Business Strategy, Business Plan, Strategic Planning: what’s the difference?
Most confuse business plan, business strategy, and strategic planning. These terms are often used interchangeably, but they represent different aspects of a company’s operations.
A business strategy is all about a desired competitive outcome. It’s an integrative set of choices that combined position your company on a playing field of your choice, in a way that sets your business for success.
Simply put a business strategy is similar to developing a theory. For example, If X is happening in the regional market, Y will follow in the local market, most companies will follow with Z, and this is a potential gap that we should fill.
Strategic planning, on the other hand, has little to do with strategy, explains Former Dean Roger Martin, author of Your Guide to Superior Management Effectiveness. It involves setting long-term goals to achieve the set strategy. These goals might include increasing sales, expanding market share, or enhancing customer satisfaction.
The main difference between the two is that strategic planning is based on goals that when achieved together should lead to the specific desired position the strategy was built to achieve.
A business plan is the process of outlining a company’s objectives, strategies, and tactics for achieving set objectives. It serves as a roadmap, guiding the organization through its operations and providing a framework for decision-making.
Developing a well-crafted business strategy should help you either differentiate your business from its competitors or create a completely new market for your business to lead.
7 factors to consider when developing a business strategy
It is important to note that a business strategy should be based on a company’s unique capabilities and strengths. While it is tempting to aim for the highest possible goals, it’s important to approach it like a chess game. Use your available pieces to reach the best outcome.
To figure out your best play, here are some of the chess pieces you should consider:
- Industry analysis: Conduct thorough research to understand the competitive landscape in both your industry and target market. Identify key trends, opportunities, and threats that could impact your business. This information will help you develop a strategy that is both relevant and effective.
- Current Resource: Assess the resources that you have at your disposal, such as financial capital, human capital, and technology. Include in the assessment other currently in progress projects and liabilities that will take away from said resources.
- Internal limitations: Consider internal limitations as part of the resource evaluation. Examples to consider include company culture, strength of the management team, organizational structure, training programs, and financial stability. Your strategy should be aligned with your internal capabilities and strengths.
- Risk tolerance: Consider the suitable level of risk your business can absorb. Is there room to take on more aggressive strategies, or is a conservative approach more suitable? Your risk tolerance will influence the types of strategies you consider.
- Customer preferences: Understand the needs, wants, and preferences of your target market. Your strategy should be designed to meet the needs of a target consumer base.
- Competitive advantage: Part of determining your choice of a blue-water strategy or a competition-based one is an accurate evaluation of your unique strengths and competitive advantages.
- External factors: Regardless of which market you’re operating in, chances are current external factors are impacting your business. External factors can range from economic, to political, regulatory, to the significant leaps artificial intelligence is taking.
Once you evaluate your current situation, the following step is setting a strategy and directing all resources in one direction. For example, it’s inadvisable to rebrand, expand to new markets, and invest in a new product simultaneously.
5 Steps to Build a Business Plan
Now comes the roadmap. A successful business requires a carefully crafted plan that outlines its objectives and tactics necessary to achieve them.
- Key summary & goal setting: Provide a concise and compelling overview of your business. Highlight your mission, vision, goals, and key strategies. Make sure it captures the attention of potential investors, lenders, and partners.
- Market analysis: Conduct thorough research to understand your target market, industry trends, and competitive landscape. Identify opportunities, threats, and potential challenges.
- Organizational structure: Outline the structure of your business, including roles, responsibilities, and reporting relationships. Ensure that your organizational structure is efficient, effective, and aligned with your business goals.
- Financial projections: Develop realistic financial forecasts, including income statements, balance sheets, and cash flow statements. Use these projections to assess the financial viability of your business and make informed decisions.
- Operations plan: Describe your day-to-day operations, including production processes, supply chain management, and customer service. Ensure that your operations are efficient, effective, and aligned with your overall business strategy.
All three tools are interconnected, each serves a unique purpose in guiding your organization toward success. While understanding the difference between them is crucial for effectively utilizing them, the whole point is achieving your vision while maintaining the stability of your organization.
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