The Importance of Business Strategies

Entering into a business or business deal blind is a gamble. Building specific business strategies is
an absolute necessity to increase the odds of success. And the importance of business strategy
quickly becomes apparent, and strategies come in various styles. Many business owners will seek or
hire outside consultants to assist with forming and carrying out strategies.

Ultimately, a sound strategy or set of strategies that constantly evolve and improve is a path to a
better business. Without strategy, the business depends on blind luck.

The Importance of Strategy

Strategy answers the questions about a business. How will it run? What is the market? How does
the business compete against similar businesses? What is the profit model and profit potential? How
much inventory and how many employees are needed to perform daily functions?

The list of questions is a long one. And, ultimately, the answers to those questions are used to form
a good business strategy. The two key elements behind any business are the major goals and the
strategy to reach those goals. The third part is the execution to make it all happen.

Without the strategy, a path to achieving goals is not clearly defined, and the business will hit
roadblocks without any immediate solutions to move forward.

Big Picture Role of Strategy

The overarching strategy is essentially the business structure and core functions. Business owners
and managers build departments to handle specific tasks and setup processes to execute the core
operating functions. This strategy runs the business on a daily basis. It’s the way in which products
or services are built or sold while maintaining operational objectives.

After the big picture strategy built, specific strategies are developed around each department and
task. How can the product improve? Where can we penetrate new markets? Questions of this nature
are constantly developing and contributing to a refined set of strategies.

Specific Strategies

A few specific and common good business strategies are hiring, marketing and sales. Other aspects
of the business are often stabilized after the initial structural strategy is achieved. Hiring, marketing
and sales however are always evolving and they contribute to productivity and bottom line
profitability.
A hiring strategy is critical for reducing turnover and finding quality to produce productive employees.
Building robust job descriptions clearly states your desires and filtering through employees to find
the best hires is intensive. Good help is hard to find as some business owners say.

Marketing strategy is used to build and define your brand through strategic messaging. Marketing
will ultimately create the business motto, logos and messages that are used in advertising and sales
collateral.

The sales strategies differ from marketing because they are directly responsible for generating
revenue. Sales functions on goals and strategies for inbound and outbound processes. How will the
business reach potential customers and bring them to the business? How will the business go out
and find the customers to make sales directly? These two questions are common starting points for
building the sales process.

The company can then build scripts for cold calling, train inside sales teams to receive and convert
customers and create outbound sales processes to get in front of customers and win their business.
It’s a competitive world and a well thought out strategy is critical for both marketing and sales.

Pricing Strategies

Even though the concept of pricing strategy sounds easy, it is actually quite complex. Many
businesses have a set it and forget it mentality, but those who test and price products based on their
market, can better maximize sales and revenue.

In some cases, that means pricing above the median market to distinguish the brand. In others, it
means acquiring inventory in bulk and pricing below the market on a tighter margin to drive more
sales. Pricing is tightly associated with the brand and how that brand is portrayed and received by
the consumer.

What Is Strategic Perspective?

A perspective is a way of viewing things, and every business should use multiple perspectives to
form a holistic vision of the company. The strategic perspective is especially important as it develops
the competitive mindset. With the strategic perspective, you can develop a range of approaches to
common business obstacles, such as market penetration and brand recognition.

Developing a Strategic Perspective

Creating the strategic perspective is not necessarily easy. In business, most employees and owners
are flooded with daily tasks and responsibilities that are essential to operations. While working
through daily processes, it becomes easy to miss the big picture.

Developing the strategic perspective requires stepping back and considering all the working parts in
and surrounding your business. The process of developing a strategic perspective is not static. As
the business evolves, so should the strategies.

4 Approaches to Strategy Formulation

Strategy formulation best happens through collaboration on every level of the business. All positions
in a company have their own unique perspective of challenges and solutions that can contribute to
strategy formulation.

Four ways to collect these perspectives are:

Executive meetings

Department meetings

Employee surveys

All-hands meetings

Using these four approaches to strategy formulation brings a diverse field of valuable input to the
table. After identifying shortcomings, inefficiencies or opportunities that would otherwise be missed,
strategies are developed to address them.

Holding quarterly or bi-annual checkups to review the success of strategies implemented while re-
approaching the process of strategy development is a prudent practice.

Short-Term Strategies

Short-term strategies are often easier to identify and address. Many of these strategies are
developed in the departmental meetings by simply listening to employee feedback. For example, the
accounting department might conclude that shifting from a weekly payroll to a bi-weekly payroll
saves a specific amount of hours and reduces the need for additional hiring.

Other common short-term strategies occur by identifying simple inefficiencies in the way employees
communicate. A manufacturing company may find they are ordering too much raw material because
of a simple disconnect between the order managers and the floor managers. Based on this
feedback, a strategy will be formed to close the loop and build a more efficient system.

Short-term strategies are especially prevalent in the world of sales. Every single sale offers the
opportunity to form a short-term strategic perspective. In a scripted sales environment like cold-
calling, this is less common. But working on sales that require unique proposals that address the
specific needs of potential buyers requires strategy.

The sellers must consider and address the pain points commonly experienced by the buyer so that
you can create a personalized approach to closing the sale.

Long-Term Strategic Planning

The long-term game is often more complex and strategies are based on a combination of big-picture
ideas and actionable plans. The long-term strategic approach may also incorporate a number of
short-term strategies that work together for a single result.

The first step in long-term planning is to set specific goals. The goals are often set according to
revenue, but building goals for brand identity, brand recognition and market penetration are also
important.

For example, if you want to penetrate the market as a luxury brand with a higher price point than the
competition, the strategies formed will reflect that goal. The business will focus heavily on brand
identity, and will build a pricing strategy that tops the market and will work to drive sales in that
specific market.

Forming a luxury brand and attempting to market high prices to the wrong audience is a strategy that
will likely fail. Working through your marketing plan with strategic perspective to identify and
approach the ideal customer will result in a greater number of sales and a highly effective business.

What Is a Strategic Business Model?

The expression "strategic business model" simply means your company emphasizes strategic
planning in starting and developing operations. It is important for small business owners to develop
business strategies that outline how they intend to achieve goals. For many companies, strategic
management involves formulating a plan to generate profit.

Strategy Steps

A first key step in a strategic business model is determining your value proposition. Top quality, low
prices and elite service are common factors of an effective value proposition. Segmenting your
marketplace to identify the best customers for your business is a key marketing strategy. Analyzing
competitors to focus on key competitive strengths and assessing ways to minimize costs are other
strategic business considerations.

What Is the Difference Between a Business Objective & Business Strategy?

Business objectives establish what the company wants to accomplish, and business strategies form
the plan for how it will accomplish those objectives. Both steps typically align with your company's
mission and are a part of the strategic management process that company leaders go through to
provide direction for the company. Small-business leaders sometimes do not make establishing
goals and strategies a priority like large organizations do.

Keys to Objectives

When setting business objectives, there are several keys to make them effective. One main key is to
create measurable goals. This means attaching a numerical value to what you hope to accomplish.
For instance, setting an objective of 10 percent market share growth within one year allows you to
measure your success and plan a follow-up. Objectives should also correlate to your company's
current business position and challenge your company to move forward.

Business Strategy

A strategy is sometimes referred to as a road map to success because it outlines the critical steps
and tasks to reach objectives. For instance, an objective to grow sales by a certain percentage over
a specific time frame may require strategies such as hiring new sales staff, offering more training, or
offering incentives to top performers. A goal of increased market share by 10 percent means you
likely need to invest in marketing to draw new customers.