How to develop business strategies for success

Business strategy development starts with a look at the existing situation of the business by answering questions like:

Do the businesses in the existing portfolio constitute a good fit?
Does the company have any competitive strengths?
What approach is best for exploiting opportunities in tomorrow’s world?

Strategy Development for Big Businesses

Big businesses formulate strategies at different levels.

Corporate Strategy: The CEO and top management work at developing:

A Vision Statement outlining the likely scenario in tomorrow’s world
A Mission Statement setting down the role the business wants to play in that world
A statement of objectives translating that role into specific goals in terms of business portfolios and business results
A strategy report specifying the policies, resources and plans to achieve the objectives

Business Unit Level Strategy: Each business unit of the corporation will develop a competitive strategy. Typical strategies are (i) Gaining a cost advantage, (ii) Differentiating one’s offers from the competition and (iii) Focusing on a particular segment. The strategy report will identify the kinds of projects and programs for implementing it.

Functional Strategies: The projects and programs are implemented through actionable functional strategies for Marketing, Product Development, Human Resources Development, Financing, Legal aspects, Supply Chain Management and IT Management

Operational Strategies: Operating managers adopt PERT/CPM, Operations Research and other approaches to achieve their targets within given budget and resource constraints.

The above is a simplified view of big business strategy development.

Strategy Development for Small Business

The key element of the strategy development process involves answering the questions:

Where is the business now?
Where does it want to go?
How does it get there?

A tool known as SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is used to gain insights into the existing situation

What strengths such as technical know-how, marketing skills, business contacts or financial liquidity have the business accumulated?
What weaknesses such as lack of business and marketing know-how or financial or time constraints can prevent it from achieving its potential?
What opportunities such as growing market demand or a gap in existing offers provide an opening to build on the accumulated strengths?
Are any business threats foreseen such as obsolescence, competitor actions, or changes in economic or political environments?

By the time it completes the SWOT analysis, the business will have a good idea of where it wants to go. This idea is converted into specific goals. A separate article discusses small business strategy development in more detail.

It is at this stage that detailed project reports and financial projections are prepared. These plans and estimates provide actionable programs and set down the goals to be aimed for.

Business strategy development thus essentially involves looking at where the business is now, and where it wants to go. Actionable projects and programs are then developed to exploit market opportunities by leveraging its strengths, taking care to remedy its weaknesses and guarding against perceived business threats. Strategies, when complemented by Performance Management, lead businesses to success.

Small Business Strategy Development Alternative

Big corporations can engage in multiple businesses. They can hire staff with specific industry experience for each business unit. Small businesses are more “hands-on” and have to focus on one business. A separate article, Business Strategy Development, looked at how big businesses develop their strategies. The small business scenario calls for a different approach.

SWOT Analysis Requires Specific Expertise

In the Business Strategy article, it was suggested that small businesses can start with a SWOT analysis to identify their strong points and weak points, going on to pinpoint market opportunities, and major threats the business might have to face.

A SWOT analysis requires a specialized skill to do it in a meaningful manner. Not all new entrepreneurs might be equipped to do it. One alternative in such a situation is to seek the help of an experienced and successful business consultant.

Another alternative for a new entrepreneur is to proceed as follows:

Look at the market and identify a product or service that has good demand but inadequate supply
Select a few products or services tentatively for further examination.
Learn more about the selected choices to find one that:
Involves doing things that the entrepreneur is strong at (or can become strong at because the person likes doing these things)
Requires only feasible levels of resources like know-how, finance and skilled people that the person can organize
The product or service can be sold in sufficient volumes and at profitable prices to recover business overheads (as revealed by a breakeven analysis)

On finding a business that meets the above criteria, commit to it and develop a business plan that explains in detail how the entrepreneur will
Market the business
Raise needed finance
Organize technical know-how and production facilities
Locate and hire any skilled people required
Achieve profitable volumes
Carry on the business, i.e. as a proprietorship, partnership or company, and
Comply with all government regulations applicable to the business

The Business Plan as Small Business Strategy

The exercise of developing a business plan as above has two major consequences:

The entrepreneur becomes aware of key issues involved in running a business, and how these issues are typically handled, and
Establishes a set of specific targets to be achieved in such areas as sales, costs and overhead expenses

The small business now has a roadmap indicating where it wants to go, and how to get there. That in essence is what business strategy is about.

Some expert outside assistance might be necessary to prepare a feasible business plan. That is okay so long as the businessperson gets involved in the exercise.

Be very clear about one thing at this stage. The business plan is still only a route map and not a forecast of how things will actually turn out. In practically all cases, things will happen very differently. A separate article on “bottleneck-oriented” Small Business Management looks at how to handle changing scenarios.

Small businesses will not typically be able to afford the kind of business strategy development practices adopted by big businesses. Instead, they can seek to answer key strategy-related questions by developing a detailed small business plan. The business plan will chart out a feasible strategy roadmap to follow.