An effective business strategy is the cornerstone of sustainable success for pretty much any enterprise. However, the precarious state of the global economy means that firms of all sizes are feeling the pinch at the moment, and when resources are squeezed it can be hard to find the funding required to secure the market research and strategic analysis that underpins effective business strategy . Many firms across the world are now choosing to outsource the gathering of vital business strategy information through companies like MBA and Co, rather than meet the ongoing costs of employing full time staff with the requisite qualifications to provide such expert analysis.
For the small or start up company in particular, this flexible purchase of expertise makes sound financial sense. However, to get maximum bang for your buck, you first need to be proactive in determining the direction of your business before hiring outside help. This means having a firm grip of the basics so that you can outsource only the more technical aspects of market research and strategic planning. So just what is an effective business strategy?
I’ll start with a definition that I found online, which is a great place to start researching business ideas, theory and strategy:
‘A business strategy is an integrated set of plans and actions designed to enable the business to gain an advantage over its competitors and, in doing so, to maximize its profits.’
As a start up or small business, your initial strategy may simply have been to supply a good or service for which you feel there exists a market. If you are very lucky (or observant) this could be a gap in the market, a situation which will hopefully buy you some time to get established and grow before larger players with more clout appear, and try and snatch your customer base through deploying superior marketing resources, or economies of scale
More likely is that you plan to sell to an existing market, which is no bad thing because at least you know that the market actually exists – which is not always a given with a perceived ‘gap’. The downside is of course that your competition is already established, and has a customer base who is familiar with them.
Undercutting this competition is a time worn strategy, and while it can be achieved you must be very careful that you do not cut margins to the point where profit evaporates. To borrow another common business maxim: Turnover is vanity, profit is sanity. In other words, you can steal all the business that you like by undercutting the competition, but it all means nothing if the price of sale equals the cost of production.
Differentiation is often a better tactic than a low cost strategy, although competitive pricing can be an effective part of this approach to take out the higher end of the market, if you’ve spotted a complacent and greedy competitor. Differentiation through added value is perhaps the most desirable business strategy, as then you need not occupied the budget end of the market and have a better chance of realizing a decent profit. Add value through creating a superior brand, or delivering a better service, and you will gain and retain customers.