What is Business strategy and Why is it Important ?

What is Business strategy and Why is it Important ?

What’s a Business Strategy?

Business strategy refers to a long-term plan of action designed to help a company achieve its vision and compete effectively in the market. It involves analyzing internal and external environments, setting goals, and determining the best course of action to reach those goals while delivering value to stakeholders.

It’s not just about what products or services you sell, but how and why you do so. A business strategy serves as the blueprint for decision-making across departments—from marketing and operations to finance and human resources.

Harvard Business School’s framework for business strategy centers around three crucial questions:

1. How can my business create value for customers?
   By identifying what customers want and delivering superior products or experiences, a business can foster loyalty and satisfaction.

2. How can my business create value for employees?
   A company is only as strong as its people. Creating a supportive work environment with fair pay, benefits, and growth opportunities enhances productivity and retention.

3. How can my business create value by collaborating with suppliers?
   Sustainable and mutually beneficial relationships with suppliers can reduce costs, ensure quality, and boost innovation.

These questions guide strategic thinking and help businesses focus on long-term value creation rather than short-term profits.

The Importance of Business Strategy

A clear and effective business strategy acts as a roadmap for organizations. It aligns vision with operations, ensuring that all departments work toward a common goal. It empowers leadership to make informed decisions, utilize resources wisely, and maintain agility in a competitive environment.

Without a solid strategy, businesses are prone to:

• Poor decision-making

• Wasted time, money, and manpower

• Missed market opportunities

• Difficulty adapting to change or competition

Let’s explore how a strong strategy impacts major areas of a business:

1. Price Setting

What it means:
Strategic pricing involves determining the right price point for your products or services—not just based on cost, but also on customer perception, market demand, and competitor pricing.

How strategy helps:

• Ensures that pricing reflects the value customers are willing to pay, not just cost plus profit.

• Takes into account brand positioning—premium brands may use higher pricing to signal quality.

• Adjusts pricing for different customer segments or geographies.

• Aligns with long-term goals like market penetration (setting lower prices to enter new markets) or maximizing margins.

2. Supplier Management

What it means:
Supplier management is about how a business selects, communicates with, and manages its suppliers for raw materials, goods, or services.

How strategy helps:

• Builds long-term, win-win relationships   long-term, win-win relationships with suppliers instead of transactional ones.

• Chooses suppliers that align with brand values—e.g., eco-friendly, ethical labor, or local sourcing.

• Negotiates better Pricing, delivery times, and quality controls  through strategic partnerships.

• Reduces risk by diversifying Supplier base having contingency suppliers in place.

3. Talent Acquisition and Retention

What it means:
This refers to the ability of a company to attract, hire, and retain skilled employees who contribute to its success.

How strategy helps:

• Defines a strong employer brand that appeals to the right candidates (e.g., purpose-driven, innovative, flexible).

• Ensures alignment between employee roles and business goals, which improves motivation and retention.

• Guides investment in  training, career development, and culture building to keep top performers engaged.

• Adapts hiring strategies based on growth goals or skill gaps in the organization. 

4. Resource Allocation

What it means:
Resource allocation is the process of distributing a company’s limited resources—money, people, time, and tools to achieve its strategic goals.

How strategy helps:

• Prevents wastage of resources on low-impact areas by focusing only on high-priority objectives.

• Helps set budgets, timelines, and manpower for each department based on strategic importance.

• Encourages data-driven investment decisions—e.g., putting more resources into digital marketing if analytics show higher ROI.

• Enables better crisis management by identifying where to cut or reallocate resources quickly.

  Creating Value Through Business Strategy

  Value creation is at the heart of any successful strategy. The value a company provides must exceed the cost to customers, suppliers, and employees. When stakeholders feel they’re getting more than they give, loyalty and long-term success follow.

  Harvard’s “Value Stick” framework helps visualize this concept:

  1. Willingness to Pay (WTP): What customers are ready to spend

  2. Price: The actual amount charged

  3. Cost: What it costs the company to make the product or deliver the service

  4. Willingness to Sell (WTS): The minimum amount suppliers or employees are willing to accept

  A business strategy aims to widen the gap between these variables to maximize value.

  For example:

  • Raising WTP (without raising price) increases customer delight.

  • Lowering costs increases firm margin.

  • Reducing WTS increases supplier and employee satisfaction.

  Increasing Customer Delight

  Customer delight is the emotional response when a product or service exceeds expectations. It’s what turns a first-time buyer into a repeat customer and brand advocate.

  Ways to increase customer delight include:

  • Personalization: Offering tailored experiences or products based on customer data.

  • Value-added services: Providing free delivery, easy returns, or extended warranties.

  • Brand alignment: Customers are more willing to pay when a brand reflects their values, such as sustainability or social responsibility.

  • Exceptional support: Providing fast, helpful, and empathetic customer service builds trust and loyalty.

  A strategic approach to understanding your audience’s needs through research, feedback, and analytics allows you to identify and act on the factors that drive higher WTP.

  Increasing Firm Margin

  Profitability is a key goal of any strategy. Firm margin is the difference between what you sell your product for and what it costs to produce. A high margin allows for reinvestment, innovation, and growth.

  You can increase firm margin by:

  • Raising Prices: If justified by value perception or brand strength.

  • Lowering Costs: By streamlining operations, automating tasks, or finding alternative suppliers.

  • Optimizing Efficiency: Improve ROI by focusing on high-margin products or reducing customer acquisition costs.

  • Innovating Offerings: Develop new, high-value products with lower cost bases.

  A strategic focus on ROIC (Return on Invested Capital) ensures you're not just earning revenue, but doing so efficiently. It signals to investors and stakeholders that your business is healthy and scalable.

  Increasing Supplier Surplus & Employee Satisfaction

  A business doesn't exist in isolation. Suppliers and employees are vital parts of the value chain and should be treated as strategic partners.

  Supplier surplus increases when the company finds ways to reduce suppliers’ operating costs or increase long-term contract security. For example:

  • Bulk purchasing agreements

  • Transparent negotiations

  • Co-branded marketing efforts

  Employee satisfaction is similarly crucial. It's the difference between what you're paying and what employees are willing to accept—not just in salary but in culture, benefits, and growth.

  Improve employee satisfaction by:

  • Offering flexible work arrangements

  • Investing in professional development

  • Fostering a strong company culture

  • Recognizing and rewarding achievements

  Happy employees are more productive, stay longer, and advocate for your company, enhancing your brand internally and externally.

  Conclusion

  A well-defined business strategy is the foundation of long-term success. It provides direction, aligns resources, and ensures every decision supports the company’s goals. By focusing on creating value for customers, employees, and partners, businesses can build a strong competitive advantage and adapt effectively to market changes. Whether you're a startup or an established organization, investing in a clear and actionable strategy is essential for sustainable growth and innovation.

  As we move forward into this dynamic marketplace, staying informed about these developments will be crucial for success in digital marketing strategies. Need Help, reach us for more details on how you can kickstart your business.