Business Strategy: How to grow your business the right way

I remember when I first started my business, I wanted a simple roadmap for success.

But when I tried to find out how to grow my business, I could only find generic stuff. 

You know, like ‘look for opportunities’, or ‘network’.

I read article after article that advised me to spend more time on Pinterest, Instagram or Twitter to grow my audience.

But, is this really useful?



Because it doesn’t tell you much you don’t already know.

It doesn’t tell a customer why they should buy from you and nobody else.

And it doesn’t help you to create a plan for moving forward.

The reality is, if you want to grow your business, what you need is a business strategy.

It’s getting this right that makes the difference between a failing business and a highly successful one.

If I’d put one of these in place when I started my first business, I’d likely be in a much better place right now. 

But, I didn’t. And now, I regret it.

In this post, I’m going to explain exactly what a business strategy is and why you need one.

It’s the first article in a series, so look out for new posts to help you to decide which strategy to pursue and how.

Let’s dig in.

what is business strategy a pen laid on paper working out the answer to the question

What is a business strategy, and why is it important?

A business strategy is a set of clear guidelines providing the direction for your business. When broken down, it’s a set of plans, actions and goals working together in harmony to grow your business. 

Business strategy is also known as competitive strategy, and it outlines what markets you will compete in, how you’ll compete, what resources you need, and how you will move forward from where you are now.

It answers the question, ‘How are you going to be better than anyone else who does what you do?’

In other words, it’s your ultimate guide to how you’re going to make money with your business. 

It’s your long-term business blueprint.

What is often meant by business strategy?

When researching a business strategy on the net, many articles actually refer to a marketing strategy. They talk about growing your customer base, networking and using social media.

These are not business strategies.

But, they can be actions that fall out of one if used the right way.

After all, there’s no point in growing your order book by attracting customers if you’re spending too much of your time attracting a single customer. You’re losing money on each sale!

Moreover, wasting time, effort and resources on plans that pull in opposing directions is not big or clever. Everything you do with your business must head n the same direction, towards the same goal and along the same path.

This is what business strategy does. It makes sure you’re meeting all the necessary conditions for you to generate more sales and make more profit.

But, to do this, you need to decide on what type of basic business strategy to use for your specific business.

The good news is, there are three basic strategies to choose from to help you get started. 

types of business strategy. A laptop and cup on a desktop inftont of shelving unit

Types of competitive strategy

It seems obvious to say that the best strategy for your business is the one that’s right for your specific circumstances. 

However, many people don’t consider what this means in any detail because we don’t think about what our circumstances really are! I know I didn’t when I first started running my own little consultancy business.

So, it’s great to know that others, such as Harvard Management Professor Michael Porter, have studied this issue more in-depth. Porter concluded that across all industries and companies, there are three broad and consistent types of business strategies used by profitable and winning firms.

This means that adopting any one of these strategies for your business, or even a combination of them, will put you ahead of your competitors and make you money, once adapted to your unique business.

Let’s dig into what these are. (NB. None of them necessarily require more time on Instagram or Pinterest!)   

What are the three basic strategies?

There are three types of business strategy recognised by management gurus that are important in the long-term success of any business, even little ones! These are cost leadership, differentiation, and focus.

Occasionally, it’s possible to use a combination of them, but the reality is most profitable businesses choose only one. This is because all your efforts need to be focused in the same direction. Trying to do more ends up with you pulling in opposing ways. 

Which is not great for cutting costs and increasing profits, missing the whole point of running a business.

It’s also worth mentioning that different niches will have differing levels of profitability. However, each of the generic strategies that follow will make sure you are the most successful in your field. 

cost leadership lady using calculator to work our costs

1. Cost leadership

This strategy focuses on making money by producing your products or services at the lowest possible cost. In essence, you focus on doing what you do more cheaply than your competitors.  

However, cost leadership doesn’t mean selling more cheaply. It’s important not to confuse the two.

The idea behind the cost leadership concept is to put more distance between your costs and your revenue by lowering the first factor and maintaining – or staying competitive – with the latter. 

In other words, by increasing your profits!

It’s the idea behind well-known brands like Ikea.

Ikea uses mass-produced standard products making the production of a single item relatively cheap. In addition, the company’s flat-packed products require us to put them together, saving it from having to pay for an assembly line.

It’s a strategy that works really well.

However, with small businesses, this strategy has some unique risks. This is because, to make this concept work, we often need a large market share and/or high upfront investment in equipment that’s simply not always available to smaller businesses.

That said, there are a few things smaller business owners can do.


Think about limiting your business to selling a single product or service and be really good at it. Your customer gets a really good product or service, and you save money on having to order additional supplies and/or labour to help you.

For example, billionaire Richard Branson started out with a mail-order record business before scaling up to owning music stores. He did pretty well out of it!  

Be efficient!

Specialisation also helps to improve efficiency. Other factors to help with this include good training, the right people and well-defined processes.

Automating simple tasks can also help with reducing errors and saving you time. You can then focus on more important things.

Focus on your procurement

Lastly, be good to your suppliers!

Do your research and compare prices. Sometimes, buying a slightly more expensive local product may mean saving on costs such as postage and storage. But it also allows you to build up a beneficial relationship.

Moreover, take advantage of early payment discounts and don’t buy more than you need. Inventory sitting idle can be expensive!


differentiation. A green bottle amidst white desktop items

2. Differentiation

This strategy is about being different and standing out. (Like the green bottle above.)

It doesn’t mean ignoring cost savings. It is only that these aren’t the primary driver for your business.

With differentiation, you’re aiming to improve that profit margin by increasing your revenues by offering something truly unique, and by not lowering your costs. At least, that’s the way I look at it.

Make-up brand Lush does this really well.

It has a simple and genuine brand and offers handmade cosmetics. This distinguishes it from other brands, such as Sephora.

Lush knows its target customers are ethical buyers who value social and corporate responsibility. It ignores those who use cosmetics as status symbols. 

The brand doesn’t sell an image, it sells its values in its products and offers a very unique retail experience with loads of freebies! Quite frankly, it stands out.

For a small business, differentiation can be a great strategy because you can take your creativity to the max. Just make sure you’re telling everyone why you’re different!

Your differences allow you to compete on factors other than prices, such as quality, design, or even reputation. It may be you use good materials that last a long time and/or provide superior performance to your competitors. If so, shout about it!

It’s important to note, however, that we’re talking about your industry here, not only your local market. You need to be so different in what you provide that people will travel to get to you! 

This is how you can develop brand loyalty, like Lush, where people don’t mind paying that little bit more for your offerings. After all, there is no alternative.

Which means… you make money.

Just be realistic with your pricing because brand loyalty will only go so far. And watch out for copycats. 

focus. An up close picture of a dog snout sniffing a rose in a basket

3. Focus

Lastly, there is the focus strategy.

This concept is about focusing on a very specific customer or market. It’s about giving a niche customer base exactly what it needs.

The previous two strategies are relatively broad. 

However, this one is about narrowing your target market to something very specific and serving it perfectly. 

It also usually focuses on either being a cost leader or a degree of differentiation. It may not meet the exacting but broader requirements of the other two, but it’s better in its niche. The trick is to know your customer niche intimately. 

Of course, there are some limitations with the strategy, such as it will limit your market reach – it involves a trade-off between profits and the number of sales you make.

And again, there are risks too. You need to make sure you’re not out-focused by a competitor finding a submarket within your niche. Always keep an eye on the broader market and make sure there is still enough useable difference between your offerings and your competitors, whether with differentiation or cost leadership.  

An example of a niche strategy is Patek Phillipe, the high-end watch manufacturer. It focuses on quality and extremely high standards and only sells to those who can afford its luxury. 

Low customer volume but with a very high price tag. 

It works pretty well. It’s a successful and long-standing company.

How to develop the best business strategy for your small business? 

You know, despite all that I’ve written about the three types of strategy, there really is no ‘right’ answer to this question.

And it’s this lack of a discrete answer that can make setting a strategy really hard. This is where those questions on the infographic come in – they’ll help you identify which strategy could work better for your business.)

However, if you can throw yourself behind an understanding of where you think your business should be going, it’s a real confidence booster! You gain a sense of purpose that was previously lacking.

If you own or run a small business, or indeed are a solopreneur, the only person who can set your strategic direction is you. This means it’s really easy to fall back on the functional areas of your business you know well, whether it’s marketing on Pinterest or spending too much time designing.

However, if you ignore deliberately setting a strategy to provide a roadmap through your rapidly evolving business environment, your business performance will suffer.

And the usual remedy to this?

To cut costs.

Which leads to…

Lower revenues. And a downward spiral.

However, by instilling a genuine belief in yourself and your plan by setting a logical and well-thought-through strategic direction, you’ll be able to focus.

And then, you’ll have the confidence to tackle the challenges head-on!

As your confidence in your plan develops, so will your business.

What are you waiting for?!

Do you have a specific business strategy? Or do you allow it to evolve on a daily basis?

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