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Business Strategy

What is a business strategy? The definition

A business strategy is explained as the course of action or a set of decisions or guiding principles that help managers achieve business goals. It is the means by which organizations try to realize their vision for the future. A simple definition of the word business strategy is long-term business planning. A business strategy usually spans at least a number of years.

What is a business strategy? The definition

A business strategy is explained as the course of action or a set of decisions or guiding principles that help managers achieve business goals. It is the means by which organizations try to realize their vision for the future. A simple definition of the word business strategy is long-term business planning. A business strategy usually spans at least a number of years.

A business strategy generates a desired pattern of decision-making, provided it is effectively communicated and adopted within the organization. It is therefore about enabling people throughout the organization to make decisions and allocate resources based on the guiding principles to actually achieve the objectives. A good business strategy then functions as a North Star and roadmap. It defines actions people should take and prioritizes activities.

Business strategy in practice

The roadmap of business intentions and actions is being designed in business for some other purposes as well. These goals reflect why good business strategy is so important to organizations. Firstly, the strategy serves the planning process. It helps identify steps required to achieve business goals. The process of preparing the business strategy furthermore leads to the identification of strengths and weaknesses. This insight helps in positioning the organization. In addition, having a good business strategy helps in controlling activities that are carried out to achieve the objectives as efficiently as possible.

There are different types of business strategies. Michael E. Porter defined three general business strategies in 1980. The first is Differentiation. Companies that use this strategy prove to the customer that they are different and better than the competition. Such a strategy is less focused on price than the other types of strategies. The long-term vision of companies with this strategy is to cut costs in the areas that do not contribute to the differentiation. The second type is Cost Leadership. The aim of this strategy is to be the cheapest provider of products or services. An example of this is Wal-Mart. They focus on supplying almost all products at affordable prices. Such a strategy works well for large companies that sell products on a large scale. The last type of strategy is Focus. A niche company then mainly focuses on a small share of the market. They fulfil the needs of fewer people than other companies, but enjoy less competition. Think of craft beer or paint brushes intended for a special type of material.

Every organization forms its own strategy, but not all companies are successful in executing it. Many companies in the technology sector differentiate themselves from the competition by creating the most advanced products. The overall strategy is therefore close to innovation orientation. Other companies focus on developing and selling new products and others focus on sustainability. A strategy can also be to contract out certain production or business processes. This is called outsourcing.

Whatever the strategy, it is important that the strategy is right. Tools used in developing and assessing a business strategy include Mintzberg’s 5 Ps of Strategy, the Rockefeller Habits, the EPRG Framework and the Ashridge Model.

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Strategy theories, methods and tips

The articles linked to business strategy are about the different types of strategies, the conditions in which each can be optimally used, methods of adapting strategies and general supportive methods and models. How do I know if I have chosen the right strategy? How can I learn from my competitors’ strategies? How can I optimize my strategy in order to achieve my objectives? How can I implement strategy theory in my field or position?

Virtual Value Chain Model

July 3rd, 2022

Virtual Value Chain Model: this article explains the Virtual Value Chain Model in a practical way. After reading you will understand the basics of this powerful problem solving tool. What is the Virtual Value Chain Model? Today’s organizations are…

Business Motivation Model (BMM)

May 12th, 2022

Business Motivation Model: this article explains the Business Motivation Model (BMM) in a practical way. After reading it, you understand the core of this strategy theory. What are the Business Motivation Model (BMM)? In 2000, the American Business Rules Group…

Outsourcing Decision Matrix

May 12th, 2022

Outsourcing Decision Matrix: this article provides a practical explanation of the Outsourcing Decision Matrix. After reading, you’ll understand the basics of this powerful management and strategy tool. What is an Outsourcing Decision Matrix? It is often a difficult choice…

Ashridge Model

May 12th, 2022

Ashridge Model: this article provides a practical explanation of the Ashridge Model. After reading, you’ll understand the basics of this powerful strategy tool. What is the Ashridge Model? The Ashridge Model is a framework and tool for drawing up…

Levers of Control model

May 2nd, 2022

Levers of Control: this article explains the Levers of Control model, developed by Robert Simons, in a practical way. After reading it, you understand the basics of this strategy and management related tool. What is the Levers of…

Service Profit Chain

May 2nd, 2022

Service Profit Chain: this article explains the theory of the Service Profit Chain in a practical way. After reading it, you understand the core of this strategy theory. What is the Service Profit Chain? The American economists W. Earl Sasser…

EPRG Framework (Perlmuter)

March 25th, 2022

EPRG Framework: this article explains the EPRG Framework in a practical way. After reading, you’ll understand the basics of this powerful marketing tool. What is the EPRG Framework? EPRG stand for Ethnocentric, Polycentric, Regiocentric, and Geocentric. It is a…

5 P’s of Strategy (Mintzberg)

March 24th, 2022

5 P’s of Strategy: this article describes the concept of the 5 P’s of Strategy by Henry Mintzberg in a practical way. After reading you will understand the definition and basics of this powerful strategy tool. 5 P’s of Strategy…

Crowdsourcing

February 17th, 2022

Crowdsourcing: in this article you will find a practical explanation of the Crowdsourcing business model. After reading, you will understand the basics of this powerful tool for external collaborative initiatives. What is Crowdsourcing? This concept was first mentioned in 2006…

Rockefeller Habits

January 24th, 2022

Rockefeller Habits: this article explains the theory of Rockefeller Habits, developed by Verne Harnish in a practical way. After reading it, you understand the core of this strategy and scale up theory. This article contains also a Rockefeller Habits

Contingency Plan

January 24th, 2022

Contingency Plan: this article describes the concept of a Contingency Plan in a practical way. After reading you will understand the definition and basics of this powerful strategy tool. Introduction Starting and owning a business is very exciting. But when…

Game Theory

January 24th, 2022

Game Theory: this article describes the Game Theory, developed by Oskar Morgenstern and John von Neumann in a practical way. After reading you will understand the definition and basics of this powerful strategy and decision making tool. What is…
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