A business strategy gives your company a clear set of guidelines for making decisions across many areas, such as hiring staff or developing new products. It also helps define the steps and actions your business should take to meet its goals.
Developing a business strategy that matches the vision you have for your company takes time and effort. In this article, we’ll explain what a business strategy is and why it matters. We’ll also go over the main parts of a good strategy and share examples that can help you come up with ideas for your own business.
While a business strategy may seem simple in theory, creating one that works well—and putting it into action—is not always easy.
Key Areas Covered in This Guide:
- What is a business strategy?
- How is strategy different from tactics?
- What are the main parts of a business strategy?
- Why is a business strategy important?
- How to build a business strategy
- How to measure the success of your strategy
What is a Business Strategy?
A business strategy is a long-term plan created by company leaders to achieve important goals. It outlines the big picture for where the company wants to go and the steps it will take to get there. This plan becomes the base that helps guide many decisions in the business.
Once the plan is in place, the entire management team should follow it closely. A clear strategy helps all departments work in the same direction. This prevents teams from working in isolation or at cross-purposes.
It’s also important to know that a strategy is not the same as a mission statement. For example, Amazon’s mission is “to be Earth’s most customer-centric company.” This describes their overall vision, not the steps they will take. The strategy is developed to help bring that vision to life.
“However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill
How Is Strategy Different from Tactics?
Before diving into how to build a strategy, it helps to know how strategy and tactics differ. They are related but not the same.
A strategy is the big plan that shows the direction the company wants to go in and how it will get there over time.
Tactics, on the other hand, are the specific actions taken to reach those goals.
For example, if a company’s strategy is to be the lowest-cost provider in its industry, a tactic might involve negotiating better deals with suppliers to lower expenses.
What Are the Key Parts of a Business Strategy?
Business strategies can vary, but most strong strategies include the following core elements:
1. Vision and Objectives
The strategy should support the long-term goals of the business. A clear vision points the company in the right direction. Objectives help break the vision into smaller, achievable targets. These also guide which resources are needed and who is responsible for each task.
2. Core Values
The company’s values shape the way decisions are made and how the business operates. Defining these values ensures that all teams and leaders are working with the same principles in mind.
3. SWOT Analysis
This stands for strengths, weaknesses, opportunities, and threats. It’s an important part of the strategy because it helps leaders understand where the company stands, what it needs to improve, and where it can succeed.
4. Tactics and Operational Delivery
This part focuses on the actions needed to carry out the strategy. It outlines how day-to-day work should be done. Managers responsible for these tasks need to be clear on their roles to avoid wasting time and resources.
5. Resources and Allocation
Every company needs resources like people, technology, money, and equipment. A strategy should clearly state how current resources will be used and what new resources will be needed in the future.
6. Measurement and Review
This step looks at how well the strategy is working. It includes setting goals, tracking progress, and adjusting as needed. Data and business tools often help in this area to make sure the business stays on track.
Why Is a Business Strategy Important?
Now that we know what a strategy is, let’s look at why it’s so important.
Most business leaders have a vision for their company. In the early stages, like with startups, the vision may be flexible. But as the company grows, it becomes harder to stay focused without a clear strategy.
If a business doesn’t have a well-defined strategy, it may begin to lose its direction. New staff might not understand the core values or long-term goals. Even if the business is doing well in the short term, it might not be set up for long-term success.
This becomes even more of a problem when outside issues arise—like falling sales, rising costs, or strong competition. In these situations, the lack of a clear strategy can cause the business to struggle. Teams may get caught up in daily problems and not have time to plan for the future.
The good news is that this can be avoided. While building a strategy takes effort, it’s worth making time for. As a leader, you should set aside time to focus on creating a roadmap for your business.
Having a strategy doesn’t guarantee success. But it does give your team a clear goal to work toward. If your company hits tough times, a solid strategy helps your employees stay focused on what really matters.
How to Build a Business Strategy
We’ve covered what a strategy is and why it’s important. Now let’s look at how to build one. This can be done in five key steps:
1. Define Your Vision
Start by understanding your company’s values and the position you want in the market. This vision sets the tone for the entire strategy.
For example, Amazon’s vision is:
“To be Earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”
A strong vision also outlines who your ideal customer is and the main value you offer.
2. Set Your Objectives
The next step is to create top-level goals. These may include increasing revenue, growing market share, or creating value for shareholders.
It’s important to set goals that are specific and realistic. Your strategy should help answer how your business will grow, compete, and succeed over time.
Note that goals related to values or mission statements are usually part of other strategies, like your marketing or communication plans.
3. Analyze Your Business and Market
Now it’s time to review your business using a SWOT analysis. Knowing your strengths allows you to build on them. Being honest about weaknesses helps you avoid depending on areas that may not be strong enough.
Also, look outside your business. What’s going on in the market? Who are your competitors? What opportunities exist? These insights help define the space you’ll compete in.
4. Define Your Competitive Advantage
This step answers the question: how will you reach your goals? What makes you stand out?
This is where you identify your unique selling point (USP) and how you will compete with others in your market. Think about how you will attract customers, raise sales, use new technology, or improve your profit margins.
Without a clear competitive edge, your strategy may fail—even if the rest of the plan looks good.
5. Build a Framework
The last step is to turn your strategy into a working plan for each department. Not all parts of a business will contribute equally to the strategy. That’s why it’s important to align each team’s work with the overall business goals.
This framework connects the big picture with daily tasks. It helps everyone stay focused and work together toward the same end result.
How to Measure the Success of a Business Strategy
You’ll know your strategy is working if it leads to growth and stronger business results. But to really understand its impact, you need to track progress through key performance indicators (KPIs).
Each department can have its own set of KPIs that support the larger business goals. Some examples include:
Financial Performance:
- Revenue
- Gross profit
- Net profit
- Operating profit
- EBITDA (earnings before interest, taxes, depreciation, and amortization)
- Free cash flow
Competitive Advantage:
- Market share
- Brand recognition
- Media coverage
- Growth compared to competitors
Tracking these metrics helps you adjust your strategy if needed and stay on course for long-term success.
