What is a business strategy and how to write one?

A business strategy is a long-term plan of action to achieve specific goals or results for an organization. It shows how an organization achieves its mission and vision and provides a roadmap for decision-making and resource allocation. Business strategy typically includes analyzing the market, identifying opportunities and threats, defining the organization’s strengths and weaknesses, and developing a plan to invest, exploit opportunities, and overcome challenges. This can include elements such as marketing, sales, operations, finance, human resources, and technology. The ultimate goal of business strategy is to create a sustainable competitive advantage and increase the company’s profitability.

Business model and business strategy are closely related concepts. Some describe the business model as the concrete representation of the implemented strategy. In each case, the business model and business strategy describe how a company will succeed: how it creates value for the customer, how it competes with its industry competitors, and how it generates revenue and spends money to achieve reasonable margins. fact

There can be different types of strategies and models; Also for companies in the same industry that offer similar products or services. For example, Southwest Airlines (in the United States) and Ryanair (in Europe) pursue strategies based on providing low-cost transportation services. Instead, Singapore Airlines pursues a strategy based on a brand image that offers luxury and the highest quality customer service.

A strategy is successful if it leads to a strong competitive position, business growth, and reasonable profit margins. This article describes the business strategy and business model in more detail using related terms such as strategic objective and business plan.

A Complete Guide to Writing a Business Plan

What is the Purpose of Business Strategy? What should business strategy achieve?

While there are many different strategies, almost all are successful when they focus on just two areas of business performance. Strategies are generally successful because they accomplish one or more of the following objectives:

Create customer demand and thus...

• Increased business value.
• The ability to raise prices and achieve higher profit margins.
• Increase customer retention and business development.

Cost reduction:

• Reduce product development, production, sales, distribution, and service costs.
• Reduce infrastructure costs, and reduce operating costs.

However, as the examples below show, there are many ways to create demand and reduce costs.

How are strategic objectives identified? How are strategic objectives set?

A company’s business strategy is perhaps best described and understood in terms of key business performance objectives (e.g., strategic goals).

Setting specific goals in each of these areas can lead to increased customer demand or reduced costs. A goal can be part of strategic objectives, the achievement of which significantly contributes to the achievement of the company's overall performance objectives; goals such as the ability to compete effectively, grow the business, and achieve reasonable profit margins. However, you should keep in mind that in the following examples, achieving a goal in one area (e.g. customer retention) may be dependent on achieving other goals in other areas (e.g. customer service).

Below are some examples of strategic goals in one or more of these areas.

Functional area: Infrastructure

Goal: Operating with low infrastructure and operating costs

This goal can be achieved by using low-cost office space or hiring remote employees; Low-cost airlines in Europe typically keep their operating costs low by hiring flight crews from outside the EU and minimizing customer service. Retail stores pursue a cost-cutting strategy by avoiding expensive window displays and minimizing the use of sales staff.

Field of action: branding.

Goal: Create value for brands that like luxury prices.

Fashion designers (e.g. Armani, Donna Karan), luxury goods designers (e.g. Louis Vuitton), and even consumer technology manufacturers (e.g. Apple and Sony) have successfully implemented goals such as product design, product quality, pricing, and brand promotion. . their products.

Scope of action: Customer loyalty.

Objective: Encourage customers to buy more products from the original source.

There are several types of this strategy, sometimes called the "subscription model" (e.g., mobile phone providers encourage their customers to sign long-term contracts with them in exchange for free or discounted phones) or "vendor dependency" (the computer printer manufacturer sells its products at a low price but makes a good profit margin on inks that can only be obtained from the original source). Additionally, customer retention strategies can be implemented by focusing on customer service (improving customer satisfaction) or pricing (offering low prices to repeat buyers or those who intend to upgrade from previously purchased products).

Neighborhood: Pricing

Goal: Achieve market leadership in the “low price” sector.

When a retailer can meet its infrastructure and operating cost objectives (as in the example above) or supply chain objectives (e.g., negotiating with suppliers to reduce prices compared to bulk purchasing and accessing a fixed retail market), it may be possible to offer lower prices than to offer competitive prices to customers.

Areas: Product development, manufacturing, direct sales, and distribution

Goal: Produce the final product with low production costs; Sell and deliver to customers profitably.

Dell's success is due to an innovative approach to reducing costs in each of these areas. These products are designed to be easily assembled from pre-fabricated components, sold primarily through mail order or online, and distributed by commercial shipping companies (without "middlemen" such as retailers) at no cost to the company.

What business model will be the subject of a strategy? 

The business strategy is implemented, communicated, and finally tested and evaluated through a business model and by the company's management. Furthermore, it is safe to say that the business model is at the heart of the company's business plan. The business plan explains the implementation of the business model and strategy, the positive or negative factors that affect the company's performance, and the impact of the implementation of the business model on the company's financial performance and financial position over the year and in the years to come. come more detail and depth.

Business Model Components

1. Company Overview and Value Proposition

The business model includes a description of the company’s value proposition. The value proposition describes how the company’s products and services are presented in terms of the value they provide to the customer.

For example, Dell Computer Company was founded in 1984 with an innovative and unique value proposition at the time. The company strives to produce computers exactly when the customer orders them and to deliver them at a very competitive price. As another example, Boeing Co. stated the customer value proposition for the 747-8 very simply: “…longer range, better fuel efficiency, and lower operating costs.”

In short, the value proposition shows why customers buy from your company rather than your competitors.

2. Enterprise Customers

The business model usually clearly states the following to the customer:

• The target market or audience for the Company’s services and products. For example, a market may be defined based on factors such as gender, age, occupation, economic status, experience or education, geographic location, or specific interests.
• The Company’s approach to customer relationship management (CRM), includes plans and objectives for customer service, customer satisfaction, and customer retention.
• Sales and distribution strategy. The Company may choose to market its products directly through retail stores, through in-person sales meetings, through catalogs or online ordering and direct shipping to customers, or through third-party resellers or sales representatives.

Marketing strategy and marketing plan that describes how the value proposition will be communicated and promoted through product positioning, branding, and application of a pricing model.

3. Company operations and infrastructure.

This part of this business model clearly states:

• Core activities of the company to implement the business model (activities such as market analysis, product design, production, etc.). This also includes the important activities of business partners, supply chain partners, distribution partners, and others.
• Key resources and assets needed to create customer value. For example, these resources and assets can range from buildings and equipment to core employee capabilities, patents, and intellectual property.

4. Corporate Finance

For many people, the financial part of the company is the most important content and the main reason for the existence of the business model. This section quantitatively describes:

• Revenue sources and cost structure of the company. This part of the business model is usually summarized and titled in report form as (a) the company's income statement and (b) the company's operating budget and capital budget.
• The financial position of the business, including sources of financing, and the degree of financial leverage (the amount of financing from lenders relative to the amount of financing from the business owner).