Business Strategy


A business strategy is considered as the different actions and decisions taken by an organization to attain business goals and to remain competitive in the respective industry or market into which it operates. It can be viewed as a roadmap to reach desired goals and explains what is required to do by the business for fulfilling its purposes. Also, business strategy acts as a guide in the decision-making process of a company for hiring and allocating resources.

In other words, business strategy is defined as a set of principles that provide guidance once adopted and communicated by an organization and initiates the desired decision-making process. Also, this business planning is for the long-term and generally, a business strategy of an organization is for three to five years or can be for a longer period as well. This can also be viewed as a master plan of an organization that is implemented to obtain or secure a competitive market position, smooth running of operations, customer satisfaction, and gain desired business outcome.


It is preferable and profitable to retain existing customers in a business than to look for new customers all the time. This is considered a major aspect where the necessity of business strategy can be seen. To increase customer loyalty may be a tough task if a strong business plan or strategy is not there in the system. Businesses without proper guidelines on retaining existing customers may have the risk of overtaken by competitors as they (competitors) can easily convert them into their customers by focusing on better customer service.

So, businesses are required to make a strong system of follow-up for the purpose of making calls and sending emails to existing customers in order to ensure the proper functioning of their products and to inform customers that they are well taken care of by them.

A business strategy is required for resource allocation as well. The resources of any business are in limited quantity irrespective of the big size of business. This creates a mandatory need of managing these resources efficiently so that they can be used effectively. A strong business strategy supports businesses in optimum utilization of their resources such as employees, supply partners, clients, brand value, patents, trademarks, etc. to gain a competitive advantage over competitors. With the support of a sound business plan, organizations can also develop promotion plans and products by considering the requirement of the target market. In the case of mismanagement of resources, businesses may incur losses in terms of customers and revenues in the long-term.

Another need for developing a business strategy is an expansion of the business which is not possible without a well-designed strategy. Once expansion goals are there in detailed form for executives and leaders, it is easier to grasp opportunities in the external business environment and facilitate business expansion. Organizations are able to allocate an appropriate budget and hire the right manpower for market research activities, to collect data and analyze trends to facilitate organizations in exploring untapped market segments.


1. Product Differentiation Strategy 

This type of business strategy is related to offering products and services of a business that contain different and unique attributes as compared to competitors. The cost is less area of focus in this business strategy as companies can look for higher prices for making their product or service stand out in the market. The reason to keep prices higher is due to the additional and unique features of a product that other competitors are not offering. For example, the paintings with unique artwork are of higher prices as compared to normal paintings and customers are also willing to pay more due to the unique art. So, product differentiation strategy allows businesses to sell their products and services according to their terms as their products or services carry a superior quality.

2. Cost leadership strategy 

This business strategy includes keeping the right price of products or services that insist customers buy the products and services of an organization rather than its competitors. This strategy is used by businesses to reduce the cost of production i.e. below the competitive price in the market and increase their efficiency. Or in simple words, this strategy is all about charging fewer prices for products than competitors in the same market or industry.

This strategy may help companies by generating more business as it provides a unique value proposition.

3. Focused differentiation 

The main focus of this niche business strategy is on a small segment of customers in the market and these customers are targeted through differentiated products and services. To meet the demand of this market, a business should offer products and services with unique features.


The main concern of a business strategy is resource issues such as how to raise finance for manufacturing a new business unit and allocation of major resources in different products. There are two main categories of business strategy i.e.:

a) Generic strategy

Different types of generic strategies include growth, Internationalization, and Retrenchment. These are explained as under:

  • Growth strategy: This is related to an organization’s expansion to buy new assets, develop new businesses, and new product development.
  • Globalization or Internationalization: This includes operating businesses in more than one country.
  • Retrenchment: Consists of downsizing to focus on the best business areas.

b) Competitive Strategy

This involves being competitive in the market either by selling products or services at a cheaper rate than competitors which can be obtained if the organization is a leader in the market; or, product differentiation from competitors through providing extra features, customer care, attractive packaging, etc.


There are three main levels of business strategies i.e.:

a) Corporate

This is considered as a business strategy’s highest and vast level. The business plan at this level defines the guidelines of what and how to achieve in business. This also creates vision, mission, and objectives for all at the corporate level.

b) Business unit

This level is a unit-oriented strategy that is different for each business unit. A business unit may have different products including the different levels of operations. These units make strategies that make them different from their competitors. These competitive strategies also align their goals with the overall goal of the business which is already defined in strategy at the corporate level.

c) Functional level

These strategies are formed by different departments or functions of business units. These functions consist of sales, operations, marketing, CRM, HR, finance, etc. These strategies are meant for daily-based decisions and actions that are required for strategies at the unit and corporate level, to fulfill goals at the functional level and maintain harmony between different functions.


The key elements of a business strategy are as under:

1. Vision, mission, and objectives of the business

This is the main component of a business strategy i.e. to meet the business goal or objective. It also provides direction, vision, and clear instructions to the business related to things that need to do, the way to do, and the people responsible for doing it.

2. SWOT analysis

This provides a clear position on the current situation of the organization. SWOT analysis is an analysis of strength, weakness, opportunity, and threat of an organization. It considers as a required element of business strategy because it shows the current internal strength and external opportunities of a firm that it can take advantage of it. It also provides information on internal weaknesses and external threats of the company should be cautious about.

3. Core values

A business strategy includes components of core values of a business which indicates what is required or necessary and what is not. This clarifies different confusion and provides a clear way to the top management, business units, and different departments.

4. Plan for resource attainment and allocation

A business strategy also provides clear directions on how and from where the required resources can be procured and the way to allocate them, and the people responsible for managing it.

5. Operational plan

Functional and unit-level business strategies provide a detailed operational plan for the work that should be done and how to do it in the most efficient and effective way. This helps in saving a great amount of time as well as effort due to everyone is clear about the operational plan.

6. Control measures

A business strategy also includes control measures to assess a business’s performance properly. It facilitates tracking the output and performance of the company as per the given targets.


Below are the different steps in formulating a business strategy that includes analysis of the internal and external environment of an organization, examine the ways to deal with opportunities and threats, developing an appropriate strategy and supporting activities, optimum utilization of resources as per objectives, etc.:

1. Identifying threats and opportunities in the external business environment

Different threats can be present in the outside environment of an organization such as new competitors, the purchasing capacity of customers, etc. Various opportunities are also available in the external environment like untapped markets, new and advanced technology, etc. So, while formulating a business strategy, the following aspects should be considered:

  • The suitable economic environment in which a company should operate and it’s changing patterns.
  • Different opportunities, that are available to earn profits and various risk factors along with these.

2. Analysis of internal environment i.e. resources, practices, and capabilities

The internal capabilities and resources of an organization can act as limitations while choosing a business strategy and mostly, in the case of start-up companies that have limited fixed-assets and employees. A business strategy can be successful if it includes the right people and resources. So, the following things should be examined:

  • Different competencies of the company and finding the ways through which these competencies can be beneficial over competitors.
  • Different resources that will either support of limit actions of a firm.

3. Look for strategies that may address opportunities and threats

This step includes developing different alternatives as things can be done in multiple ways, checking different facts and assumptions, assessing the main information to create a better strategy, etc.

4. Developing better coordination between strategy and supporting activities

Business strategy also includes a group of activities that support in winning over competitors. Different activities support each other and the ultimate goal.

5. Making alignment

After the development of a business strategy, it is required to develop alignment between strategy and activities of the organization.

6. Implementation

Once the strategy is defined, the last step includes its implementation and includes the hiring of manpower having required competencies, the purchase of adequate equipment, and defining the structure of resources.


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