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3.6. Business Strategy

If you have decided on the basic parameters of your business as a part of your corporate strategy, i.e. what line of business, where, and on the basis of what type of competitive logic your company will operate, it is necessary to further develop this generally broad strategy.

We recommend using a business strategy to achieve this - a relatively detailed strategy for each SBU defined as a part of the corporate strategy (A company that has been divided into three separate SBUs at the corporate strategy level will have to develop three separate business strategies). In order for your company’s strategic goals to stay intact, which is one of the biggest hurdles that companies often find themselves facing, it is imperative that the business strategy does not deviate from the company’s broader strategic scope, as defined by your company’s corporate strategy.

A business strategy defines, for every SBU set at the corporate strategy level, the strategic goals for elements/variables of an extended marketing mix (7P) - product, price, place, promotion, people, processes and planning (Keřkovský, Vykypěl, 2009).

Setting a business strategy requires determining its content, i.e. which strategic aspects/ areas should each SBU address. We recommend considering and setting 7 strategic variables which define the extended marketing mix (7P) (Hanzelková, Keřkovský, Odehnalová, Vykypěl, 2009):

Product: What you are selling to your customer
Price: The pricing strategy for your product
Place: What your channels of distribution will be
Promotion: Your target audience
People: Aspects of human resources
Processes: Development, supply, production, distribution, IT, others
Planning: How your company will be managed as a whole

Business Strategy

Extended marketing mix as the basis of your business strategy and its contents (adapted from Keřkovský, Vykypěl, 2009)

Table below provides a more detailed idea of which strategic aspects of your business strategy (or individual Ps) should be considered (modified from Hanzelkova, Keřkovský, Vykypěl, Odehnalová, 2009).

Marketing Mix Variable (P)	Consider the following aspects:
Product	Definitions of the product’s basic parameters, its main advantages, which specific need(s) - e.g. my main goal is to be modern, I want comfort and ease, I want to minimize costs etc. - this product should address for a given target audience Selecting the product’s level of quality Product variations (whether it will be available in more variations or not, if so, how many and what kind.) Design (how important it is for the product, basic requirements for design - e.g. excellent functionality, how attractive the product is, maximum cost savings etc..) Guarantees, customer service (availability, quality, price etc.) Conditions for claims and exchanges or refunds for purchased goods (by law or above standard etc.) Conditions for purchasing used products and selection of new products, recycling etc. Also includes additional services provided along with the product, increasing the value of the product, offering a combination of several products, product packages - their contents, variations etc. Your company should also set up a USP (unique selling proposition) – the unique but relatively specific quality of the product or service that will give you a competitive edge. For example, an organic family farm can define the USP of their meat products in that they use special techniques for smoking their meat, giving their meat products a unique, mild flavour.
Price	Setting up a basic pricing policy with regard to the product: Economic factors – profitability, turnover The customer’s ability and willingness to pay the set price Competitiveness of prices (in accordance with the generic competitive strategy, e.g. the price to added value ratio of the product and the product’s ability to compete in the market, including the customer’s brand perception etc.) The effect of the price on marketing - whether or not the pricing policy is motivational etc. Prices and pricing policies also entail discounts for customers and distributors (wholesale, retail), deductions, payment dates, credit and payment conditions (payment in installments with interest, without interest etc.) Pricing policies for different variations of the product etc. Product economics should include detailed calculations, including calculating the break-even point, i.e. the minimum amount of products or services that must be sold at a set price in order to create a balance between expenses and revenue - that means no profits or losses. This minimum (balanced) level of sales should then be assessed in terms of the number of potential customers that are likely to generate a market segment for the given product. Pricing policies may be time-sensitive - i.e. different prices for newly launched products etc.
Promotion	Includes selection and an accurate description/understanding of the target audience’s needs, demands and habits in a given SBU - this is carried out using segmentation: dividing potential customers into smaller groups which have different needs, habits etc., and then selecting (targeting) appropriate customer segments (i.e. groups of customers whose needs, demands and financial limits can be better catered to with our product/service than a competitor’s), which are also broad enough to allow the company to prosper financially Furthermore, rethinking the framework of other marketing and sales aspects, especially which channels to sell the product/service through - will it be using a conventional approach such as advertising, engaging your own sales representatives, or external networks? Will I invest in advertising alone or with other companies, e.g. those who will distribute the product? When considering the above, it is necessary to assess whether or not your company has sufficient financial resources for promotion or how to acquire them. Note: Details regarding marketing and a marketing strategy are addressed within the description of functional strategies.
Place	Specifies the market and distribution channels (retail shops, wholesale, retail chains) and their basic parameters; scope (generic scope, selection of location, luxury); specific location requirements - their parameters, accessibility for the target group, convenience (i.e. parking), appearance and image; other required functions etc. As well as alternative distribution methods, e.g. franchising etc.
People	Involves aspects such as the size of the team, qualifications, the quality of employees in various positions, resources for recruitment, development and compensation, human resources expenses (including seasonal fluctuations)
Planning	Involves planning, managing, organizing (including organizational structure) and the company culture of a specific SBU/company - just like the other strategic variables (P), it should significantly contribute to the company’s generic competitive strategy
Processes	Specifies development, supply, production, distribution, IT and other processes necessary for meeting the needs of customers in separate SBUs. It sets the company’s capacity, optimizes, defines quality standards of different processes, flexibility etc.

When considering each “P“, it is imperative that:
- Each P contribute, within the generic competitive strategy, to building the maximum added value for the customer
- The Ps generate a clear competitive advantage-not necessarily in the product itself, but in the competitive advantage the company’s strategy is based on, e.g. easier, cheaper, quicker or more reliable: distribution, processes, pricing policies, the company’s approach to the customer etc.
- All aspects of individual Ps complement each other and work together. Below are several examples of the interconnectivity of individual Ps:
- Considering what main advantage the product/service will have - this advantage must also reflect the needs of the selected target audience (which your company must select carefully and know in great detail).
- The specific price range that you will set for your product/service can not only affect the customer’s willingness and ability to pay for the product compared to similar, competing products, but also customer perception of your product’s image as well as brand recognition. It is also important to consider how easily their needs can be met with substitute products or services.
- Certain types of products can be efficiently sold using certain methods only (advertisements vs. sales representative) - sales methods and associated marketing expenses significantly impact the company’s operating costs and product economics.
- Each product/service generates profit only after a minimum required volume has been sold - the target audience you select and base your strategy on must be suitable not only qualitatively, but also in size (sometimes a large enough group cannot be found in the market, in which case you need to consider alternatives such as exporting).
- If you set rigidly standardized processes and management system, it may interfere with the need to flexibly address the specific needs of your customers that your generic competitive strategy is based on.
- When considering your product price and overall economy of a given SBU, i.e. in terms of profitability and possibly increasing the company’s overhead etc., it is necessary to assess the product’s potential in terms of financial gain (considering a boost in sales volumes, financing the product’s early development stages from sales of other products, financing future developments from the future sales of this product etc.), as well as the product’s indirect potential, which can often be difficult to calculate (sales and synergy with other products, the company’s image, attracting new customers with other products) etc.

Other definitions of Ps – segmentation, targeting and target audiences

As you have observed in the above chart, we recommend taking a different approach to the P-Promotion variable as a part of your business strategy. Conventional practices suggest a comprehensive approach to the entire marketing strategy. From a strategic point of view, however, it is essential to carefully select and define your target audience when setting your business strategy (without a detailed knowledge of your target audience you cannot define the remaining Ps in the marketing mix.) Apart from your target audience, we also recommend considering the marketing aspects that can have a significant impact on your company’s ability to sell the product and its ability to finance the necessary marketing and sales support.