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Business Strategy

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content="Business,Strategy,Model,Succcess ,finance,business plan,growth,motivatioin">

Business Strategy - Your Business Model for YOUR Succcess!


Strategy / Business Model for `Your` Success Globally

Meaning of Business Strategy and Business Model

The terms business model and business strategy
are very closely related. Some business people prefer to define the business
model simply as the concrete illustration of the strategy at work. In any case,
both the model and the strategy describe how the company makes money: how it
creates customer value, how it competes with others in the same industry, and
how it generates revenues and spends money to create acceptable margins.

Many different strategies and models are possible, even
for companies in the same industry selling similar products or services.
Southwest airlines (in the US) and Ryan Air (in Europe), for instance, have
strategies concentrating on providing low cost transportation. Singapore
Airlines, by contrast, has a strategy based on brand image for highest quality
luxury customer service.

A strategy is judged successful if it leads to a strong
competitive position, business growth, and good margins. This item further
describes business strategy and business model, in the context of
related terms including strategic objective and business plan.

Østyle='font:7.0pt "Times New Roman"'>  lang=EN-GB style='font-size:10.0pt;font-family:Verdana;color:#002060'>What Must
a Business Strategy Achieve?

Østyle='font:7.0pt "Times New Roman"'>  lang=EN-GB style='font-size:10.0pt;font-family:Verdana;color:#002060'>Business
Strategy Strategic Objectives

Østyle='font:7.0pt "Times New Roman"'>  lang=EN-GB style='font-size:10.0pt;font-family:Verdana;color:#002060'>The
Business Model at the Heart of the Business Strategy

What Must a
Strategy Achieve?

Although many strategies are possible, almost all of them
succeed by targeting just two areas of business performance. Successful
strategies work because they accomplish one or more of the following:

  1. lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
    "Times New Roman"'>Create customer demand, resulting in

    • lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
      "Times New Roman"'>Increased business volume.

    • lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
      "Times New Roman"'>Ability to charge higher prices and take
      higher margins.

    • lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
      "Times New Roman"'>Increased customer retention, repeat business.

  2. lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
    "Times New Roman"'>Lower costs:

    • lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
      "Times New Roman"'>Lower cost for developing, producing, selling,
      distributing and servicing products.

    • lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
      "Times New Roman"'>Lower infrastructure costs, lower operational costs.

As the examples below illustrate, however, there are many
different ways to attempt to create demand and lower costs.

Strategy Strategic Objectives

company's business strategy is probably best described
and understood in terms of key business performance objectives (i.e., strategic
objectives). Consider, for instance, the major operational focal points in one
company's business.



Lines and arrows simply show contributions or impacts from
one areas to another. The example is by no means meant
to be exhaustive: even a small business includes other operational and structural
areas that may be candidates for strategic objectives.

Setting certain objectives in any of these areas may lead
to either increased customer demand or to lower costs. The objective can be
called a strategic objective if achieving the objective contributes
materially to reaching overall business performance objectives, including the
ability to compete effectively, grow the business, and achieve good margins.
Notice in the examples below, incidentally, that reaching an objective in one
area (e.g., customer retention) may depend on reaching objectives in other
areas (e.g., Customer Service).

A few examples of strategic objectives in one or more of
these areas include the following.

Area: Infrastructure.

Objective: Operate with low infrastructure and low operational costs.

This objective may be achieved by using inexpensive office
space or expecting employees to work from a home office, "Low cost"
airlines may lower operational costs by hiring non union
flight crews and minimizing customer services. Retail stores implement a low
cost strategy by avoiding expensive store displays and using only a minimal
sales staff.

Area: Branding.

Objective: Establish value for brand name that allows premium pricing.

Clothing designers (e.g., Armani, Donna Karan), designers
of luxury goods (e.g., Louis Vuitton), and even consumer technology goods (such
as Apple Computer and Sony) successfully brand their products by achieving
objectives in product design, product quality, pricing, and promotion.

Area: Customer retention.

Objective: Encourage customers to buy successive products from the
original source.

Varieties of this strategy are sometimes called the
"subscription model" (e.g., mobile phone service providers who entice
customers to sign long-term contracts in return for discounted or free phone
handsets), or "lock in" (a maker of computer printers sells printers
at low price, but then makes good margins from printing ink that must be bought
from the same source). Customer retention strategies are also approached
through setting objectives in customer service (to improve customer
satisfaction), or pricing (offering favorable prices
for repeat buyers or for upgrades).

Area: Pricing.

Objective: Be the "low price leader" in the market

A retailer may be able to offer customers lower prices
than the competition if the retailer can achieve objectives in infrastructure
and operational costs (as in the example above), or achieve objectives with the
supply chain (e.g., negotiate lower prices from suppliers in return for volume
buying and access to the retailers established market).

Areas: Product Development, Manufacturing, Direct Sales, and

Objective: Produce finished products at low production cost; sell and
deliver to customers at low cost.

The success of Dell computer is attributed to an
innovative approach to achieving low costs in each of these areas. Products
offered are designed to be assembled easily from pre-built components, sales
are primarily through mail order or online, and distribution is accomplished
through commercial carriers (without "middlemen" such as retailers,
and without store expense).

The Business
Model at the Heart of the Business Strategy

The business strategy is implemented, communicated, and
ultimately tested and evaluated by business management through a business
Moreover, It is accurate to say that the business model is
the heart of the company's business plan.
The business plan explains in more detail and depth how the business strategy
and model will be implemented, what will impact business performance for better
or worse, and what implementing the business model should lead to in terms of
the company's financial performance and financial in the next year and beyond.

A business model typically includes at a minimum four
major components:

1. The company's offering and value proposition.lang=EN-GB style='font-size:10.0pt;font-family:Verdana'>

The business model includes a statement of the company's
value proposition. This describes the company's offerings in goods and services
in terms of the value they offer to the customer.

For instance, Dell was founded in 1984 with an innovative
value proposition that was unique at the time. Dell promised to build a
computer, exactly as and when a customer orders it, and deliver
it at a very competitive price. As another example, Boeing states the customer
value proposition for its 747-8 aircraft very simply: "...more range,
better fuel efficiency, and lower operating costs."

In brief, the value proposition states states
why customers would buy from this company instead of from the competition.

2. The company's customers.style='font-size:10.0pt;font-family:Verdana'>

Regarding customers, the business model typically spells
out clearly ...

The target market, or audience for the company's products
and services. The market may be defined in terms of such factors as gender,
age, occupation, economic status, experience or education, geographic location,
or special interest, for example.

The company's approach to customer relationship management
(CRM), including plans and objectives for customer service, customer
satisfaction, and customer retention.

The selling and distribution strategy. The company may
plan to deliver directly to customers directly through retail shops, through
visits from a direct sales force, through catalog or
online orders shipped directly to customers, or through third party
distributors or resellers.

The marketing strategy and marketing plan, which explain how
the value proposition will be communicated and promoted, throughstyle='color:#1F497D'>
product positioning, branding and through
application of a pricing model.



3. The company's infrastructure and operations.lang=EN-GB style='font-size:10.0pt;font-family:Verdana'>

This section of the model spells out clearly

  • lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
    "Times New Roman"'>Key activities performed by the company in order to
    implement the business model (such as market analysis, product design,
    manufacturing, and so on). Also spelled out are key activities that will
    be performed by business alliance partners, supply chain partners, channels
    partners, and others.

  • lang=EN-GB style='font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:
    "Times New Roman"'>Key resources and assets necessary for the creation of
    customer value. These can range from buildings and equipment, to critical
    employee skills, to patents and intellectual property, for instance.

4. The company's finances.style='font-size:10.0pt;font-family:Verdana'>

For many people, the section on company finances is the
business model's most important content and its reason for being. This section
describes in quantitative terms ...

The company's revenue sources and cost structure. This
part of the business model is often summarized and presented in descriptions
that have the form of (a) the company's income
statement, and (b) the company's operating budget and capital budget.

The company's financial position, including sources of
funding and degree of leverage (the extend to which funding is provided by
lenders compared to funding provided by owners).

style='font-size:10.0pt;font-family:Verdana'>Now go and be successful.


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