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LUX WMN

21 January 2025

Timeless Strategies: Classic Business Theories and How to Use Them

In the world of business, theory and practice often seem miles apart. While we’ve all studied countless business models, frameworks, and theories - whether at university, from reading articles, Internet searches, or consulting reports, knowing about them and knowing how to use them in the fast-paced business environment are two entirely different things. This article aims to bridge that gap. Some of the most important and seminal business strategy theories that are still relevant to current and new businesses are discussed — but more importantly, there is a focus on how to apply these theories in practice with tips.

Navigating the competitive terrain


The Five Forces by Michael Porter


Why is it valuable? It’s a timeless framework for understanding the competitive forces in your industry. This tool not only helps to identify potential risks and barriers but also uncovers opportunities to gain a competitive edge. It’s a useful analysis to conduct before embarking on developing your strategic plan.


How to use it?


The threat of new entrants: Look at barriers like startup costs, regulations, or strong brand loyalty among existing companies. As yourself, what makes your business hard to imitate—such as intellectual property or unique business models—and strengthen those areas to deter new competition.


Bargaining Power of Suppliers: If there are only a few suppliers or if they provide something unique, they may have more influence over prices or terms - this increases competition in your market. Explore possibilities to diversify your supplier base, or look for alternatives that reduce reliance on powerful suppliers.


Bargaining Power of Customers: If your customers have many options or low switching costs, they can demand better prices or higher quality increasing competition in your industry. Focus on differentiating your product or service so that customers feel they’re getting something they can’t easily find elsewhere. Truly assess and interrogate your value proposition relative to your competitors. If customers see a uniqueness in what you offer, this reduces their bargaining power.


Threat of Substitutes: Can your customers switch to different products or services that fulfill the same need? If your answer is yes, this will increase competition in your industry. To curb this, innovate continuously, and invest in keeping your product or service updated with features or benefits that reduce the appeal of substitutes. This will mean time dedicated to frequently scanning the market for competitor offers.


Competitive Rivalry: Based on the analysis of the above four factors - look at how intense the competition is within your industry. If there are many players offering similar products or if growth is slow, rivalry tends to be higher. Focus on what sets your business apart—whether it's your unique value proposition, superior customer service, or niche focus – always ensure that not only your product or service, but your brand stands apart from the competition.


The power of the SWOT


Why is it valuable? A SWOT analysis is important because it provides a clear, structured way to assess both internal and external factors that impact your business. It is one of the most common tools in the seminal business literature, yet so many people still misunderstand it or use it incorrectly.


How to use it?


The key to correctly using a SWOT analysis is to understand which aspects are internal to your company and which are external. Strengths and Weaknesses are always internal, while Opportunities and Threats are external. This analysis should ideally be conducted before you commence with any strategic planning so that you have a good idea of your internal and external situation.


Strengths – these are internal factors that give you a competitive advantage. These can include aspects such as potential access to capital, a highly skilled team, or innovative technology and products. These are often confused with Opportunities – Opportunities are external factors. You need to be open to a brainstorming session and to really take introspection on what your strengths really are. Remain objective and only list aspects that you know are a reality in your business. Don’t fool yourself with over-positive thinking or overestimating your abilities. Be honest and specific. It's not just about generalities like "good customer service"—but identifying the actual aspects that make your customer service stand out, such as 24/7 support or a personalized approach.


Weaknesses - these are internal factors that put your startup at a disadvantage or hinder your progress. As with the strengths, this is internal and not to be confused with threats – threats are external factors that you cannot control. Consider what are weaknesses within your organization, and be objective. These can include things like limited market presence, gaps in skillsets, lack of resources or capital, or unclear brand messaging. Don’t shy away from identifying your weaknesses. Being aware of these issues will help you develop plans to improve them.


Opportunities are external factors in your market or industry that you can and should leverage for growth. Using a PESTLE analysis (scanning the Political, Economic, Social, Technology, Legal, and Environmental aspects relevant to your business) is ideal for identifying both opportunities and threats. Examples of opportunities include emerging market trends, new technologies, changes in regulations, and gaps that competitors are not addressing. These are discovered from a detailed information search from multiple sources – ranging from news articles to industry reports, to AI prompts (of course check the sources). The key is diverse research and also searching for the opposite of what you think is happening or trending – in this way ensuring that you get truly objective information. Focus on favorable changes – whether societal, technological, or political – aspects that create room for growth.


Threats are external factors that could potentially harm your startup or hinder success. Examples include intense competition, economic downturns, shifts in customer preferences, or new technologies that disrupt your industry. Like with the opportunity analysis, you can apply a PESTLE analysis to identify threats, and again – use multiple sources, and focus on also searching for the opposite of what you “believe” or “feel” about the industry, to ensure objective information and results are obtained. Take a proactive approach to understanding potential threats so that you can develop strategies to mitigate them before they become major issues.


Turning vision into actionable growth


There are many strategic planning steps and models, but the following seven steps are the most commonly used.


The Seven-Step Strategic Plan


Why is it important? The Seven-Step Strategic Plan is important because it provides a structured approach to turning your business vision into actionable steps, ensuring long-term success and sustainable growth.


How do you use it?


Step 1: Defining a mission and vision.


Vision – Write down where you want to be in the long term. This is always optimistic and almost not achievable. It serves to inspire.

Mission – Write down what your business does and how will what you do reach your vision. A brief sentence followed by a few bullet points is a useful manner in which to structure your mission statement.


Keep your vision and mission statements concise and aligned with your business's core values.


Step 2: Conduct a SWOT analysis


See the detailed discussion under the SWOT section above. For best results and where possible involve key team members in this analysis to get a well-rounded view. This step helps you make realistic decisions about where to focus your efforts.


What is core about the SWOT analysis exercise is to determine what weaknesses you need to improve on, in order to counter threats and leverage opportunities. Similarly, identify how you can use your strengths to help improve weaknesses, combat threats, and leverage opportunities.


Step 3: Set SMART GOALS


Define specific, measurable, achievable, relevant, and time-bound (SMART) goals that will guide your strategy. Break larger goals into smaller, manageable milestones. For instance, if the goal is to launch in a new market, the first milestone could be market research.


Step 4: Develop Strategies and Tactics


Define the actions required to achieve your goals.

The Strategies are broad approaches to achieving your goals. For example, a strategy might be to expand your digital presence. Tactics are specific actions to execute your strategy. In this case, tactics could include launching a social media campaign or improving your website’s SEO.


Always prioritize strategies that provide the highest return on investment (ROI). Consider what’s most impactful for your current stage of growth.


Step 5: Allocate resources


Assign the necessary resources—such as budget, time, and personnel—to execute your strategies. Use project management tools like Trello, Asana, or Monday.com to track progress and ensure everyone stays on schedule – or simply use Google Sheets or Excel.

Step 6: Implement the plan


Put your strategies into action! Start working on the tasks and tactics outlined in your plan, keep an eye on progress, and make adjustments as necessary. Definitely establish regular check-ins or progress meetings to ensure everything is on track. Be flexible and ready to adapt if certain strategies aren’t working as expected.


Step 7: Evaluate and Revise


Continuously assess the effectiveness of your strategy and make improvements. Use KPIs (key performance indicators) to measure the success of your plan (e.g., customer acquisition rates, revenue growth, or market share). Gather input from your team, customers, and stakeholders to understand what’s working and what needs adjustment. Be open to adjusting your strategies and goals based on the insights you gather during the evaluation process. Ideally, you should plan to evaluate your strategy quarterly. Stay agile by adapting to changing market conditions, technological advancements, or new customer needs.


While the business landscape may evolve with new technologies and trends, the core principles behind these theories remain constant: understanding your market, leveraging your unique advantages, and making informed decisions. For any current or new business looking to launch and grow successfully, these classic models help navigate uncertainty, align your team, and position your business for long-term success.


Ready to tackle this yourself? Elevate your business with LUX WMN's business and marketing strategy workbook. Discover actionable steps, and practical tools, and learn how to develop a business and marketing strategy to launch your business into success. Feeling stuck? Book a consultation session with LUX WMN Business Studio hello@luxwmn.com


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