Small Business Strategy: How to Focus on Your Best Fit Strategy

An effective small business strategy will help build your business. Use strategic planning samples or a strategic plan template; for example, a strategic planning SWOT or five forces model analysis.

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Small business strategy needs to be developed differently than big or medium sized business strategy.

Small business strategies are often focused on developing niche strategies (there are many small business strategy articles dedicated to this topic), however niche strategies are not always the only choice.

As part of your strategic planning process (for all business sizes), consider Michael Porter's "Five Forces Model" and use the model to help you better understand your business environment.

Once you've reviewed the model and reviewed which small business strategy best-fits your business, develop your strategic plan checklist as the next step. Then conduct your strategic planning SWOT (strengths, weaknesses, opportunities, threats) analysis. And start writing your strategic business plan.

Use a strategic planning template or strategic planning samples to build your own strategy and plan.

The Five Forces Model is detailed here with a few examples of each force.

1. Entry Barriers
• Cost to enter market;
• Cost advantages for those already in the market;
• Government restrictions and policy;
• Economies of scale; Is the industry dominated by one or two large companies?
• Capital expenditures, including equipment investment costs,
• Brand identity; Is it difficult and/or challenging to attack or weaken existing companies?
• Will customers have to incur high costs to switch from their present supplier to you?
• How will the existing companies in the market react upon your entry?
2. Buyer or Customer Power
• Do buyers have leverage in the market?
• Are there many buyers or a few (if just a few, you will be very dependent on them)?
• Are your buyers price sensitive; what kind of pricing strategy do you need to develop and use?
• Is there a threat that your buyers might begin to compete against you (backwards integration)?
• Do your buyers have strong brand identity?
• Is there enough service and/or product differentiation in the industry?
• Are there substitutes available for buyers?
• Are there incentives for buyers?
3. Supplier Power
• Are there many suppliers or few (if few, who do those few work with; is there enough supply)?
• Is volume important to supplier - that is, does a buyer have to purchase minimum quantities?
• Can you substitute the materials supplied (for best quality and/or price)?
• Are switching costs high or low?
• Are supply costs contained or volatile?
4. Threat of Substitutes
• How easily can your product or service be replaced by another product or service(e.g. DVD players have replaced Video players - technology enabled)?
• Are switching costs high or low?
• Is brand identity a factor?
• Are price and quality a factor?
5. Degree of Competition or Rivalry
• Are there high exit barriers (e.g. government penalties)?
• Is the industry concentrated or fragmented?
• Where is the industry in its life-cycle (and what is the product life-cycle stage): is the industry in introductory, growth, maturity or declining phase?
• Are rivals similar or diverse?
• Are switching costs high or low?
• Do competitors have good, high value brand identity or are they considered commodity suppliers? (Conduct competitive intelligence and analyze your competition in business.)

Once you have a better understanding of the environment you operate in (or want to operate in), you will be better able to select the best small business strategy for your business.

Best Strategic Planning Templates Include These Strategies:

Many small business industries can be defined as fragmented. Some specific strategies that small businesses need to consider because they are a good strategic fit:

• Focus on product or service type - become an expert, high value provider of this service or product; offer strong product differentiation and ensure that your product positioning fits the market.

• Focus on a type of customer - become an expert, high value resource to a specific customer group; offer difficult to duplicate knowledge and service. Provide not only good customer service, but the best customer service. And be recognized as the best.

• Focus on a specific local area or region - become an expert in that specific area; offer knowledge and resources that no one from outside the area can.

More Small Business Strategies:

(Some Strategic Planning Samples)

• As a small business owner, it will be challenging to follow a low-cost strategy: to achieve the low costs you typically would need to enjoy economies of scale that aren't easily obtained as a small business.

  However you could consider networking and building alliances with other small businesses that operate in non-competing products or areas, try to build some buying power and approach suppliers as one entity.

• If you are primarily doing business on the internet, it is possible to be a relatively low-cost business using digital technology but it would likely still need some investment from the business to gain market share in such a gigantic and over-populated market.
• If your small business has multiple locations, it is possible to organize and plan for some economies of scale by setting up each of the individual locations in a template format and running the administration of those locations from one front office.
• If your small business is entering the emerging technologies field, there are some specific strategies to focus on:
• try to be recognized as the first in the field;
• try to be recognized as the best in the field - with a commitment to product quality and differentiation;
• try to build partnerships with the best suppliers in the field;
• then use these three advantages (recognized as first and best and working with the best) to build your relationships with customers.

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