Business Strategy that Leaders Need to Have

The use of the term business strategy is often not well defined, even though this is an important component to meet stakeholder needs. However, creating a business strategy is not easy because you have to be able to develop a clear strategy.

By developing a good strategy, you can communicate tasks, obligations, and achieve success. For this reason, you must understand business strategy and what skills you can use as a leader in developing strategies.

What is business strategy?

Business strategy is the adjustment, organization, and integration of a company's initiatives to provide an advantage in its markets. To create an effective business strategy, you can create value for stakeholders with a value stick that visualizes the process.

The value stick represents the value created for consumers, brand value, and value created for suppliers. The value stick has four categories, namely willingness to pay (WTP), price, cost, and willingness to sell (WTS).

Skills that must be possessed as a leader

To develop a business strategy, you must utilize a value stick that is supported by skills that can create value for consumers, employees and suppliers.

1. Create value for consumers

To satisfy consumers, you must be able to increase the gap between product price and consumer WTP. There are two ways you can do this, namely reducing prices and increasing consumer WTP.

If possible, offer a lower price than the WTP you have determined. This will delight consumers and have the potential to capture an even wider market segment. Meanwhile, you can also increase consumers' WTP which will make your product or service even more attractive to them.

However, it is important to remember that WTP is difficult to determine because each consumer has different desires and abilities. Therefore, you need a thorough understanding of consumer demographics and values.

You can observe the simplest population differences, such as age, income, education, and location. However, there are characteristics that you can only find out by asking consumers such as their risk tolerance and desires for certain products.

Lastly, brand awareness, legality, packaging and recommendations from people around you can also have an influence. Apart from the price, each of these factors can influence a consumer's decision to choose one brand over another.

2. Increase employee satisfaction

Not many people realize that employee turnover is very expensive. According to a 2019 Gallup study, the cost of replacing one employee can range from half to twice the employee's salary. To prevent this, you can do two things, namely providing a large salary and establishing attractive working conditions.

Although this does not always happen, increasing employee compensation can also increase employee satisfaction with the company. If a raise is not possible, you can offer better working conditions or environment.

This is done to give employees an incentive to lower the minimum compensation they receive. Additionally, good benefits, flexible schedules, and career opportunities are ways to increase employee satisfaction without a big paycheck.

Knowing employee values ​​will make it easier for you to increase their satisfaction. Therefore, never hesitate to ask for feedback from employees, consider their requests.

3. Create value for suppliers

Suppliers are one of the most important stakeholders in business strategy. However, finding a supplier who is willing to work together and accept low costs is a challenge for you.

To overcome this, you can work with suppliers to increase the gap between the minimum price the supplier will accept (WTS) and the payment they will receive. This is also known as supplier surplus.

If suppliers are having problems with waste and internal costs, you might consider helping them with lean manufacturing. Lean manufacturing is a production process that focuses on maximizing productivity and minimizing waste. Not only for suppliers, lean manufacturing can also benefit consumers by reducing costs and saving money.

4. Manage your company's margins effectively

Even though when creating a business strategy you must pay attention to the values ​​of stakeholders, you must not ignore profits. The ideal strategy should widen the gap between price and cost. To manage company margins effectively, you can use a value stick framework, such as increasing customer WTP and reducing supplier WTS.

Increasing consumers' maximum WTP allows you to raise prices without sacrificing their satisfaction. Apart from that, you can also add more features to your product or strengthen your brand image.

In addition, you can reduce supplier WTS. Usually, to maximize profits, suppliers will use as much costs as possible. By buying in bulk or committing to a long-term contract, you will usually get lower prices, and the company can lower costs.

To gain skills as a leader who masters business strategy, you need time, effort and thorough understanding. For this reason, company leaders need to continue to maintain this by continuing to carry out evaluations within the internal and external scope properly.