Outperforming the competition on all levels is the ultimate goal of every business, but each organization utilizes different tools to accomplish this goal. Identifying and implementing the best business strategy frameworks will assist you in laying out the organization’s short and long-term objectives.
Having a vision for the future of your business is often not enough, as both internal and external factors can affect its performance in the market.
For instance, you might struggle to reach your client base because the market is already oversaturated, or you might fail to recognize internal weaknesses that are slowing the organization’s growth.
All business strategy frameworks are designed to help an organization address business issues preventing them from reaching its full potential.
So, in this guide, we’ll introduce you to different types of business strategy frameworks and show you how to pick the one that will boost your company’s performance.
What is a Business Strategy Framework?
Young entrepreneurs and executives of multi-business companies often overlook the importance of formulating a clear strategic plan for an organization or specific project. Nonetheless, the lack of vision is one of the most common reasons why products, projects, or entire companies fail.
A business strategy framework is a set of guidelines or tools an organization can use to evaluate its structure and the current situation on the market. There are hundreds of frameworks created by academics and industry professionals that take different approaches toward strategy development.
Hence, the framework you choose should assist your organization in facing the challenges that are preventing it from achieving better results.
Although business strategy frameworks can be a valuable asset for startups and young businesses, they can also serve as guidelines for large multi-business companies struggling to accomplish their missions.
Rather than offering a direct solution, frameworks provide a set of tools that simplify the process of creating a viable business strategy.
Types of Business Strategy Frameworks
There are no official classifications of business frameworks, and they can only be roughly divided into external and internal analysis categories. So, external frameworks help organizations assess the outside factors that may affect their overall performance on the market.
On the other hand, the internal analysis category contains frameworks that optimize an organization’s processes and evaluate its structure and portfolio of products to maximize productivity.
It is worth adding that the strategy frameworks are not equally effective in all contexts, and you should recognize the right strategy to get the desired outcomes.
External Analysis Strategy Frameworks
Conditions in which companies operate change over time as new competitors arrive on the market with improved product portfolios. Besides the competition, a company can be affected by changes in legislation, market fluctuations, and countless other factors.
The proper business strategy framework might help you anticipate these changes and adapt to them faster than other companies. An organization can utilize a broad range of strategies to analyze the external factors that can affect it, including these frameworks:
- Porter’s five competitive forces – The framework is based on the assumption that the organization’s profitability depends on the competitiveness of the environment. Hence less competitive environments leave more space for the rapid expansion of an organization.
- Scenario planning – This approach proposes the development of different scenarios to predict the organization’s future. Each scenario is based on uncertainties that may or may not affect the company’s path towards the projected goal.
- Blue Ocean Strategy – Developed by W. Chan Kim and Renee Mauborgne, the Blue Ocean Strategy suggests that an organization should secure its competitive position by entering an uncontested market. Nonetheless, the new market penetration requires the company to develop a unique product.
- PESTLE Analysis – The PESTLE acronym stands for Politics, Economic, Socio-Cultural, Technological, Legal, and Environmental. This strategy framework involves the analysis of how these factors can affect the company’s operations.
Internal Analysis Strategy Frameworks
Failure to recognize weaknesses, lack of a strategy and vision, or poor performance of some of the company’s departments are some of the most common reasons why businesses struggle to remain competitive.
Examining the organization’s strong and weak sides and finding ways to build strategies based on its strengths is one of the most significant benefits of internal analysis strategy frameworks.
These frameworks offer a set of tools that, when used correctly, enable the organization to evolve and adapt to the conditions on the market. Here are some of the most common types of strategy frameworks used to conduct an internal analysis.
- The VRIN Model – This approach involves evaluating the company’s resources and understanding how to utilize them to improve its position in the market. The acronym VRIN describes assets that are valuable, rare, inimitable, and non-substitutable.
- Balanced Scoreboard – Besides the financial gain, businesses need a broader set of goals to achieve sustainable market growth. The Balanced Scoreboard framework suggests that a business strategy should involve Financial, Customer, Internal Process, and Learning and Growth aspects.
- SWOT Analysis – As one of the most basic business strategy frameworks, the SWOT analysis offers a guideline for business owners who are just starting their companies. It suggests that a viable business strategy is formed by assessing its strengths and weaknesses and recognizing the opportunities.
- Value Chain Analysis – This client-oriented framework offers a set of tools organizations can utilize all internal processes that can increase the value they’re providing to their clients. It entails assessing the Production, Marketing, Sales, and Operations departments and finding ways to improve their performance.
Implementation of Business Strategy Frameworks
Turning theory into practice is never an easy task, but that’s what the implementation of a business strategy framework is. All business frameworks are theoretical models that suggest a series of actions that assist organizations in creating a business strategy.
Consequently, the best time to implement a strategic framework is before starting an organization, as it will enable you to have a clear vision of its mission and develop a market penetration strategy.
Even businesses that are struggling to remain competitive can utilize these frameworks to evaluate their weaknesses and strengths or reassess the market conditions.
The implementation process of the framework you selected depends on the organization’s goals, the business model, the internal process you want to improve, and the industry your business is working in. Consequently, each framework can be applied in countless ways, and each application process is specific.
Even though two organizations might use the same framework, they don’t necessarily have to apply the framework in the same manner.
Why Do Businesses Need Strategy Frameworks?
Having a visual outline of the company’s all-encompassing strategy is the foundation upon which the company’s actions are based upon. An underlying strategy framework should guide every message, action, or initiative an organization makes.
By adopting a business strategy framework, you create a narrative that defines the organization’s strategic focus and enables you to build brand trust. It allows you to provide your employees with a set of clearly defined goals your employees should strive to achieve.
Consistent messaging is also among the advantages of implementing a business strategy framework. It will enable you to define your company’s language to speak about its values, portfolio of products, or services.
A strategy framework helps a business reach its client base while offering a guideline on handling internal matters.
Even so, whether or not a business needs a strategy framework depends on its vision, structure, and mission, since implementing a wrong framework can cause confusion and chaos both internally and externally.
The Implementation Costs of Business Strategy Frameworks
Estimating the costs of business strategy framework implementation is difficult because there are too many variables involved. Ultimately, the framework should be based on your preferences, which means that the actual steps you’ll need to take are context-dependent.
Hiring a consulting agency to help you assess your organization and selecting the most appropriate strategy framework will also affect the total cost of the implementation process.
Furthermore, a strategic framework is a set of policies and business decisions that don’t necessarily require any expenditure. Instead, it suggests ways to manage an organization’s resources efficiently and utilize them to maximize market growth.
The Most Important Things to Consider While Choosing A Strategy Framework For Your Business
Despite countless similarities, each organization has different strengths and weaknesses, sets of core values, or objectives.
As a result, the needs of every company are different, as one organization might require assistance navigating a competitive market, while another might need to improve its internal processes.
That’s why the process of choosing a strategic framework is context-specific because it depends on the factors affecting a particular organization. Besides, companies can choose to combine different frameworks, which further complicates the selection process.
We’ve shortlisted some of the most essential aspects you need to consider while deciding which strategy framework to choose, so let’s take a closer look at them.
Defining the Organization’s Goals
In addition to profit, each organization should have a set of goals it wants to achieve. Defining these goals will help you select the strategic framework that makes reaching these goals more accessible.
It will also give the company’s employees something to strive for, which will, in turn, create better team chemistry and improve the results of different departments. As a company grows, so do its goals, and having a strategy framework will make it easier to adjust the goals to support its new mission.
Detecting the Operations You Want to Improve
The reason why an organization is struggling to keep up with the competition may be hidden in its internal and external actions.
Reassessing the organization’s new market penetration opportunities, maximizing the product development efforts, evaluating the effectiveness of its marketing approach, or measuring the performance of all of its departments is a great starting point for the creation of a new strategic framework.
Discovering the actions that failed to produce desired results is the first step towards forming a coherent and viable strategy that will boost the organization’s market growth.
Evaluating the Market
How well a particular service or a portfolio of products will perform on the market doesn’t depend solely on factors within an organization. In fact, a wide range of political and socio-economic factors that shape a market also affect the products.
Companies have to analyze markets they’re operating on and detect the threat of substitutes to know the current demand for a particular service or a product.
Market evaluation becomes even more critical if an organization operates on foreign markets because they might face different political, legal, and economic challenges at home and abroad.
Assessing the Organization’s Weaknesses and Strengths
Whether it is human resources, an innovative product, or an efficient approach to buyers, every asset a company has gives it an advantage over its competitors.
On the other hand, poor internal communication or incoherent messaging are weaknesses that can hamper the organization’s growth and prevent it from establishing trust with its clients.
Finding the strengths and building the strategic framework around them while simultaneously improving the weaknesses will enable you to formulate a viable long-term strategic plan.
Hiring a consultant
It can be challenging to have a clear vision of the company’s future when observing it from the inside. That’s why organizations choose to hire consultants that assist them in creating an overarching strategy.
Consultants bring considerable experience and knowledge to an organization that is struggling to craft a coherent strategy. Using the services of a consulting agency enables an organization to detect its weak spots, find a way to improve them, and build up its strengths.
However, the costs of hiring a consulting agency can be overwhelming for a business that is already performing poorly on the market, as there is no guarantee that doing so will turn the organization’s fortunes around.
Organizational maturity denotes the organization’s ability to adapt to its environment and learn from its previous experiences.
This concept suggests that organizations that are not mature enough cannot implement strategic frameworks efficiently because they’re not ready for the challenges they need to face.
Companies with years of experience in the industry are more likely to redefine their strategy framework than relatively new businesses that don’t have highly developed internal structures.
Assessing the maturity of your organization will help you establish if it is ready for the changes you want to implement.
The Advantages of Business Strategy Frameworks
Provides an organization with a long-term strategy
Choosing and implementing a strategic framework enables a company to define its goals in the foreseeable future. It also makes it easier to adjust to the changes of the environment as a simple shift of focus or a strategy tweak can set a company back on its course.
It makes an organization aware of its strengths and weaknesses
Failing to recognize the advantages or address weaknesses can have far-reaching consequences for businesses. A strategy framework provides a guideline that enables the organization to build a strategic plan based on its advantages and helps it deal with its weaknesses.
Allows a company to improve its internal structure
Measuring the performance of each of the organization’s departments will reveal any shortcomings that might affect its overall productivity. It also helps establish better communication between departments and builds cohesion throughout the organization.
Establishes trust with the clients
A business strategy framework enables companies to deliver a consistent message to their clients through the years. It helps establish brand trust and highlights the core values the organization supports, resulting in a large base of loyal customers.
Provides the organization with a better understanding of a particular market
Political and socio-economic factors influence domestic and foreign markets, and understanding these factors allows a company to find its place within a market.
A business strategy framework can reveal all the cultural, legal, or economic factors an organization must face to remain competitive.
The disadvantages of business strategy frameworks
Strategy frameworks require a high level of organizational maturity
Only organizations that are mature enough to stick to the strategy framework they choose can benefit from them. Implementing a strategy framework in a company that suffers from a lack of maturity will push it further into disarray and confusion.
Detecting the proper strategy framework can be difficult
Every organization has a specific set of needs and goals, so finding a strategy framework that can accommodate these goals and needs isn’t always easy. In some cases, organizations need to hire consultants to discover the framework that fits their requirements.
The 4 Best Business Strategy Frameworks
Suggesting that one business strategy framework is better than another is a slippery path because their effectiveness depends on the context in which they are applied.
Furthermore, there are hundreds of frameworks you can use to analyze a market or detect growth opportunities for your business. Combining several frameworks might also be an effective solution for an organization looking for a way to strategically approach different aspects of its operations.
We’ve shortlisted the 4 most common business strategy frameworks that can assist you in detecting all aspects you have to consider while designing a viable business strategy, so let’s take a look at what these frameworks entail.
Porter’s Five Competitive Forces
Formulated with the aim of providing companies with a guideline to detect the challenges and opportunities that may affect their future performances, Porter’s Five Competitive Forces focuses on the business analysis of the competition.
According to the framework’s author, an organization needs to monitor new entrants to the market and evaluate the bargaining power they hold over suppliers and buyers.
Besides assessing the power of suppliers, it is necessary to estimate how difficult it is to replace the services or products a company is offering. Porter suggests that organizations have to determine how competitive their market is to understand it.
He also indicates that rating each of the competitive forces on the 0 to 10 scale will enable an organization to determine if it can improve its position on a market or penetrate a new, less competitive market.
McKinsey’s Strategic Horizons
Organizations that want to expand quickly should consider implementing McKinsey’s Strategic Horizons framework. This model is composed of three horizons that cover the company’s short-term, mid-term and long-term goals.
The first horizon allows an organization to remain realistic about its priorities and work towards the goals it wants to achieve. Completing a wide range of short-term goals sets a company on course to transition from where it currently is to where it wants to be.
Through the data acquisition process required to accomplish goals, an organization gains insight into how well it is performing across all three horizons.
This framework also offers assistance for companies that achieved great results on the first horizon but failed to repeat the same success on the second one, which ultimately caused them to fail to achieve their long-term goals.
The Blue Ocean Strategy
Rather than thinking about the Blue Ocean Strategy as a business strategy, you should approach it as a series of strategy frameworks.
Exploring ways to enter a market with little to no competition is at the core of the Blue Ocean Strategy because it suggests that creating value through innovation generates more profit than participating in the so-called Red Ocean or the already highly competitive market.
Strategy Canvas is one of the most important frameworks featured in the Blue Ocean Strategy that is designed to help an organization discover markets that its competitors overlook.
Employing the Strategy Canvas and all other strategy frameworks from this model requires extensive knowledge of a specific industry, its key players, and their areas of interest.
Although it was created in the 1960s, SWOT Matrix analysis is still regarded as one of the most effective strategic planning techniques.
The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, where strengths and weaknesses are recognized as internal factors, while the opportunities and threats are regarded as external.
The technique views the organization’s strengths as characteristics that give it an advantage over its competitors, while the weaknesses are regarded as the characteristics that give a business a competitive disadvantage.
Through the identification of these factors, companies prepare for the steps they need to complete in order to achieve their mission. However, this technique has been criticized because it doesn’t show managers how to get a competitive advantage in quickly developing markets.
FAQS about Business Strategy Frameworks
Question: Do business strategy frameworks guarantee results?
Answer: Implementation of a business strategy framework doesn’t guarantee that your company will reach its objectives but rather offer a theoretical framework that can be used to improve the company’s long-term performance.
Question: How long does it take to implement a business strategy framework?
Answer: Depending on the strategy framework you choose, it can take anywhere between several months and ten to twenty years to fully implement a framework.
Question: Are strategy frameworks designed for businesses from all industries?
Answer: Even though some strategy frameworks are universal and can be applied to organizations from various industries, the application process requires industry-specific knowledge.
Question: Can I apply a business strategy framework on my own?
Answer: Theoretically, anyone can apply a business strategy framework if they have sufficient knowledge, but hiring a professional consultant might be a better option if you’re not familiar with different types of strategy frameworks.
Final Thoughts: How to recognize the right business strategy framework?
The awareness of the organization’s strong and weak sides puts its management in the position to create viable strategies that will secure constant market growth.
Business strategy frameworks are the tools that assist companies in the process of discovering new markets, crafting a coherent plan of communication with the customers, and gaining competitive advantages over the competition.
We suggest utilizing the SWOT Matrix analysis if you’re just starting your company because it will enable you to learn where the organization’s strengths and weaknesses are.
You can pair this technique with Porter’s Five Competitive Forces if you want to get a better understanding of the competition your organization is facing. Managers of large organizations should opt for the Blue Ocean Strategy if they can generate value through innovation.
Which of the best business strategy frameworks are you going to choose? Let us know in the comments.