Why Businesses Need Strategy Basics

There’s a quiet advantage most successful businesses don’t advertise: the ability to see around corners. It comes not from luck, but from a disciplined habit of asking, “What’s really happening here?” That habit—the foundation of strategy—is what separates stable companies from those scrambling to survive.

When you think about it, every business, big or small, is constantly making decisions. Should we enter this new market? Can we raise prices? Who are we really competing with? Without a way to structure those decisions, the path forward becomes reactive, not intentional.

That’s where strategy basics come in. This chapter is built for anyone who’s ever wondered why some companies grow while others fade. You’ll learn to see competition not just as rival brands, but as a system shaped by forces you can analyze, predict, and act upon.

By the end, you’ll have a clear mental model of how strategy works in practice—and why even a small business can use this framework to make smarter choices.

What Exactly Is Business Strategy?

At its core, business strategy is the deliberate plan to position your company so it can win in its specific market.

It’s not about flashy slogans or overnight success. It’s about thinking ahead. It’s about asking: What does success look like? Who am I competing with? Why might this change in six months?

When I started teaching strategy, I often saw students confuse it with goals. But goals are outcomes. Strategy is the path to them. A goal might be “increase revenue by 20%.” A strategy is “differentiate through customer service and niche loyalty in urban markets.”

Strategy Isn’t Just for Executives

Many believe strategy belongs only to CEOs or consultants. But the truth is, even a café owner can use strategic thinking to decide whether to expand into takeout or partner with a delivery platform.

Strategy is simply a structured way to think through decisions. It doesn’t require a degree in economics. It just requires curiosity and a willingness to look deeper than surface-level competition.

Here’s a simple way to think about it: when you’re making a decision, pause and ask: What forces are shaping this choice? That moment of reflection is where strategy begins.

Why Companies Need Planning — Even Small Ones

Every business, no matter how small, operates within a system of forces. Ignoring those forces leads to blind spots. Over time, blind spots become vulnerabilities.

Consider two coffee shops in the same neighborhood. One reacts to a new chain by slashing prices. The other asks: Who’s our real competition? Are customers switching because of convenience, price, or quality? What could we do differently?

That second shop is using strategy. It’s not just reacting—it’s anticipating.

Four Real Reasons Why Planning Matters

1. It reduces uncertainty. Planning doesn’t eliminate risk, but it frames what you know and what you don’t.
2. It helps prioritize resources. With limited time, money, and energy, strategy tells you where to focus.
3. It builds consistency. When everyone understands the strategic direction, decisions align over time.
4. It reveals hidden opportunities. By analyzing the market, you might discover a need no one else is serving.

These aren’t abstract ideas. They’re the difference between surviving and thriving.

Everyday Examples of Strategy in Action

Let’s break this down with three real-life examples that show why strategy matters—without a single chart or jargon.

Example 1: The Corner Grocery Store

A small grocery in a suburban town faces competition from a superstore just two miles away. At first glance, the solution seems obvious: offer lower prices. But pricing isn’t just about numbers. It’s about trade-offs.

By analyzing the five forces, the owner discovers:

• Buyer power is high—customers can easily switch.
• Threat of new entrants is low—local zoning and permits make entry hard.
• But supplier power is rising—key produce suppliers are consolidating.

So instead of a price war, the store partners with local farmers, promotes fresh, seasonal goods, and builds loyalty through weekly newsletters. Now, customers don’t just come for low prices—they come for trust, freshness, and community.

That’s strategy. Not a radical shift. Just intentional thinking.

Example 2: The Freelance Designer

A graphic designer lands a client who demands a logo in one week. The immediate reaction? Work late. But strategy says: What if I ask: “How many other designers are competing for this job?”

By thinking through competition, buyer power, and substitutes (like AI tools), the designer realizes she can’t just work fast—she must also differentiate. She offers a brand story with the logo, explains her design process, and adds a free brand style guide.

The client pays more, but values the added insight. The designer wins not just the job, but a repeat client.

Example 3: The Home-Based Bakery

A home baker starts selling cupcakes online. Sales grow—but then plateau. Why?

She runs a basic five forces check:

• Competitive rivalry: High—dozens of similar bakeries operate online.
• Buyer power: Moderate—customers have many choices.
• Substitutes: Yes—store-bought cakes, ice cream, etc.
• New entrants: Low—requires a kitchen, permits, and branding.
• Supplier power: Low—flour, sugar, and eggs are widely available.

She realizes her real edge isn’t price or speed—it’s personalization. She starts offering custom birthday messages, themed cakes, and video delivery of the baker’s hand-written note.

Now she’s not just selling cupcakes. She’s selling a story. And that makes all the difference.

How to Start Thinking Strategically (Even as a Beginner)

You don’t need a business degree to begin. You just need to train your mind to see patterns.

Start small. Pick a business you know—your favorite café, a local tutoring service, a phone repair shop. Then ask:

• Who are the main competitors?
• What do customers really value?
• What would make someone switch to a different provider?
• Could a new business easily enter this space?
• What are the alternatives to this product?

Answering these isn’t about being perfect. It’s about building the habit of observation.

A Simple 5-Step Strategy Framework

1. Define your business. What do you actually sell? Don’t confuse it with a feature—focus on the customer need.
2. Identify direct and indirect competitors. Look beyond brands. Are there substitutes?
3. Assess buyer power. Can customers bargain? Are they price-sensitive?
4. Evaluate supplier and new entrant risk. Is it easy to enter? Do suppliers control key inputs?
5. Ask: What’s the one thing I can do differently? This is your starting point for strategy.

Doing this once is a learning moment. Doing it regularly builds insight.

Common Misconceptions About Strategy Basics

Let’s clear up a few myths that trip up beginners.

Myth 1: Strategy is only for large companies

False. A café, a freelancer, or a solo parent starting a side hustle can all benefit from strategic thinking. It’s not about scale—it’s about clarity.

Myth 2: Strategy means planning everything in advance

Not at all. Strategy is often adaptive. You make a plan, test it, adjust, repeat. The goal is to learn faster than your competition.

Myth 3: You need complex tools to start

Not true. A pen, paper, and a few questions are enough. The power is in the thinking, not the software.

Myth 4: Strategy is the same as marketing

Marketing is one tool. Strategy is the map. You can’t market effectively without knowing your position in the market.

Reflection Questions: Link Theory to Your Life

Now, take a moment to reflect. These aren’t tests—they’re invitations to think.

• What business in your community do you think is most at risk from a new entrant? Why?
• Have you ever chosen a product because of a unique experience rather than price? What made it different?
• What’s one decision you made recently that could have used more strategic thinking?
• Imagine you opened a local shop. What would be your biggest competitive threat? How would you respond?

These questions aren’t about answers. They’re about habits. The more you practice asking them, the more natural strategy becomes.

Frequently Asked Questions

Why is strategy important for startups?

Startups face high uncertainty. A clear strategy helps them test ideas faster, avoid wasting resources, and focus on what truly matters. Without it, even great ideas fail.

Can strategy be learned, or is it instinct?

It’s learnable. While some people are naturally more observant, the framework of analyzing competition, buyers, suppliers, and new entrants can be taught and practiced. The more you do it, the better you get.

How long should a strategy take to develop?

For beginners, a full analysis of a small business can take 30 to 60 minutes. The goal isn’t speed—it’s clarity. A quick review is better than no review at all.

Do I need a business degree to use these frameworks?

No. The five forces model is designed for beginners. You don’t need advanced economics—just a willingness to look beyond surface-level competition.

What if my business has no real competitors?

Even unique businesses face substitutes. A custom furniture maker might not have direct competitors, but people can choose prefab furniture, used items, or even skip buying altogether. Always consider alternatives.

How often should I re-evaluate my strategy?

At least once a quarter. Markets change. New entrants appear. Customer preferences shift. Revisiting your strategy keeps you relevant and responsive.