Types of Business Strategy for Organizations
A successful organization requires a strategy that is both clear and well-defined. Without a thorough, well-thought-out plan, a company may get lost in the woods. A methodical approach to determining an organization’s direction is business strategy planning. It specifies the goals and steps necessary to realize that future vision, as well as success indicators. Strategic planning helps you focus on your fundamental purpose, goals, development, and prospects by reintroducing you to “the big picture.” It serves as the cornerstone for entrepreneurs to realize their vision, which they share with stakeholders through a strategic company plan and program.
In this article, we are going to talk about the types of business strategy for organizations.
The acronym “SWOT Matrix” or “SWOT Matrix Analysis” refers to a framework that considers four factors: strengths, weaknesses, opportunities, and threats. This thorough study considers both internal and external elements as well as present and potential future conditions. The competitive position of a company is assessed using IT, and business strategy planning is created using it. The SWOT analysis analyzes both internal and external factors as well as the current condition and any predicted future events.
A SWOT analysis is meant to assist you in taking a practical, factual, and data-driven look at the benefits and drawbacks of a business, its initiatives, or its industry. The organization must avoid preconceived notions or gray regions and concentrate on real-life settings to maintain the analyses’ accuracy. Businesses should use it as a reference rather than a strict prescription.
The key advantages of the SWOT analysis are that it produces new insights and useful information about the business. This framework is also extremely affordable. Anyone who is familiar with the company can actually carry one out. The drawbacks of this framework, however, include erroneous data since preconceived beliefs might skew the data, and SWOT Analysis might not be the best choice for intricate, all-encompassing business strategy planning.
Components of SWOT Analysis
Every SWOT analysis will comprise the following four categories. The following elements are required for a SWOT analysis to be comprehensive, even though the elements and conclusions under these categories vary from firm to business:
- Strengths: A company’s strengths are factors like its strong brand, loyal clientele, healthy balance sheet, cutting-edge technology, etc. that show what it excels at and what makes it stand out from the competitors. A hedge fund, for instance, might have developed a proprietary trading strategy that beats the market. It will next decide how to exploit the findings to entice further investors
- Weaknesses: A company’s shortcomings keep it from reaching its full potential. For instance, the business needs to improve in areas like its brand, higher-than-average turnover, debt levels, supply chain, and cash flow if it wants to remain competitive
- Opportunities are favorable external factors: that could give a business a competitive edge. A car company might export its vehicles into a new market if a country lowers its tariffs, increasing sales and market share
- Threats: Threats are elements that have the potential to harm an organization. A company that grows wheat, for example, is vulnerable to a drought since it may destroy or reduce crop yield. Increased material costs, fiercer rivalry, and labor scarcity are a few more prevalent challenges
How to Do a SWOT Analysis?
A SWOT analysis can be broken down into multiple sections with specific recommendations both before and after evaluating the four components. A SWOT analysis frequently involves the following steps.
Step 1: Establish your Business Strategy Goal
A SWOT analysis may be general, but it will probably be more useful if it is narrowed down to one particular objective. A SWOT analysis might be used, for instance, to decide whether or not to start a new training program. If the organization has a goal in mind, they will know exactly what they want to achieve after the process is over. In this situation, the SWOT analysis should help in determining whether or not the program should be presented.
Step 2: Gather Resources
Every SWOT analysis will be unique, and a company might need different data sets to enable building out many SWOT analysis tables. To start, a business should be aware of the information it has access to, the data constraints it encounters, and the dependability of its external data sources.
A business should be aware of the ideal people mix to include in the study in addition to the data. Some employees inside the production or sales sectors may have a greater understanding of what is happening internally while other employees may be more connected to external factors. A varied range of viewpoints is also more likely to provide contributions that add value.
Step 3: Compile Business Strategy Ideas
The team tasked with conducting the study should start by jotting down ideas under each of the four categories of the SWOT analysis.
The SWOT analysis’s strengths and weaknesses categories can learn a lot from what goes on inside the firm. Financial and human resources, tangible and intangible (brand name) assets, operational efficiencies, and others are examples of internal factors.
Possible inquiries for listing internal elements include:
- What are we doing well?
- What is our best quality?
- What are our critics, exactly?
- Which of our product lines performs the worst?
Both internal and external factors must be considered for a firm to prosper. Categories including monetary policy, market movements, and supplier access can be used to construct a list of opportunities and weaknesses.
The following are examples of possible searches for external factors:
- What market trends are readily apparent?
- What ethnic or racial groups are we ignoring?
- What is the market share of the competitors, and how many are there?
- Are there any recent regulations that could have a negative impact on our company or our products?
Step 4: Refine Findings
It is now time to clean up the ideas using the lists of suggestions inside each category. A corporation can narrow its emphasis to only the best concepts or the greatest business risks by refining the ideas that everyone had. A significant discussion among participants in the analysis may be necessary at this level, and top management may need to be involved to help rank priorities.
Step 5: Develop the Business Strategy
It’s time to translate the SWOT analysis into a strategic plan now that you have the prioritized list of your company’s strengths, weaknesses, opportunities, and threats. The analytical team puts out a summarized plan that gives direction on the original target using the bulleted list of things inside each area.
For instance, the business considering whether to launch a new product may have discovered that it is the market leader for its current product and that there is room to grow into new areas. Yet, the weaknesses and opportunities might offset the increasing material costs, congested distribution channels, the requirement for more labor, and the unpredictability of product demand. The analytical team creates a plan to review the choice in six months in the hopes that expenses will be reduced, and market demand will become more transparent.
The Blue Ocean Strategy
Chan Kim and Renée Mauborgne introduced the phrase “blue ocean” to represent the market universe in their influential book Blue Ocean Strategy.
The term “blue oceans” refers to all the industries that do not yet exist and the untapped, unpolluted market space. Demand is created rather than contested in blue oceans. So, there are increased chances for rapid, profitable expansion.
Competition is unimportant in blue oceans since the rules of the game are still being established. An analogy used to depict the greater and deeper potential to be discovered in untapped market space is a “blue ocean.” In terms of lucrative growth, a blue ocean is large, deep, and strong.
This business strategy involves pursuing differentiation and low cost at the same time in order to expand the market and generate new demand. Establishing and controlling uncontested market space with the intention of driving out rivals is the objective. It is based on the notion that, depending on the actions and attitudes of business actors, industry structure and market limitations can be constructed.
The goal of this business strategy is to assist your organization achieve uncontested market space apart from competing, closely related companies. The term “blue oceans” is used to describe these new areas in contrast to the gory “red oceans” that are teeming with vicious rivalry.
You stay away from crowded markets. Your business faces competition from major competitors in your industry, including mega corporations. If you employ the blue ocean business strategy, though, your product won’t be exactly like any other while still satisfying customer needs and being given at a reasonable price. The influential big names in your field won’t pose a threat to you in the end.
It offers room for expansion. Creating new value for your customers by balancing product or service innovation with cost and usefulness is known as the “blue ocean” technique. Word-of-mouth marketing has the potential to boost demand as more people buy what you’re selling.
You’ll converse with clients at their level. Value and affordability are given equal weight in blue ocean technique. Your ideas will always be released at a price point that your target market can afford. This strategy lowers the obstacles to purchasing for your target market.
How to Implement a Blue Ocean Business Strategy?
The following actions are advised in the book by Kim and Mauborgne for putting the business strategy into practice:
- Establish a launch date for your new products and hire personnel who will contribute to the development of your team and brand identity
- Your present team’s weaknesses should be identified, and you should attempt to improve them.
- Identify any potential areas of discomfort for your current and future clients
- Create goods and services that address these problems in ways that no other company has ever thought of
- Make a formal shift plan in writing and test your new goods and services (as well as the steps you’ll need to take to get there)
The blue ocean strategy may seem novel, but companies have been employing it successfully for a while — long before Kim and Mauborgne gave it that name.
A business strategy planning technique called Hoshin Kanri was created in the 1960s and 1970s and is based on Japanese tradition. It is used to facilitate organizational collaboration in order to handle critical strategic objectives effectively. Hoshin planning is designed to get rid of the inefficiencies that might happen when there is poor coordination and communication between various departments within an organization. Hoshin planning has become a common choice in recent years due to the large number of organizations—especially manufacturers—that have adopted it.
How to Implement Hoshin Planning?
Step 1. Establish Organizational Vision
- What is the present status of your business strategy, vision, planning procedures, and execution system?
- What rules and guidelines are in place already for setting and implementing goals?
- What is the daily management system and organizational structure?
- What long-term plans are in place right now?
- What are the mission and vision statements you currently have?
Step 2. Develop Breakthrough Business Strategy Objectives
The Four Growing Quadrants: Breakthrough goals are huge advancements that will take three to five years to accomplish and will push your business to its limits. The four quadrants of growth, a modification of the Ansoff Matrix, is one of the techniques we use to create these in order to find growth opportunities. Utilizing this technique, we identify stretch objectives in each area by taking into account customers and non-consumers, those who are now using your service and those who aren’t, as well as current jobs and new jobs.
Step 3. Develop Annual Objectives
What must you accomplish this year to fulfill your three to five year breakthrough goals? A yearly business strategy would be “98% of loans close in 30 days,” for instance, if the breakthrough goal is to “reach industry leading closure time.”
Step 4. Deploy Annual Objectives
How can you translate those ground-breaking goals into actionable departmental aims and objectives? We create high-level priorities for improvement before applying measurements to them. Then, we establish second- and third-level goals for the firm that are directly related to the top-level priorities. In essence, we’re cascading down to achieve total alignment across the board. Each stage descends into ever-finer detail until you can see the thing or receive it. As a result of the integration of many divisions and the maintenance of concentration, the business strategy objectives are once again met throughout the entire organization.
The goals and cascading priorities are depicted in the Hoshin Planning Matrix, often known as the X matrix. Managing progress toward attaining objectives and recognizing improvement opportunities also benefit from the use of other tools, such as comprehensive action plans, summaries of reports, and value stream maps.
Step 5. Implement Annual Objectives
Here, advancements are put into practice while employing the best technique for achieving the business strategy. A great foundation for organizing teams to make improvements is provided by the five-step SCORE (Select, Clarify, Organize, Run, Evaluate) technique developed by the Lean Methodologies Group for the execution of Kaizen events. Other techniques for problem-solving outside SCORE meetings might include innovation projects, capital improvement projects, Lean Six Sigma DMAIC projects, and just-do-it approaches.
Step 6. Monthly Review
- How well-off is the company at completing the business strategy?
- What remedial measures are required for those who are behind?
By monitoring progress toward attaining annual improvement goals, a monthly review promotes a culture of accountability and action.
Step 7. Annual Review
An in-depth analysis of the year’s objectives at the end of the yearly cycle reveals how the organization is doing in relation to its stated goals and what changes need to be made for the following cycle.
Which Strategic Planning Framework Should I Implement?
No matter whose framework(s) you choose to employ to draft your business strategy, the finished document must have these five characteristics:
- A Core Vision – Your strategy plan should communicate to each employee and stakeholder the overall picture and the core vision for the business
- Clear values – Values drive all that firms do. Your strategic plan should make it clear what the company’s values are to encourage buy-in
- Thinking Long Term – Strategic plans should focus on long-term outcomes and goals rather than the immediate here and now
- Accountability – Although it may not be stated clearly in the strategic plan, it is essential to identify who oversees carrying out and updating the plan
- Integrated Metrics – Whether you choose to use KPIs or other measures, measuring and evaluating data is crucial for assessing whether the business strategy was successful
Not every business strategy works the same way. To carry out each type of strategy, a particular collection of abilities, materials, strategies, and plans must be used. Whichever one you might choose to implement, make sure you set relevant organizational goals and actionable steps to achieve the business strategy.