Business leaders face many challenges. Making decisions about who to hire, how to spend funds, how to prioritize projects and how to meet goals are just some of the hurdles to overcome.
In order to be prepared to answer these and other big questions, most companies develop a corporate strategy to provide guidelines for decision making. BusinessDictionary.com defines a corporate strategy as “the overall scope and direction of a corporation and the way in which its various business operations work together to achieve particular goals.”
Business owners can establish a clear direction and the guidelines by which they can maintain business operations by formulating a corporate strategy, as Dummies.com notes. Michael Porter, an expert on corporate strategy and competitiveness, provides these examples of basic strategies for competitive advantage:
- Being a low cost provider (Walmart)
- Being a leader in innovation (Apple)
- Specializing in product quality (Toyota)
- Focusing on differentiated needs of customers (American Express).
Each different strategy requires a different mindset and approach to business operations, yet they all have a key similarity: a well-formed business plan. Developing a business plan means answering essential business-related questions, such as what products or services to provide and where and how to produce, market and distribute those. Business leaders need to nail down these chief questions in order to ensure the long-term health of their company and create a vision that can be shared among other employees.
Components of a Strategic Plan
Strategic plans vary significantly, depending on the size and type of company. Nonetheless, all strategic plans have important similarities, and these major components must be considered and defined, according to Dummies.com:
- Mission statement
- Vision statement
- Values statement or guiding principles
- SWOT analysis: strengths, weaknesses, opportunities and threats
- Competitive advantage
- Long-term strategic objectives
- Short-term goals/priorities/initiatives
- Action items/plans
- Financial assessment.
While all these parts are vital to the strength of your strategic plan, a strategic plan also should answer three key questions:
- Where are we now?
- Where are we going?
- How will we get there?
Types of Business Strategy
While there may be some overlap, strategies are often grouped into different types, as explained by Boundless.com:
- Growth strategy – Growth strategies are specifically-named plans that a business enacts in order to boost revenue and earnings growth.
- Consolidation strategy – Consolidation strategies are concerned with the mergers and acquisitions of smaller companies into larger ones for economic development.
- Global strategy – Global strategies seek to define ways to reach a variety of geographical markets.
- Cooperative strategy – Cooperative strategies are plans in which each member anticipates that the benefit from the cooperation outweighs the cost of individual effort.
- E-business strategy – E-business strategies are concerned with keeping up with the global economy via electronic methods.
- Value-creating strategy – Value-creating strategies focus on eliminating competition by gaining increased market share.
- Value-neutral strategy – Value-neutral strategies concentrate on securing a place within a particular market instead of focusing on where resources or manpower are allocated.
- Value-reducing strategy – Value-reducing strategies seek to refocus business markets, define target demographics and implement policies that prevent unnecessary or harmful growth.
Deciding what strategy to use for your business can be difficult, especially because there are many similarities between the types. However, asking key questions about your business will help you narrow your focus. For example, consider the following questions when you’re debating between a value-creating, value-neutral or value-reducing strategy:
- Does my company feel threatened by competitors?
- Does my business need to tighten its resources and monitor its finances more closely?
- Are only a few people benefiting from the organization’s success?
Why Corporate Strategies are Essential for Business Leaders
Defining and utilizing strategy is essential for business leaders. The guidelines set in business strategies help those with managerial roles make decisions that align with the overall goals and needs of a company. Without a plan, it’s easy to get sidetracked from actual direction and achievements that your company desires to achieve.
Business strategies are also important for other employees within a company, as it helps professionals understand the overall vision of the businesses for which they’re working. In this way, employees can make sure that their work aligns with and helps achieve company goals.
Tips for Creating a Business Strategy
To begin the planning process, you’ll want to make sure you allow time for big-picture strategic thinking, which might include getting your team members out of the office so they can step away from other projects. The people on your planning team are also vitally important, and you’ll want to form a diverse team of strategic thinkers who will represent all areas within your organization.
Once your team meets to discuss a plan, here are some things to keep in mind, based on recommendations from Dummies.com:
- Make sure your plan is actionable and includes goals, action steps, responsibilities, measures of accountability and specific deadlines.
- After a work session is over, make sure you articulate the next steps that everyone needs to take so that each team member clearly understands his or her responsibilities.
- Use examples from other companies so you have a good idea where to begin.
No matter the type of company, forming a business strategy is crucial to meet goals, and these tips can help your company reach the next level of success.