It is also a matter of philosophy, in short, how the company interprets the real world and thinks it will develop in the future.
There are many ways to break down business strategy.
Let’s perhaps, start with a simple break down of business strategy, in three core parts:
- Market entry (or go-to-market) requiring initial traction (also in a niche market).
- Growth and market share acquisition, requiring expansion (from niche to broader).
- And business model renewal, requiring integration, consolidation, or innovation (you either acquire, merge, or place bets).
Market entry: context-based
A market entry will vary from the company’s size or existing products. If, for instance, a company like Microsoft or Google enter new markets, they will not do it as niche players.
Instead, they might build, acquire, or grow products that have the potential to gain a large customer/user base, quickly.
However, if we instead take into account a business strategy for startups, therefore, companies entering a market as a new player, there might be three primary ways to do it:
Breaking apart existing offerings
One way is to look at the product and unbundle it compared to what existing players are doing. This process looks at the current product offering in the marketplace and makes the product better and more convenient.
Take the case of Apple turning the music industry upside down, by offering single songs on its iTunes (a model then made obsolete by Spotify as it offered all songs users wanted with a single subscription.
Breaking apart the distribution network
Breaking apart the value chain
Another entry strategy is that of identifying within the customer journey, the most valuable part, to offer that alone.
Perhaps, Birchbox offering a subscription service to provide customers samples of pre-selected cosmetic products, remove the hardest part from the value chain (select those products in the first place) while providing what might be perceived as the most valuable part (high quality pre-selected cosmetics delivered straight to the customer, thus removing the most challenging part).
For instance, when PayPal entered the market, it didn’t do it by trying to bring in as many customers from all over the places. It simply found out that many of its power users were on eBay, and it surfed, what it was at the time a giant.
As we’ll see by the end of the article, eventually eBay acquired PayPal, and by 2015, it spun it off. Today PayPal is worth much more than eBay.
Business model renewal
This renewal can happen in several ways. Some of them can be through:
Integration and consolidation: vertical or horizontal
An example of placing bets into the future, is how companies like Google, have within their portfolio, a set of companies, which product and potential business model (many of them are still at development stage) is in part adjacent (like self-driving that can be used also to improve existing products) or, for now disjoined.
For isntance, back in 2015, eBay spun off PayPal. Today PayPal has a market cap of over $200 billion, comapred to eBay over $40 billion market cap.