3 examples of business strategies to inspire you to create your own | hbs online (2023)

Successful companies often change the way the world lives. Think of Apple, Google, and Netflix and the immense value they both bring to consumers. Despite ambitious profit margins, companies' business strategies were not based solely on financial goals. Each has prioritized consumer value through innovations like smartphones, faster search engines, and streaming video.

If you want to develop a winning business strategy, here's an overview of value creation, how to create value, and examples of companies that have successfully implemented it into their business models.

What is a values-based corporate strategy?

The added value for the client and the company determines the success of a business strategy. According to Felix Oberholzer-Gee, a professor at Harvard Business School, in the HBS online courseBusiness strategy, “These companies don't win by having the best product or the most impressive service. They win by creating the most value.”

While it may be hard to imagine, the value stick framework shows how a company can maximize profit while creating more value for its customers, suppliers, and stakeholders.

Ovalue stocksIt is a graph made up of four components: willingness to pay (WTP), price, cost, and willingness to sell (WTS). Each segment represents how the value of a sale is divided among a company, its customers, and suppliers. While each component adds value, it is created through two levers: WTP and WTS.

To better understand how these components helpvalue-oriented corporate strategies, here are examples of how to implement them in your organization.

increased willingness to pay

Willingness to pay (WTP)means the highest price a customer is willing to pay for a product or service. This calculation determines the threshold above which customers are most likely to make a purchase. Any small imbalance in this number can discourage or even discourage the consumer from making a purchase. Only when a customer is enthusiastic about a product or service is he willing to pay more.

Businesses need to know their customers' willingness to pay to remain profitable. According to the HBS online business strategy course, it is influenced by the functional attributes of the product or service and other considerations, including:

• Economic sustainability:Is the product or service friendly to the environment?
• Social state:Does the media add value to your product or service?
• Non-market impact:Does your product or service inspire your competition?

Increasing the willingness to pay can be an effective strategy for companies interested in increasing profit margins. This difficult balancing act requires an understanding of the product and the target consumer.Business strategyidentifies three main mechanisms for increasing willingness to pay:

• rental status:Gain "status" from the media and consumers to gain greater value through public exposure and brand legitimacy.
• Reduce uncertainty:Ensuring quality and purpose within an organization so customers always know what to expect from your product and service.
• Shape flavor:Take the time to get your brand to consumers as soon as possible due to nostalgic drivers

lower WTS

The willingness to sell (WTS) is the lowest price that suppliers are willing to accept in exchange for the materials needed to produce a product or service. Just as customers must weigh personal and financial value when deciding to engage in a transaction, so must suppliers.

Another way to measure WTS is to look at employee engagement and retention. One of the most valuable assets of a company is its talent. Effective leaders nurture and develop employees to ensure that salary is not their only motivation.

Lowering WTS for one or both groups can be an effective business strategy for companies unable to increase their WTP. For example, companies that can motivate employees to work for lower costs by providing value in other ways, such as benefits packages, flexible work hours, and generous paid time off, can reduce WTS. Another way to decrease WTS is to add value to providers. This can take the form of additional storage space or long-term contracts.

3 companies with successful business strategies

One of the best ways to learn about business strategy is through real life examples. Here are three companies that faced numerous challenges but overcame them through value-based business strategies.

1. Best Buy

Best Buy, the multinational electronics retailer, is a prime example of how a change in business strategy can lead to rapid growth. In 2012, Best Buy faced stiff competition in the marketplace from online platforms like Amazon and big box stores like Walmart and Home Depot. As a result, the company lost more than $1 billion in revenue in a single quarter.

Rather than close stores or develop new products, Best Buy leadership has chosen to capitalize on an existing asset that isn't being fully utilized: its storefronts. Best Buy began using its stores as "mini-stores," offering faster delivery times, easier customer pickup, and greater product availability. As a result of increased customer convenience, Best Buy has increased its willingness to pay.

Best Buy is a prime example of a value-driven business strategy, having subsequently lowered WTS with this initiative. By keeping the vast network of stores intact and allowing suppliers to build showrooms in their stores, Best Buy offered its suppliers an affordable option. This added value reduced the WTS of the suppliers, which translated into product discounts.

2. Nike

As the largest manufacturer of sporting goods footwear, apparel and accessories, Nike has become one of the world's leading global sports brands. While much of Nike's success can be attributed to its iconic products, it is also the result of effective business strategies that thrive in today's saturated sportswear market.

Value-based pricing contributed significantly to the company's overall report.Sales of more than $44 billion in 2021. For example, Nike has consistently used consumer perceptions of its products to raise prices within their willingness to pay. Nike can do this by making the highest quality products to justify a premium price.

Many of Nike's competitors struggle to follow the same business model because Nike's most valuable asset is its image. Nike management has long understood that the pricing model is reflected not only in the quality of the products, but also in the impact of the logo. By understanding their market and social impact, unique Nike products like Air Jordans helped raise Nike's perceived value to an even higher level. As a result, brand equity and customer loyalty are two key pillars of Nike's long-term success in steadily increasing the WTP of its customers.

3. Starbucks

Even the world's largest coffee shop chain, Starbucks, had to employ a value-based strategy to dominate the market. In 2008, Starbucks faced enormous financial pressure due to increased competition from fast food chains, rising prices for groceries and supplies, and tensions in the global coffee trade. In fact, until March 30, 2008, yourProfits fell nearly 28 percentyear after year, resulting in 300 store closures and 6,700 employee layoffs.

To address these challenges, Starbucks focused on better understanding the company's willingness to pay. according to aPresentationFrom Starbucks CEO Howard Shultz: “The company needs to shift its focus from bureaucracy to the customer. We need to rekindle the emotional bond with our customers.”

One method of doing this was "My idea of ​​Starbucks." The goal was to create a space where customers could share ideas about Starbucks products, services, stores and more with each other and the company.corporate social responsibility. With nearly 93,000 ideas registered and 1.3 million new ideas generated on social media, Starbucks tapped into what matters most to its customers.

Understanding what drives customer value has led to many of the changes in the business model that is Starbucks today. For example, free Wi-Fi, beach chairs and the Starbucks rewards program, all born from customer reviews and forums. As a result, Starbucks is widely known as one of the highest WTP fast food chains due to its loyal customer base.

Profits are the result, not the goal

Companies that are considering changing their business strategy often face financial difficulties. Whether it's impending bankruptcy, falling profit margins, or increasing employee turnover, corporate strategies are aimed at solving these problems. But this is not where your strategy should start.

"Profit is not the goal," says Oberholzer-Gee in the HBS Online business strategy course. "They treat it as a result. It's people first, business second."

Executives need a deep understanding of customer value to succeed in today's competitive marketplace. While real life examples illustrate the implementation of these values-based strategies, taking an online course likeBusiness strategyit can help you create an effective business strategy that will win customers and make a profit.

Are you interested in how customer value relates to financially successful business strategies? Discover our online courseBusiness strategy, oother strategy coursesto develop your strategic planning skills. To find out which strategy course is right for you, download ourfree flow chart.