Business strategy guide: definition, types, and challenges

Business strategy has become an essential element for ensuring the growth and sustainability of any organisation. In this article, we will delve into this concept, the different types of strategies, their importance, how to formulate them, and the tools to use. Prepare to dive into the fascinating world of business strategy.

What is business strategy?

Business strategy is a long-term plan that a company implements to achieve its objectives within the context of its resources and environment. It is the result of a series of decisions made by the company’s leaders, which determine the direction to follow and the means to achieve it.

Business strategy is essential for several reasons. Firstly, it gives meaning to action by clearly defining what the company aims to accomplish. Secondly, it helps to coordinate the efforts of all organisation members by aligning their actions with the company’s objectives. Thirdly, it allows the company to focus on the opportunities that best match its capabilities and resources.

The different types of business strategies

There are several types of business strategies, each with its own advantages and disadvantages. The main ones are:

• Growth strategy: this strategy aims to increase the size of the company, whether in terms of revenue, market share, product range, or geographical presence. It can be achieved through innovation, expansion into new markets, acquisition of other companies, or increased production capacity.
• Differentiation strategy: this strategy aims to make the company unique in the eyes of its customers by offering products or services perceived as higher quality, more innovative, or better suited to their needs than those of the competition.
• Cost strategy: this strategy aims to become the lowest-cost supplier in the market, either by reducing production costs or increasing operational efficiency.

To discover all strategic orientations, we have created an article that explains them in more depth. The access link is provided in the previous sentence.

 The process of formulating business strategy

Formulating business strategy is a complex process that requires a thorough analysis of the company’s internal and external environment. This is known as strategic planning or the strategic plan This process generally involves the following steps:

• SWOT analysis: this analysis identifies the company’s strengths and weaknesses (internal) and the opportunities and threats in its environment (external).
• Defining objectives: based on the SWOT analysis, the company defines its long-term objectives, which must be specific, measurable, achievable, relevant, and time-bound (SMART goals). 
• Choosing strategies: the company selects the strategies that will enable it to achieve its objectives. These strategies may concern different levels of the company (corporate, business, functional).
• Implementation: the company implements the chosen strategies by allocating the necessary resources and defining action plans.
• Evaluation and control: the company regularly evaluates the results of the strategy implementation and adjusts its plans accordingly.

For a detailed explanation of how to develop your strategic planning or strategic plan, we have written a comprehensive article that you will find in the link provided.

The tools of business strategy

Several tools can help formulate and implement business strategy. Among the most well-known are:

• BCG matrix: this tool classifies the company’s products or business units based on their market share and market growth rate. It helps identify areas on which the company should focus.
• PESTEL analysis: this tool analyses the company’s external environment, considering political, economic, social, technological, environmental, and legal factors.
• Porter’s value chain: this tool analyses the company’s activities that create value for the customer and contribute to differentiation and competitive advantage.

The challenges of implementing business strategy

Implementing business strategy can face several challenges, such as:

• Resistance to change: employees may resist strategy implementation if it involves significant changes in their work or if it is perceived as threatening to their interests.
• Lack of resources: the company may lack resources (financial, human, technological) to implement the strategy.
• Environmental uncertainties: the business environment is constantly evolving, which can make strategy implementation more difficult.

The impact of corporate culture on business strategy

Corporate culture can significantly impact business strategy. A strong culture aligned with the strategy can facilitate its implementation, while a weak or misaligned culture can make it more difficult. Therefore, it is crucial for leaders to understand their company’s culture and ensure it supports the strategy.

The importance of aligning business strategy with HR strategy

The HR strategy must be aligned with the business strategy to ensure the company has the necessary skills and talents to achieve its objectives. This may involve actions such as recruitment, training, career development, compensation, and recognition.

Business strategies in an international context

In an international context, companies must adapt their strategy to the specificities of the different markets in which they operate. This may involve understanding cultural differences, local regulations, consumer preferences, etc.

The importance of agility in business strategy in a constantly evolving business environment 

The advantages of agility in business strategy are increasingly important in the business environment. Companies must be able to adapt quickly to changes in their environment, whether in terms of technologies, markets, regulations, etc.

Business strategies in the context of the knowledge economy

In the knowledge economy, companies increasingly base their strategy on the creation, acquisition, protection, and exploitation of knowledge. This may involve actions such as innovation, talent management, intellectual property protection, etc.

Business strategy is a key element in the success of any organisation. It provides direction to the company, helps coordinate the efforts of all its members, and allows a focus on the most promising opportunities. However, its formulation and implementation can be complex and require in-depth analysis, careful planning, and effective management.

4 key points to understand business strategy

1. The concept of business strategy
   Business strategy is a long-term plan developed by leaders to achieve the organisation’s objectives, considering its resources and environment.
2. The different types of business strategies
   The 3 main types of business strategies are growth, differentiation, and cost reduction.
3. The process of formulating business strategy
   The strategy formulation process involves a SWOT analysis, defining objectives, choosing appropriate strategies, implementing them, and regularly evaluating and controlling the results.
4. The challenges of implementing business strategy 
   Strategy implementation may face challenges such as resistance to change, lack of resources, and environmental uncertainties, while alignment with corporate culture and HR strategy is crucial for success.