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How to Create the Right Business Strategy for Your Startup

All businesses have goals. But goals are meaningless if you do not have a well-defined plan set in place detailing how you will achieve them.

 

And that’s the job of a business strategy. However, a business strategy is not as simple as you may think. If you want a plan that you can stick with through till the end, the strategy has to go to the nitty-gritty of things.

 

In this article, I will show you how to create a business strategy that is suited to your own organization while at the same time, making you aware of some of the conceptual issues and future problems that may arise when you are creating or implementing a business strategy.

 

How you can create your very own business strategy for your startup.

And, if you need any help in formulating your business strategy, shoot us an email. We help startups formulate their business strategy and even provide a free consultation in that regard!

Why You Need to Have a Business Strategy

If the business strategy is not detailed or does not keep individuals accountable, it is bound to fail. Therefore you end up having to make continuous revisions to the plan, reducing its effectiveness by a long shot.

 

That doesn’t mean the business strategy can’t be flexible. In fact you need your strategy to be flexible to account for the constant changing business environment but at the same time you need your business strategy to be extremely detailed, layered throughout your organization.

 

The business strategy helps bring your business plan to life and keeps the individuals in your organization accountable. It also shows your strengths and weaknesses and allows you to plan accordingly.

 

A word of warning though – often times, businesses get confused between the meanings of business plan, business model and business strategy. These three are completely different.

 

Business strategy is more of a sub-set of the business plan. While the plan deals with the higher level conceptual matters, the business strategy is more rooted to the ground and deals with the tangible periodic actions that a business has to take.

The Three Levels of Business Strategy

There are three levels of a business strategy - the functional level, the business level and the corporate level strategy.

A business strategy has three levels-

  1. Corporate Level strategy,
  2. Business Level strategy,
  3. Functional Level strategy

While corporate level strategy is absolutely at the top and slightly conceptual in nature, it becomes more rooted to the ground in the lower stages.

 

A well-developed business strategy helps your business discover the right marketing mix, the right market, make the right financial decisions and choices as well as improve the competitiveness of the business.

 

To begin with, we will start at the highest of the three levels with the –

Corporate Level Strategy

Of a company’s vision and mission policy, the corporate level strategy deals with the vision of the organization, that is what its end goal is.

 

This deals with what are the objectives of the business, the policy of allocation of resources, as well as how the organization shall be designed, that is, what the legal business structure of the business ought to be.

 

The business strategy at the corporate level deals with mainly the following three issues-

  1. Type of business that the organization is going to take part in – This basically means what you intend to do with your startup. This involves testing your business idea so as to ascertain whether it is a sustainable business idea. (You could use a proof of concept test.)
  2. Stance on competition – Do you want to enter a high-competition market or a low competition one? Should the market be one wherein the barriers to entry are high or should the barriers to entry be low?
  3. Proper allocation of human resource and capital across the key business areas of the organization.

While the first two instances are decisions that have to be decided before entering into the market, the third decision involves both pre-market and post-market decision making.

 

However the resource allocation has to be a broad based strategy and should not go into the minute details as you need to allow for flexibilities in the bottom two levels.

 

Since the corporate strategy is the highest level of business strategy, it is not easily changeable. However now, after the foundation of the design thinking principles and lean startup principles, if you have a startup, you need to be comfortable in allowing your corporate strategy to be changed often.

 

Changing your corporate strategy often involves changing your customer base, and even the market and this is known as pivoting.

 

Apart from those, some other areas which you may need to consider are the structure of your business - whether you want a centralized structure or a decentralized one.

 

Portfolio management is another area which can come into play in your corporate strategy. As with all levels, the more detailed your planning, the better.

 

It is better to have a thoroughly planned strategy and changing it with changing times than to make your strategy vague.

 

When you are working on creating your corporate strategy, remember that it is your master plan and all the other levels of business strategy will revolve as per the corporate strategy.

Business Level Strategy

Business level strategies are made by those organisations that are running several businesses under the, and treating them as strategic business unit.

 

Business level strategy operates over strategic business units

For example, Google has several businesses and therefore may use business level strategies.

 

But, this level of strategy making is not only used by large organisations, but also by startups. Strategic business units (SBU) can be created for all independent products that a business creates as well as for market segments that an organization serves.

 

Therefore there can be several business level strategies under a corporate strategy.

 

As such, each business level strategy is unique and depends largely upon the SBUs concerned. Since the corporate level strategy is overarching, the limits set by the corporate strategy has to be followed by the business level strategy although there is ample room to play in there.

 

For example, you may need to follow the broad resource allocation guidelines set out by the corporate strategy although you can plan your own resource allocation within your product or market segment or you could even further delegate it to the functional level of strategy making subject to some guidelines.

 

The three main approaches to business-level strategies are-

  1. Cost leadership,
  2. Focus to achieve a sustainable competitive advantage, and
  3. Differentiation

While cost-leadership was a famous business strategy principle in the 20th century, you should not focus on that approach now. Instead you should try and differentiate yourself and create a branding for yourself.

 

Innovation is the best route for business strategy at the present.

That said, once you have created your plan for this stage, you should move on the lowest stage, which is-

Functional Level Strategy

Functional strategy operates on a single functional operation and governs the activities that needs to be conducted for that function. For example, you need a functional strategy for financial management, human resources, marketing, manufacturing, research and development, information systems, etc.

 

In this level of business strategy, you often need to involve a restricted planning on the subject matter and involve deliverables so as to hold the managers executing the processes, accountable.

 

You also need to go into the nitty-gritty of resource allocation in this stage. At times, even the functional level strategy can again be subdivided into operations level strategy. However these are looked into by low level managers.

 

An example of the operation level strategy is how you can divide the marketing level strategy into operational levels such as sales strategy, pricing strategy, distribution strategy etc.

How to Create a Functional Strategy

While creating a corporate and business level strategy is comparatively easy, a lot of individuals fail to plan their functional strategy in-depth and that creates problems thereby introduce errors all the way up to the corporate strategy.

 

Functional level strategy is the lowest and the most operational level of business strategy.

As of now, I will be dealing with four of the main functional strategies which are-

  1. Financial strategy,
  2. Marketing strategy,
  3. Production strategy,
  4. Human Resource strategy.

While detailing in-depth on the four essential functional strategies in-depth is out of the scope of this article, I will be showing you the areas which you must have in your business strategy for these functions.

Creating Your Financial Strategy – What You Can’t Miss

When you are creating your financial strategy, these are the must have components–

  • Free Cash Flow – After all, cash is king. It does not matter how much your accrual income is, if you don’t have the cash necessary to run your business on a day-to-day basis.

 

  • Asset management – If you don’t strategize around this, you will find your assets being sold off or put into disuse and thereby depreciation. Make sure your employees make the best use of the capital or human resource that you introduce into your organization by way of this strategy.

 

  • Economic Value Added goals – This can be set to motivate your organization to target only those sectors which help its value to grow the largest and thereby leaving out the unprofitable or less profitable areas.

 

  • Financing your business and structuring the capital – Your startup needs a delicate balance of financing. Too much equity and your own stake will be diluted. Too much debt and you will scare off future equity. You need to ensure that the financing is done while at the same time keeping the cost of capital to the firm at the minimum. And that’s why you need to strategize for this option well in advance.

 

  • Profitability ratios

 

  • Risk assessment and management – You need to identify your key risks and create detailed plans to control them.

 

  • Optimization of tax liability – You must ensure that you structure your business in such a way that your tax liability is minimal.

 

  • Growth indices – You need to set your growth expectation and the tradeoff levels of growth with funds that you are comfortable with. Some startups have a “growth at all costs” mentality which often burns through the cash of the business. And therefore you need to strategise for this option in-depth.
As such, you can see that this area of strategy is heavily tied to the revenue model of your business.

Creating a Marketing Strategy for Your Business - The Process

Growth hacking is a marketing strategy and can be part of your startup's business strategy.

Your marketing strategy needs to make three important decisions-

  1. The markets that your product or service is going to compete in.
  2. The USP of your product – that is, where the basis of your business’ competitiveness lies.
  3. When you should compete and when you should differentiate your offerings.

The three decisions keep changing with time considering both the internal as well as the external environment of the business.


Your market position also influences the strategy that you are going to pick. There are four main market positions –

  1. The market leader,
  2. The challenger,
  3. The market follower,
  4. The market nicher.

I have discussed in-depth about the marketing strategies in this post.

The HR Strategy – The Essentials

To create your HR strategy, you need to first assess the HR capacity. This means, you need to assess number of people working for you, the skill level of the people as well as their work culture.

 

Strategizing for a business' human resource is key for developing the business strategy of a startup.

After that you need to forecast the HR requirements in the future. You need to consider the number of positions that you may need to create as your business continues to grow as well as whether you need to incorporate a new talent that you previously thought you did not need.

 

After the forecast, you may want to conduct a gap analysis to keep track of the gap between the existing and desired HR position of your organization.

 

You may also need to develop operational strategies for areas like skill development, restructuring strategies, outsourcing and creation of innovating recruitment strategies so as to find high performers in any organisation.

 

If your business has a high churn rate, you may need to plan for a retention strategy.

Some other essentials of a successful HR strategy are-

  1. Onboarding and orientation of new employees,
  2. Compensation plans for employees,
  3. Rewards system for high performers,
  4. Work culture development as well as strategy for transition in work culture,
  5. Creating team spirit and improving employee productivity.

That’s all. Hope you found the article helpful. If you need any help, send us an email detailing your needs and we will help you out with a free consultation.

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