The best definition of business strategy, at least in my opinion, is a statement of where and how an organization intends to compete. A longer version of this definition would be business strategy is a description of where and how an organization intends to compete, using the organization’s core competencies to meet customers’ needs and provide a compelling value to the customer. So, what does a statement of where and how to compete entail?

Where to compete describes and differentiates what is within and what is outside of the scope of business in which the company wishes to compete. This can include any combination of the following elements:

• Geographic scope – this could include a locality or a region. It might also include a description, calling to mind certain retailers that define their market by demographics of certain locations over a broader scope, for example, a retailer that does business only in small towns.
• Product or service offering – the particular definition of the company’s product or service offering defines where they will compete. This begins to overlap with the definition of how to compete. Breadth of product offering is one part of the process of defining where to compete.
• Preferred market segments – segmentation begins to define more specifically where to compete and some of the definitions of segmentation can greatly overlap with the definition of how to compete. Defining segments can be as specific as defining the one customer that the company intends to supply. Segmentation can include dimensions such as vertical markets, demographics or psychographics of customers, distribution segmentation, occasion-based segmentation, and many others.

How to compete moves more deeply into defining how the company will allocate resources and present itself to the customer. Defining how to compete requires an understanding of customer needs and matching these needs with core competencies, either current or desired. At its highest level, how to compete requires a choice between the generic strategies of low cost producer or differentiate supplier. Defining how to compete can involve many different dimensions as the company positions its value offering to meet specific customer needs and to stack up against the offerings of competitive suppliers. For one supplier, how to compete might include providing the highest level of precision, for another, the most durability, for another, the sleekest design, for another, the best customer service, etc.  The two major dimensions of how to compete are –

• Price and cost positioning – understanding the needs of customers, the economic value of the product/service offering, and the relative positioning versus competitors and alternatives.
• Features and benefits packaging – understanding the value of the product/service offering relative as defined by customer needs and relative to competitors and alternatives.

Business strategy provides focus for the organization’s allocation of resources and guides the actions of the organization as it builds its future. The more clearly and precisely the company is able to define its strategy in terms of where and how it plans to compete in the future, the more effective the organization can be in developing its competitive position.

How clearly has your organization defined where and how it intends to compete?