Business Strategy Components And Examples

Updated 7 September 2023

A comprehensive strategy for business creates a structure for companies to carry out their organisational goals. It helps them remain relevant in the market and identify growth opportunities. The strategy weeds out threats and weaknesses, allowing organisations to prosper on their strengths. It acts as a guide for major decisions, such as hiring practices and training needs.

In this article, we discuss what a business strategy is, why it is important, its different levels and its major components with six examples of great business strategies.

What Is A Business Strategy?

A business strategy is a business document that describes a course of action to help leaders achieve organisational objectives. The detailed plan defines business needs to guide the hiring process and inform the allocation of company resources. It provides a clear direction for different teams to pool together their talents to support the company's goals. As a result, businesses secure a competitive position in the market, improve customer satisfaction and mobilise their business operations.

Why Is A Business Strategy Important?

There are several reasons why a business strategy is important, including:

Vision

A business strategy is important because it creates a vision for the whole organisation to follow. You can lead and motivate your coworkers more effectively when they have clearly defined roles and responsibilities. A strategy gives large groups of people a shared purpose. It ensures that no individual loses sight of the organisational mission.

Trends

A business strategy allows decision-makers to identify trends and opportunities for future growth. For businesses to remain competitive, they require to adjust and reevaluate their tactics frequently. Thus, it is a dynamic resource that businesses can modify and develop to address social and technological changes in the market. It safeguards them from complacency.

Competitive advantage

A business strategy encourages businesses to introspect. It offers a guide on how your business is performing internally and externally. Businesses that can identify their strengths and weaknesses understand themselves better. This is crucial to gaining a competitive advantage and securing future profitability.

Levels Of Business Strategy

Business strategy facilitates smooth operations at different levels of a business. It is a tool not just for top management but also for leaders across different business functions to use. It can promote cohesion to business ideals and collaboration among coworkers at every level. Here is a detailed look at the three levels of business strategy:

Corporate level strategy

The corporate-level strategy is at the top of the planning pyramid. It is concerned with the destination towards which your business is moving. Business strategy at this level is a comprehensive plan that impacts every level of an organisation. It is formulated by top management, such as board members, investors and c-suite executives. They structure their goals around expansion plans, takeovers and mergers, diversification and new areas of investment.

Business level strategy

General managers develop and implement business-level strategies. They translate the direction of the business into more actionable goals. At this level, leaders plan how to achieve the organisational mission rather than what the mission is required to be. For example, if the corporate level strategy is to diversify business operations, a business level strategy would be to rebrand a product for a new demographic.

Functional level strategy

Functional level strategies are the roles and responsibilities assigned to teams to support business-level strategy. At this level, supervisors and line-managers delegate larger projects through smaller tasks among individual coworkers. These directives are specific and catered to the skills and qualifications of individual employees. For example, a functional level strategy would be to task a graphic designer with designing new product packaging.

Related: What Is Autocratic Leadership?

Major Components Of A Business Strategy

There are five key components to help you build an effective business strategy. They include:

1. Business objective

Your business objective or mission statement identifies a gap in the market that your business hopes to address. Any business strategy you set out to implement is required to always link back to this vision. Think of a business strategy as an action plan with detailed instructions on how those responsible require to achieve the organisational goal.

2. Core values

According to the organisation's core values, your business strategy is required to communicate clear guidelines on what people are required to do and need not do. Articulating these values on paper encourages coworkers to hold themselves accountable to the organisation's standards.

3. SWOT analysis

SWOT stands for strengths, weaknesses, opportunities and threats. This analysis is integral to your business strategy, as it represents a snapshot of the company's current situation. Identifying these four key areas prepares you for challenges you may encounter along the way. It shows what strengths you can use to your advantage and exposes weaknesses you require to address.

4. Operational tactics

A business strategy needs to transform a vision and plan into action. Once you identify your resources through a SWOT analysis, you can then allocate them accordingly. Operational tactics prioritise what needs to get done now and what can wait for later. It helps you manage your time and resources efficiently.

5. Measurement

To evaluate your business strategy's effectiveness, you require to incorporate a means of tracking your performance. It works best when you divide your objective into smaller targets that you can measure regularly. For example, you can measure your output through smaller financial milestones.

When To Focus On Business Strategy?

It is always beneficial to implement a business strategy because it brings more intentional thought to your operations. When businesses make sizable shifts, business strategies become even more important because they lay the groundwork on how to maximise returns. But, a strategy is not just about growth; it also ensures you take full advantage of an available opportunity in the market.

Here are a few situations when you may require to focus on business strategy:

Starting a new business
Plans to sell an existing enterprise
Raising funds among family, friends, the public or investors
Seeking a new business partner
Rebranding an existing business
Investing money into improving a business
Expanding an organisation into a new market or region
Merging with another organisation
Major internal changes such as personnel changes

Business Strategy Examples

A business strategy can highlight strengths for you to employ as a unique selling point for your product and service. Here are six examples of great business strategies:

Product differentiation

Many companies, particularly in the technology or automotive space, differentiate themselves through their innovation. To get yourself noticed using this business strategy, you require to highlight that your products are superior because of their technology, pricing, features or even design. Product differentiation is an effective strategy because it sets you apart from competitors. In return, customers are loyal to you because of the uniqueness only you can offer them.

Improve customer experience

Businesses build their reputation on exemplary customer service. Usually, companies may struggle in a particular area in their customer experience, so a business strategy focused on improving service would usually concentrate its objectives on something like online support or a more effective call center.

Cornering a younger market

Organisations see great value in tapping into customers at a young age so that they continue associating with a brand as they get older. Some larger companies buy out their competitors to gain a share of this lucrative market. Cornering a young market allows you to increase your presence in a new demographic while retaining your existing customer base.

Attractive pricing strategy

The way you price your products and services can impact the way customers perceive your business. An affordable pricing strategy is a great option to attract new customers. Pricing your products beyond what ordinary customers can afford gives an aspirational value to your brand.

Both pricing strategies are powerful, but they require a different business approach. Businesses that keep their prices low require to achieve higher volumes to be profitable. In comparison, companies who choose higher prices can maintain the exclusivity of their product while retaining a large profit margin per product.

Sustainability

As people become more environmentally conscious, the demand for sustainable products has increased as well. A business strategy that positions an organisation as a socially responsible business also demonstrates other desirable values, such as trust and integrity. Some examples of sustainable business practices include goals to reduce energy costs or to decrease the company's carbon footprint by implementing a recycling program.

Cross-sell more products

Some organisations focus on selling more products to the same customer. This strategy is popular among banks, insurance firms and online retailers. By increasing the number of products sold per customer, you can decrease your customer acquisition cost and spend less on marketing.