Steps in Developing a Business Strategy

A business strategy outlines how a company plans to create and maintain demand for its products and services, thereby increasing sales and profit. A company’s strategic plan is typically based on the fundamental objectives of increasing profitability, market share and, in the case of publicly traded companies, shareholder value.

A successful business strategy will leverage a firm’s strengths, minimize weaknesses and capitalize on opportunities. In addition, it will mitigate threats and keep the company on track in spite of changing conditions.

One of the first steps in developing a business strategy is to identify a company’s core competencies and capabilities. Then, the management team and all employees need to agree on the company’s goals. This helps ensure that everyone is on the same page and working toward a common goal.

Another important step in developing a business strategy is understanding the needs and wants of the company’s target market. Then the business can accurately determine how it will meet those needs and wants through its products or services.

For example, if the company’s product is an online platform that allows companies to sell their goods and services, it would be important for the management team to understand why customers need this product. This would help the company to develop a unique selling proposition, which it could then use to differentiate itself from competitors.

A business strategy also requires a firm to decide whether it will build its own products or buy them from other vendors. This is usually a financial decision, based on a cost-benefit analysis of each option. Oftentimes, it is more cost effective to buy ready-made products rather than develop and produce them internally.

Once a business strategy is in place, it is essential that the company communicates it to all employees and shareholders. This communication can be done through a variety of channels, such as e-mail and newsletters. In addition, the management team can use their business plan to provide a road map for growth.

The next step in a business strategy is to establish a budget that will cover all startup costs and allow for a positive cash flow in the first year of operations. This is usually done by inserting the budgeted costs into a financial model, which will then generate a projected first-year cash flow statement.

This is also the time to determine a marketing plan, which will include an outline of how the company will make money through its products or services. This can include direct sales, membership fees, advertising space and other methods of revenue generation. The management team should also consider what the company’s pricing structure will be. In some cases, a firm may choose to price its product or service low to gain a competitive advantage or it may choose to price its product high and collect higher margins. In either case, a clear understanding of the company’s pricing structure is necessary to develop an effective marketing strategy.

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