Business Strategy

Updated on April 24, 2024
Article byAswathi Jayachandran
Reviewed byDheeraj Vaidya, CFA, FRM

What is Business Strategy?

Business strategy generally includes the vision, mission, team-oriented goals, performance targets, plans, and schedules for operation. It is not always clear-cut as no standards describe what constitutes a strategy. A business strategy is usually concerned with designing, planning, and implementing plans.

What is Business Strategy

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They are plans to achieve an organization’s goals and objectives, formed after examining and assessing the internal capabilities and limitations of the organization. The process involves risk and relationship management and evaluation of the external environment. Strategies are complex and divided into various aspects, including diversification, production, searching for product alternatives, etc.

Key Takeaways

  • Business strategies are action plans laid out for different objectives. They can make or break businesses and are the core of a company’s growth.
  • The objectives to be achieved are the mission, vision, and financial and non-financial goals. Strategies are framed for the long and short term, depending on the goal.
  • There are many types of business strategies like production, supply chain, human resource strategies, etc.
  • Strategies involve multiple planning levels, including corporate, business, functional, and operational levels.
  • They have a great influence on the positioning of the organization in the market along with revenue generation.

Business Strategy Explained

A business strategyas mentioned above, constitutes a variety of aspects. It is a management activity that sets and establishes clear boundaries and priorities. A business strategy decides on the efficient utilization of energy resources and operations. It also ensures that the organization (employers and stakeholders) works towards a common goal. They also set the direction the company has to work in the future. Giving firms a competitive edge over other companies is another main goal of strategy. Therefore, these strategies are centred on the purposes and missions of the company after carefully examining the company’s internal strengths and weaknesses and identifying possibilities and risks in the external environment.

Developing a business strategy is a complex but interesting process. The plans are always problem-solution oriented. For example, production strategy involves ideas to increase production. Similarly, sales, marketing, and distribution strategies concentrate on expanding product reach and availability. Supply chain management strategy deals with supply issues, and human resource strategy finds ideas for human capital efficiency. Likewise, financial and monetary strategy plans to save cost and maximize profit. Finally, research and development strategy concentrates on efficient methods and new product development or service avenues. Therefore, a business growth strategy inculcates ideas to develop all facets of the business. In short, a holistic, rounded approach tends to reap more benefits.

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Levels of Business Strategy

Similar to the many types of business strategies, there are several levels to it too. Accordingly, they provide value to customers and possess a competitive advantage by utilizing the organizations’ core competencies. In addition, it is based on the company’s position in the industry concerning its competitors. 

Given below are the levels of the strategy employed in a business.

Levels of Business Strategy

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#1 – Corporate Level Strategy

A corporate-level strategy is a long-term, proactive, coordinated, and all-encompassing plan created by top management. In other words, it determines business (product) lines, stability, growth, and expansion, acquisitions and mergers, product diversification, integration, new investment areas, etc.

#2 – Business-Level Strategies

These are those that are relevant to a certain industry or industry sector. As a result, ideas to improve a business unit or product level market position among competitors are considered. Then the general managers create it by turning the mission and vision into actionable plans. Eventually, it resembles a blueprint for the entire company as they are specific to the industry the organization belongs to.

#3 – Functional Level Strategy

First-line managers or supervisors design a functional level strategy. The functional-level strategy entails operational-level decision-making with regard to certain functional domains like marketing, production, human resources, research and development, finance, and so forth. They aim to achieve organizational aims by maximizing resource efficiency and utilization.

#4 – Operational Level Strategy

The operational level strategy involves regions, plants, departments, etc., within the functional areas. Laying out plans under this strategy is the responsibility of the plant managers, geography unit managers, low-level supervisors, etc.

Examples

Example #1

ABC Ltd. is a computer manufacturing company in New York. It is a well-known company in the market and has been operating successfully for the past decade. Suppose the company wants to expand to more states in the U.S. They need to decide the strategy that the company should employ first. It may involve a combination of strategies also. Here, the company may want to introduce a new design or mechanism. Research and development strategy sorts out this plan. If it wants to increase sales through marketing, it should draw up a strategic plan to involve multiple marketing channels. And if the company intends to expand through production factories in various states, then companies should lay the strategy accordingly for building production units.

Example #2 – Walt Disney Company

Walt Disney is a famous American multinational mass media and entertainment conglomerate. It harnesses the benefits of strategies through multiple chains of business. Here, the central imagination division creates products, special effects, new attractions, retail stores, etc. The company’s marketing strategy helps its products, services, or merchandise reach the vast majority of its audience. In addition, the human resources division continuously trains employees across companies, etc. When these and many more strategic actions come together, the company pushes forward on the path of growth.

Business Strategy vs. Corporate Strategy

The corporate and business unit levels are the two basic levels of strategy. Business unit strategy discusses how to compete in each unique business or industry, whereas corporate strategy specifies what group of firms to compete with. Although both are crucial, business units often account for more economical performance. Therefore, the main level of strategy is the unit itself, not the entire corporation.

There are a few differences and similarities between the two and they are as follows

Purpose:

The corporate level strategy uses synergies between divisions within the corporate portfolio. Corporate leaders in diversified firms can increase their competitive advantage through these strategies. The business unit level strategies are crucial as it is during the gain or loss of competitive advantage. Companies must take a strategic stance within their industry if they want to gain a competitive advantage.

Decision-making authority:

The Decision-making authority at the corporate strategic level is the top management. General managers on the other hand, take decisions on business-level strategy.

Deals with:

Corporate-level strategy deals with product line introduction, growth, expansion, ideas for setting up new entrepreneurships, viability options, etc. In contrast, business-level strategies deal with improving the company in relation to its competitors.

Period:

The corporate level strategy focuses on the long term. Business-level strategies also focus on the long-term growth of the business.

Frequently Asked Questions (FAQs)

Why is business strategy important?

Business strategy for growth is important as they place the business in the market. It increases efficiency, controls cost, and reduces risk. In addition, they ensure that the company meets its goals and objectives and attains its vision and mission.

How is a business strategy developed?

Developing a business strategy is done by considering various factors, such as the monetary and non-monetary goals of the organization. In addition, a SWOT ( strength, opportunity, weakness, and threat) analysis of the organization forms a major part of developing the business strategy. 

How to write a business strategy?

A company’s main objective (ROIC) is to achieve a superior long-term return on invested capital. True economic value can only be attained if a high ROIC is achieved. Therefore, strategies shall be written to reflect goals, strengths, and monetary and achieve ROIC within the earliest possible time.

Core elements of an important business strategy are?

Core components of the Business strategy for growth include having a purpose, possessing a vision, mission, allocation of resources, goals, etc.

This is a Guide to a Business Strategy and its definition We explain levels, examples of business strategy & its differences with corporate strategy. You can learn more about economics from the following articles –

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