Unveiling Business Strategy Basics: 7 Frameworks for Success! Dive into key tools shaping business strategy in the Indian market
In the cut-throat world of Indian business, a well-defined strategy is not
just desirable; it's absolutely essential.
Whether you're a seasoned entrepreneur leading a large corporation or a budding startup founder with a revolutionary idea, understanding the fundamentals of strategic planning can significantly improve your chances of success.
A proper business strategy acts as your compass, guiding your decisions and ensuring your limited resources are used wisely to achieve your long-term goals. Without a robust strategy, you risk drifting aimlessly, vulnerable to market fluctuations, and ultimately losing out to competitors.
Let's explore seven important frameworks that can help you develop a winning business plan, tailored to the unique challenges and opportunities of the Indian market.
These frameworks provide a structured approach to analyse your current situation, identify your competitive advantage, and formulate actionable plans to achieve sustainable growth.
Let's first understand how to prepare for the strategy!
Before diving into any framework, you need to do your homework. The first critical step is conducting a thorough internal assessment. This involves evaluating your company's strengths and weaknesses. Ask yourselves: what are we really good at? What resources do we have?
In which areas we are lacking? Be honest and realistic. If you manufacture textiles, are you efficient in operations, can you take huge orders and deliver the goods on time? Next, it's time for external analysis. This means studying the market landscape. Who are your competitors?
What are the consumer buying trends? What are the regulatory factors? You need to know and understand the opportunities and threats present in the external environment. A common approach is to use SWOT analysis, which we will soon discuss with the other frameworks!.
The SWOT Analysis:
Probably one of the most popular because of its simplicity but powerful framework is known as SWOT, this stands for Strengths, Weaknesses, Opportunities, and Threats.
It is a fundamental tool for strategic planning that helps any business to understand its competitive environment and plan accordingly. Strengths and weaknesses are internal factors that your business can control.
Opportunities and threats are external factors that exist within the market in which your business operates. The process of doing this exercise, is to create a 2x2 matrix.
In the top row will be strengths an weakness, which are primarily your business's internal focus, and on the bottom row, would be the opportunities and threats, which are primarily focused towards the external, that is the competitive market along with other macro and micro economic conditions.
Let's take an example to show how this works. Assume you manufacture Ayurvedic products. Strengths could be a strong brand reputation for natural ingredients; weaknesses could be limited distribution reach in rural areas.
An opportunity could be the rising demand for natural healthcare products; a threat could be the entry of multinational corporations with larger marketing budgets.
By analysing these factors, you can devise strategies to leverage your strengths, address your weaknesses, capitalize on opportunities, and mitigate threats.
For instance, you might focus on expanding your distribution network in rural areas, promoting the unique benefits of Ayurvedic medicine, and building stronger relationships with local retailers.
The framework of SWOT analysis gives way to the firm to be able to identify the core issues and focus in resolving them, and thus make it a critical component in its journey going forward.
One must also understand while doing the SWOT analysis is to include all the team members to have a diverse thought process.
SWOT helps firms take rational decisions, with an appropriate understanding of the internal capabilities and the external conditions.
It is equally important to understand that just creating a SWOT sheet does not magically change things, it helps the firm to take some basic understanding and knowledge of the business and decide to resolve the issues associated.
A key approach to doing the SWOT well is to have an all hands in approach and have a diverse thought process, allowing various members from the firm to provide insight into the business.
Be mindful when you add data to the sheet and ensure that you have taken time in reviewing and re reviewing whether that data is adding value in the SWOT analysis. Also it is critical to also ensure that you brainstorm over each topic thoroughly so that you have an inclusive approach.
Porter’s Five Forces:
Michael Porter’s Five Forces framework analyses the competitive intensity and attractiveness of an industry.
This framework identifies five forces that shape industry competition namely: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products or services, and the intensity of competitive rivalry.
By assessing the strength of each force, you can understand the dynamics of your industry and identify opportunities to gain a competitive advantage. If, for example, the threat of new entrants is low and the bargaining power of suppliers is weak, your industry might be more attractive.
In the Indian telecom industry, the entry of Reliance Jio disrupted the market with aggressive pricing, increasing competitive rivalry and forcing existing players to adapt.
By understanding these forces, companies like Airtel and Vodafone Idea had to adjust pricing, improve services, and look at new technologies to stay afloat.
When using Porter's you have to first understand what are the various forces and then try and apply them to your industry.
You should also be mindful of what data to bring to the model, since that will determine how the model is able to suggest the future of the business. Porter's is a framework of competition, and should be considered as a must have when you are planning your yearly business analysis.
While doing this exercise it is important to think how each of the forces interact with each other, since their connection forms the essence of the analysis.
Understanding the industry dynamics is a key component of Porter's and you should use multiple ways to ensure that you have a good understanding of your industry for the framework to function. Keep in mind the macro and micro factors while performing the analysis.
Value Chain Analysis:
The Value Chain Analysis helps you break down your business into its key activities and identify opportunities to improve efficiency and create more value for customers.
These activities are divided into primary activities (such as operations, marketing and sales) and support activities (such as human resource management, technology development).
By analysing each activity, you can identify areas where you can reduce costs, improve quality, or enhance customer satisfaction.
In the Indian automotive industry, companies like Maruti Suzuki focus on optimizing their supply chain and manufacturing processes to offer affordable and reliable vehicles. They also invest heavily in after-sales service to enhance customer loyalty.
You can use the Value Chain analysis to identify ways to improve the supply chain, build better products and provide higher customer satisfaction.
The various ways the value chain analysis is effective is by identifying waste in the system and getting rid of it.
Doing the activity of this business analysis will allow the firm to improve various aspects that makes the business. Ensure that each part of the business is analysed in a thorough fashion, since the idea is to create better business practices and better products by way of this process.
Value chain analysis also helps create long term strategic advantage for the firm and provide a way to improve their overall business processes.
Blue Ocean Strategy:
The Blue Ocean Strategy encourages companies to create new market spaces (“blue oceans”) rather than competing in existing, crowded markets (“red oceans”). This involves identifying unmet customer needs and developing innovative products or services that create new demand.
Companies in India like Oyo Rooms disrupted the hospitality industry by offering affordable and standardized accommodation, creating a new market segment for budget travellers.
Another great real life example is that of the telecom company Jio, Jio created a new market by providing cheap data and free voice calls, thus increasing demand for data consumption across India.
Instead of battling it out with existing players, they created a new value proposition, thus allowing them to thrive in the business.
To effectively develop and define your blue ocean, you need to first identify your red oceans.
Your blue oceans should represent an untapped opportunity in the space of market. Also it is critical to understand what the customers actually want, and build a product over that rather than building a general product. This allows for customer acquisition to happen in a more cost-effective way.
To identify your blue oceans it is highly advisable to think out-of-the-box so that you do not fall in the trap of your red oceans.
BCG Matrix:
The Boston Consulting Group (BCG) Matrix classifies your business units or products based on their market growth rate and relative market share. This helps you decide how to allocate resources across your portfolio.
The four quadrants are: Stars (high growth, high market share), Cash Cows(low growth, high market share), Question Marks (high growth, low market share),and Dogs (low growth, low market share).
Stars require investment to maintain their position, Cash Cows generate profits that can be used to fund other businesses, Question Marks need careful evaluation to determine if they are worth investing in, and Dogs should be divested or restructured.
For example, a large Indian conglomerate might have a successful FMCG business (Cash Cow) and a promising renewable energy venture (Star).
Each of the quadrants need to be appropriately investigated, so that the right information and the right products are put in the right place.
Once an appropriate matrix has been developed, one should also analyse what each of the components mean and develop necessary plans around it. BCG matrix can be used as an ongoing tool for business to improve upon, in tandem with various business environments.
Ansoff Matrix:
The Ansoff Matrix provides a framework for identifying growth opportunities by considering new and existing products and markets.
The four strategies are: Market Penetration (existing products in existing markets), Market Development (existing products in new markets), Product Development (new products in existing markets), and Diversification (new products in new markets).
For example, a company selling packaged snacks in urban India could use market penetration to increase sales through promotions, market development to expand into rural areas, product development to introduce healthier snack options, and diversification to enter a completely new industry, such as ready-to-eat meals.
The importance of using this framework is to understand how your current product maps into the current market and what are the other opportunities that you can tap into based on this mapping.
It is also important when you are developing plans for entering new market, you need to understand what is the appetite of the market and whether it will accept your product offerings. Be extremely mindful of what is the right product that maps to the right geography.
Balanced Scorecard:
The Balanced Scorecard is a performance management framework that goes beyond traditional financial measures and considers other important perspectives, such as customer satisfaction, internal processes, and learning and growth.
By setting objectives and measuring performance across these perspectives, you can ensure that your business is aligned and focused on achieving its strategic goals.
In the Indian banking industry, many banks use the Balanced Scorecard to measure not only financial performance but also customer satisfaction, employee engagement, and operational efficiency. This provides a more holistic view of their performance and helps them make better strategic decisions.
This helps in the overall decision making for the business. It also allows to understand what are those factors that are contributing along with the finances, since finances is not the only indicator to determining the outcome of the business.
This also helps in making sure that the team is aligned towards achieving goals and what the various functions and functions associated are contributing to the same.
The overall goal to use the balanced scorecard is to ensure that the right parameters have been identified and you are consistently tracking progress from there on.
AI Generated Content. Glance/InMobi shall have no liability for the content
