Strategy is about finding your competitive advantage and using that competitive advantage to win. One way of developing an effective business strategy is made up of 3 key stages:
Stage 1: Understanding your environment
A business operates within an environment. It is crucial to understand how the environment is today and how it is affecting your business. Equally important is trying to anticipate how the environment will evolve and change and how such changes will impact your business. The most popular tools used at this stage are Porter’s Five Forces and PEST Analysis.
Stage 2: Understanding your own organisation
Once you have looked outward at the environment in which a business operates, it is equally important to look inwards at the business itself. It is critical to understand your organisation with its strengths and weaknesses and how it compares with competing organisations.
Some important tools that can be used to help in understanding your organisation are the Core Competencies Analysis, the Unique Selling Point Analysis (USP) and perhaps the most popular and commonly used is the SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats).
Stage 3: Evaluating Strategic Objectives
Once you have assessed the environment and delved deep into the business, this stage involves bringing together the information collected in the first 2 stages and undergoing a process of evaluating potential strategic objectives. Generally speaking, the strategic objectives are based around 3 different approaches to market: Cost Leadership, Differentiation and Focus.
A Cost Leadership competitive advantage is about having a lower cost of operations then competitors. This may or not be reflected in lower prices.
A Differentiation Strategy is for a business to find a way in its product/service offering of distinguishing itself from competition. It is therefore about developing a unique product/service.
On the other hand, when adopting a Focus strategy a business chooses to focus on a narrower customer base. This niche approach is usually relationship based and very focused on satisfying the needs of the customer.
The 3 stages for an effective business strategy may seem a long process. But once this framework in your organisation is created, it will become part of your daily decision-making. Please contact us should you need assistance working through your 3 stages.