The ultimate goal of a business strategy is to help make safer and more profitable decisions while reducing the risks. It takes experts in different departments to sit down and brainstorm so that every person can touch on weaknesses and strengths in their respective departments.