If you want a successful business, you need to build an effective strategy.
This post will look at what business strategies are, why they are important, and how to create them for your company. Then we will focus on specific business strategies of highly successful companies, and why they were so effective.
What is a Business Strategy?
In simple terms, a business strategy is a plan on how a company is constructing itself to achieve its goals. It acts as a blueprint for specific aspects of your business and will give you clear direction to make effective and smart decisions moving forwards.
This simplified portrayal of your business logic, details what your company offers consumers, how it reaches and interacts with them, the activities, resources and practices used to do so, and how it generates revenue.
Why are Business Strategies Important?
To achieve the goals and values of your company, business strategies are simply essential.
Having a structured business plan in place allows for everyone to be on the same page and work towards the same goals.
It allows efficiency while allocating resources for your business activities, while also helping you meet deadlines and allocate job roles and responsibilities. It gives structure and direction to your company, allowing you to identify the key steps you must take to reach your business goals.
Lastly, with a clear plan and set of goals in place, you can concentrate on capitalizing on your strengths, adopting them as your competitive advantage, and as a result, have your company be unique in the market.
How to Create a Business Strategy?
Creating a business strategy takes time, you want to consider all factors and have logic and evidence to back up your reasoning for such plans.
Your main goal should be to grow your company in one way or another, so when constructing your strategy, focus on systematic growth.
Your business strategy should align with the long-term vision and goals of your company. This allows for everyone to be on the same page and be working towards the same goals.
When creating your business strategy consider your company’s strengths, your target demographic and your main competitors. These factors are unique to your company and are essential to your strategizing process. Think long-term and aim for growth and longevity.
Business Strategy Examples
Next, I am going to analyze some of the business strategies used by three extremely successful companies around the world.
The first company is a specialty coffee and coffeehouse chain, the second one is an athletic apparel brand, and lastly, the third company is a hardware and software company.
Company #1 - Coffeehouse chain
Market Development Strategy
This strategy is fundamentally about identifying and developing new market segments for current products. Intending to expand into untapped markets, it specifically focuses on converting non-purchasing consumers to purchasing consumers.
Overall, the market development strategy is for helping businesses find and develop new opportunities to sell their products in specific unexplored markets.
This specific company used to be solely an American brand but used the market development strategy to expand to a global network. They now have stores all over the world occupying customers in almost every country.
A smaller-scale example is how they’ve expanded from only selling coffee beans and product mix in their store to now selling them in wholesale grocery stores. This allowed them to reach customers who would have never entered their coffee shops. Market development has allowed for intensive growth opportunities within the company because of its continuously growing customer base.
Product Differentiation Strategy
The product differentiation strategy is one where companies will highlight the unique features and benefits of their products, and what sets them apart from their competitors.
This specific brand uses this strategy in several different aspects. They have an emphasis on specialty coffee and tea, which is already a different approach from a typical cafe. Another thing that sets the brand apart from its competitors is the names of the cup sizes. This company stepped away from the standard small, medium and large, and uses its unique names instead.
And finally, because of its unique value proposition to become the “third place” for customers- after home and work, the differentiation strategy has been effective again. Customers can customize drinks to their exact liking and enjoy it in a light, airy and comfortable environment.
Company #2 - Athletic apparel brand
Product Development Strategy
This strategy allows a company to branch out and not limit itself to one sole activity. It is the idea of enhancing existing products to improve the existing market and developing new products that the market seeks.
This athletic apparel company applies this strategy by constantly introducing new products to the market, and as a result, this increases sales revenue.
By having both an exceptional knowledge of customer needs, and a clear mission of improving athletic performance, they are set apart from their competitors.
Product development has remained the primary intensive growth strategy, allowing for them to evolve with new technologies, designs and products.
Supply Chain Strategy
The supply chain management strategy is used to get products to customers with as little friction as possible. This plan makes sure every phase of the supply chain is optimized, which includes everything from sourcing materials, and manufacturing, to warehousing and finally transportation. Click here to read our blog post on the value chain framework to learn more about the supply chain.
This company thoroughly manages their supply chain, which not only grows its business faster but also saves costs. All their manufacturing is outsourced to independent suppliers allowing for the company to focus on marketing, product design, and new technologies.
The company has established long-term relationships with its suppliers, while also managing how they operate. This has allowed them to focus on making its overall operating model more efficient and has led to more brand success.
Company #3 - hardware and software company
Market Penetration Strategy
This strategy is all about working towards a higher market share, through selling more existing products into existing markets (markets they are already in). Market penetration is a way to grow a business and increase sales by the people who are already in the market.
Fundamentally, it involves gaining a larger share of the current market by selling more of the company’s current products. And doing so penetrates the markets where the company has not already achieved a notable position.
This company uses market penetration intensively, by increasing the sales of its products in the existing markets. This brand incorporates this strategy by making their products available in stores, online through their company website as well as telecommunication companies. They also have extensive promotion processes through media outlets and the company's website, to further enter the markets.
Diversification Strategy
The diversification strategy involves selling new products to new markets, essentially it is a way to grow your business and potentially achieve greater profitability. However, despite the positive outcome that can be achieved, many more risks come with this strategy. Because of the unfamiliarity of both products and the market, it entails decision risk, implementation risk and financial risk.
This company applied this strategy through its introduction of a watch product, a mobile payment and digital wallet service, and a credit card. Each of these launches was incredibly successful.
The company was able to build a diverse business portfolio over time to the point where it no longer solely relies on product sales of one specific item.
Conclusion
Despite each of the discussed strategies being unique to one another, there are a few main components that they all have in common.
They are all based on goals that are simple consistent and long-term.
Goals are well-thought-out and have been formulated after a deep analysis of its competitive environment.
The company's resources and capabilities are considered.
When developing your business strategy, it is important to think outside the box and understand what works for one company that might not work for you. The reason they often benefit so much from their strategies is that they haven’t been done before.
When it comes to strategizing, they deliberately choose to be different.
If you want your company to be successful, you must have effective business strategies set in place.
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