How to Design a Business Strategy to Remain Relevant to Market Conditions

Every business leader wants their business to continue to generate sustainable profits. However, market conditions can change, so businesses need to design a business strategy to stay relevant to current market conditions.

A business strategy helps companies maintain their market leadership, identify new business opportunities, and even plan exit or pivot strategies if the current business model is no longer relevant to the market.

Designing an effective business strategy can increase a company's profits. As stated by McKinsey Senior Partner Kevin Laczkowski, who revealed that only 20% of companies generate 90% of total economic profits over a ten-year period.

Companies that successfully achieve this position typically undertake major strategic moves that increase productivity, differentiation, and effective resource allocation. However, only 8% of companies successfully transition from a middle-tier position to a top-tier position within that period.

Unfortunately, business strategy formulation receives insufficient attention. According to the Harvard Business Review, 85% of executive leadership teams spend less than an hour discussing business strategy. In fact, this research found that employees were unaware of the company's business strategy.

The focus on execution is certainly appropriate. However, execution will not produce optimal results if the strategy is ineffective. This means you're wasting time.

Therefore, this discussion will guide you in designing an effective business strategy so that execution can have the maximum impact on your business.

What are the Elements of a Business Strategy?

A business strategy is a process an organization uses to utilize available knowledge to discuss the desired direction of a business.

This strategy formulation process will be used to prioritize necessary execution, allocate resources effectively, align company goals, and implement goals effectively.

Is a business strategy different from a corporate strategy? The difference lies in the strategy's focus and level of implementation.

Here are some elements that business leaders need to consider when planning a business strategy:

Company Vision and Mission

The business strategy being designed needs to align with the company's vision and mission, which have existed since its inception.

Based on the company's vision and mission, the business strategy will have a clear and well-defined focus, goals, and objectives.

Strategic Goals and Objectives

Businesses need to establish clear and well-defined goals and objectives to serve as the foundation of every business strategy.

Goals serve as a compass for measuring progress. Define the goals and objectives to be achieved using the SMART method to ensure alignment throughout the organization.

SWOT Analysis

To determine the necessary steps in a business strategy, businesses need to analyze external and internal aspects through a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis.

External and internal analysis supports strategic decision-making by identifying areas of strength and potential challenges.

Competitive and Environmental Analysis

Understanding the competitive landscape and broader environmental factors is crucial for effectively positioning a business.

Tools such as Porter's Five Forces and PESTLE (Political, Economic, Social, Technological, Legal, Environmental) analysis help evaluate market dynamics and external influences.

Resource Allocation and Capability Assessment

Evaluating a company's resources, such as financial, human, and technological resources, as well as assessing organizational capabilities, ensures that the business can effectively execute its strategy. This involves aligning resources with strategic priorities.

Strategic Initiatives and Action Plans

Developing specific initiatives and action plans explains how the strategy will be implemented.

These plans detail the steps necessary to achieve strategic objectives.

Performance Metrics and Evaluation of Key Performance Indicators (KPIs)

To measure the designed business strategy, it is necessary to establish performance metrics in the form of Key Performance Indicators (KPIs).

Regular evaluation ensures that the business strategy remains aligned with objectives and adapts to changing conditions.

How to Develop an Effective Business Strategy?

Once you have prepared the elements of a business strategy, it's time to develop an effective business strategy.

Here's a formula for developing an effective business strategy according to Harvard Business School.

Start with Purpose

Purpose is the foundation of a strong business strategy. A clear, purpose-driven strategy will help you align your organization's efforts toward a common goal and ensure your company's vision resonates with stakeholders such as employees, customers, shareholders, and others.

A purpose-driven strategy focuses not only on profits but also considers the broader impact the company has on people and the planet.

How do you start with purpose? Begin by defining your company's mission and core values. Align strategic goals with social and environmental considerations.

Integrate purpose into the company culture, ensuring employees feel motivated by the significant impact they contribute.

For example, Unilever's Lipton brand, which built its strategy around the goal of producing sustainable tea, aligns its entire strategy to benefit people and the planet, ultimately generating profits through a strong, purpose-driven brand.

Consider the Global Context

Global economic, social, and geopolitical conditions need to be a primary consideration.

Business strategy cannot be separated from its surrounding environment. You need to continuously evaluate the global context, considering factors such as geopolitical developments, economic shifts, and market trends that could impact your strategy.

Regularly monitor international news, political events, and industry trends. Then, evaluate how global companies impact your supply chain, customer base, and business operations.

Then, build flexibility into your strategy. This allows for quick adjustments to external shocks or new opportunities.

For example, the dairy industry, especially in countries like Mongolia, would need to adjust its strategy if China decided to heavily subsidize its dairy sector, making local production less competitive.

Data Analysis and Case Studies

Your business strategy should be data-driven and supported by internal data and external case studies or economic trends.

Data analysis helps reduce cognitive bias, ensuring that every decision is based on facts rather than assumptions.

Internal data used can include company financial data, historical performance, and customer insights. This also includes analyzing sales trends, market share, profits, customer satisfaction, and product performance.

External data can include case studies of other companies' successes and failures. Study companies in your industry or other industries to understand successful strategies, especially under similar market conditions.

Take Netflix as a case study. Netflix demonstrates how a data-driven strategy can be a game-changer. Netflix used customer viewership data to identify patterns, personalize recommendations, and develop its own original content, ultimately transforming it from a DVD rental service to a global streaming leader.

Communicate Effectively

Effective communication is key to the successful execution of a business strategy. Businesses must not only design a solid strategy; they must also ensure that every stakeholder in the organization understands the plan, their role, and how they contribute.

Research shows that 95% of employees don't understand their company's strategy. For a strategy to be successful, employees must clearly understand not only the "what" and "how" of the strategy, but also the "why."

This creates alignment and empowers employees to make decisions that contribute to the company's overall goals.

Whenever a business strategy is formulated, clearly explain the vision, goals, and objectives of the strategy to all employees.

Hold regular strategy meetings, general meetings, or updates to ensure everyone is aligned.

Create feedback mechanisms such as surveys and team discussions to gauge employee understanding and engagement.

An example of a company that implements effective communication is Starbucks.

Starbucks is known for aligning employees with the company's strategy through regular communication regarding its commitment to ethical sourcing, employee well-being, and community involvement. This strategy is reinforced through internal training programs and clear messages from leadership.

Learn How to Design an Impactful Business Strategy

When to design a business strategy? In today's fast-paced market, if you only plan your business strategy once a year, you're likely to fall behind.

Look at how startups operate, they plan their business strategies in Sprints, which can be every two weeks or even once a week.

To ensure your business executes effectively, you need to learn how to design an impactful business strategy.

You can learn how to design and implement a business strategy aligned with company goals in prasmul-eli's business strategy certification program.

You'll be equipped with skills in conducting internal and external analysis, competitive strategy, the business model canvas, and more related to business strategy components.

Prepare yourself and your business leaders to design impactful business strategies.