Business Strategy: Definition, Elements, Types, Process

What is Business Strategy?

Business strategy is a crucial process that involves allocating resources and developing cohesive resource strategies that align with business decisions and actions. Its main objective is to achieve sustainable competitive advantages, enabling the business to attract customers.

Business strategy involves the allocation of resources and resource strategies that are consistent and cohesive with business decisions and actions.

Strategic fit expresses the degree to which an organization matches its resources and capabilities with the opportunities in the external environment.

The matching takes place through strategy; therefore, the company must have the resources and capabilities to execute and support the strategy. It is a situation that occurs when a specific project, target company, or product is seen as appropriate with respect to an organization’s overall objectives.

Most business managers seeking to expand their company’s operation through a merger or acquisition will look for another company that makes a good strategic fit with their firm.

So, business strategy links the business and its internal and external environment (Grant, 2010).

A business strategy consists of the competitive moves and management approaches developed to attract and please customers, conduct operations, grow the business, and achieve performance objectives.

Issues in Business Strategy

Business management strategy is a plan that addresses the following issues identified by John E. Gamble and Arthur A. Thompson Jr. (2009):

• Changing market conditions
• Features and attributes to be included in the business’s products or services
• Pricing of the business’s products or services
• Distribution channels selected for the company’s products
• Reactions to offensive moves by rival sellers
• Allocation of the company’s financial resources
• Acquisition of new physical assets and resources
• Development of internal competencies, capabilities, and resource strengths
• Development of alliances and joint ventures to supplement the business’s competencies and capabilities.

Business strategy includes business strategic planning to address all the issues narrated above. The most important aspect of a company’s business strategy is its approach to competing in the marketplace and to strengthen its long-term competitive position.

Business strategic planning is to achieve sustainable competitive advantages in order to attract a large number of buyers for its products or services over the offerings of competitors.

Elements of Business Strategy

Following are the elements of a venture’s business strategy identified by John E. Gamble and Arthur A. Thompson Jr. (2009):

1. Actions to diversify by entering new businesses; actions to gain sales and market share by adjusting pricing.
2. Product features, product quality, customer service, product selection, or other product or service attributes.
3. Actions to respond to changing market conditions or other external factors.
4. Actions to enter new geographic product markets or exit existing ones.

Business strategic actions also include capturing emerging market opportunities and defending against external threats to the venture’s business prospects, strengthening market standing and competitiveness by acquiring or merging with other companies, and strengthening competitiveness via strategic alliances and collaborative partnerships.

The company’s business strategic elements also include actions to strengthen competitive capabilities and correct competitive weaknesses and actions and approaches used in managing R &D, production, sales and marketing, finance, and other key activities.

Types of Business Strategy

Robert M. Grant (2010) identifies two strategies: Static and dynamic.

• Static strategy competes with the present business situation.
• The dynamic strategy is preparing for the future of business success.

According to Robert Grant, static strategy targets where an entrepreneur is competing—product market scope, geographic scope, and vertical scope; and how entrepreneurs are competing—what is the basis of the entrepreneur’s competitive advantage.

Dynamic strategies are what entrepreneurs want to become (vision statement), what entrepreneurs want to achieve (mission statement and performance goals), and how entrepreneurs will get there (guidelines for business development, priorities for capital expenditure and R&D, growth modes: organic growth, and business alliances).

Designing Business Strategy

Henry Mintzberg finds that business strategy design has three distinguishing strategies.

1. Intended strategy is intended by the entrepreneur himself and the top management team.
2. Realized strategy is the actual strategy that is implemented.
3. Emergent strategy is the decisions that emerge from the complex business management processes.

Entrepreneurs interpret the intended strategy and adapt to changing external market situations and contemporary socio-economic and political contexts.

The emergent strategy permits entrepreneurs and business team members to adapt and learn through continuous interaction between strategy formulation and strategy implementation.

Moreover, entrepreneurs need to look at business competitive advantages to achieve business sustainability.

According to Gamble John E. and Thompson Jr. Arthur A. (2009), business sustainable competitive advantages are:

1. Developing a cost-based advantage.
2. Creating a differentiation-based advantage.
3. Focusing on a narrow market niche within an industry.
4. Developing unmatched resource strengths and competitive capabilities to match experience, know-how, or specialized resources that a business has developed and perfected over a long period.

Therefore, there is a close relationship between a business strategy and its business model because a business model indicates how its strategy will generate revenues sufficient to cover operating expenses. Without the ability to deliver good profitability in the business model, the strategy is not viable, and the business’s survival is in doubt.

Business models and business strategies are for business success.

So, the right business model is important for successful business winning because it is management’s design for how the business strategy will generate a revenue stream sufficient to cover its cost structure and produce attractive earnings and return on investment.

A winning business strategy fits the circumstances of the business’s external situation and its internal resource strengths and competitive capabilities, builds competitive advantage, and boosts business performance. The business model can be achieved through the right strategic management process.

Formulating Business Strategy

The problem of formulating a strategy can vary widely from case to case, but certain common elements or steps are applicable in most instances.

In the simplest terms, these business strategy problems can be reduced by following seven key steps (Peters & Waterman, 1982):

1. Setting provisional objectives.
2. Assessing the probable future environment.
3. Assessing the situation of the business.
4. Formulating alternative strategies.
5. Evaluating these alternatives.
6. Deciding on the favored strategy.
7. Drawing up the plans needed to implement it.

It is important to understand that a business strategy consists of the competitive moves and management approaches developed to attract. Please, customers, conduct operations, grow the business, and achieve performance objectives (Gamble & Thompson Jr., 2009).

The business management strategy is a plan that addresses the following issues identified by John E. Gamble and Arthur A. Thompson Jr. (2009):

• Changing market conditions
• Features and attributes to be included in the business’s products or services
• Pricing of the business’s products or services
• Distribution channels selected for the company’s products
• Reactions to offensive moves by rival sellers
• Allocation of the company’s financial resources
• Acquisition of new physical assets and resources
• Development of internal competencies, capabilities, and resource strengths
• Development of alliances and joint ventures to supplement the business’s competencies and capabilities.

Business Strategic Management Process

According to John E. Gamble and Arthur A. Thompson Jr. (2009), the strategic management process has the following five integrated stages:

1. Developing a strategic vision of the company’s future direction and focus.
2. Setting objectives to measure progress toward achieving the strategic vision.
3. Crafting a strategy to achieve the objectives.
4. Implement and execute the chosen strategy efficiently and effectively.
5. Evaluating performance and initiating corrective adjustments that are needed in the company’s long-term direction, objectives, strategy, or approach to strategy execution.

The first three stages of the strategic management process make up a strategic plan.

A strategic plan maps out where a business is headed (vision), establishes strategic and financial targets, and outlines the competitive moves and approaches to be used in achieving the desired results mission.

A strategic vision describes “where we are going”—the course and direction management has charted and the company’s future product-customer-market-technology focuses.

In other words, a strategic vision is what it says about the business’s future strategic course—where the business is headed and what the business’s future product-customer-market-technology focus will be.

The mission statements of most businesses say much more about the business’s present scope and purpose — “who we are, what we do, and why we are here.

Effective strategic vision benefits are;

• It crystallizes an entrepreneur’s own views about the business’s long-term direction;
• it reduces the risk of rudderless decision-making (lacking a clear sense of one’s aims or principles) by management at all levels;
• it is a tool for winning the support of employees to help make the vision a reality;
• it provides a beacon for lower-level managers in forming department missions and
• it helps a business prepare for the future.

Managing the implementation and execution of strategy is easily the most demanding and time-consuming part of the strategic management process.

Managing the strategy execution process includes the following principal aspects:

• Staffing the organization to provide needed skills and expertise.
• Allocating ample resources to activities critical to good strategy execution.
• Ensuring that policies and procedures facilitate rather than impede effective execution.
• Installing information and operating systems that enable company personnel to perform essential activities.
• Pushing for continuous improvement in how value chain activities are performed.
• Tying rewards and incentives directly to the achievement of performance objectives.
• Creating a company culture and work climate conducive to successful strategy execution.
• Exerting the internal leadership needed to propel implementation forward.

Strategy maps bridge the gap between strategy formulation and implementation by visually describing the connections between operating-level activities and broad organizational strategies.

Strategy maps are tied to balanced business objectives and organize the business’s key activities: financial, customer, internal business process, and learning and growth.

The sum of a business’s strategic vision, objectives, and strategy constitutes a strategic plan.

Evaluating business performance and initiating corrective business adjustments in vision contains a vision for long-term direction, objectives, strategy, or execution in light of experience, changing conditions, new ideas, and new opportunities.

This strategic management is the trigger point for deciding whether to continue or change the company’s vision, objectives, and strategy.