Developing an effective business strategy is critical for startups looking to succeed in Africa. It can help them stay ahead of the game, outperform the competition, and capitalise on exciting opportunities in the African market. According to the African Development Bank, in 2023–2024, Africa’s GDP growth projected at 4.1% will outperform the global average of 2.9%. Europe is only projected to grow by 1.1%. In contrast,18 countries in Africa are expected to exceed 5% growth rate. This growth is supported by Africa’s growing middle class, diverse markets, and vast resources, making it an attractive business destination.
In this post, we will discuss business strategy development in detail. We’ll cover the benefits of a solid business strategy, proven methods, and different approaches, and provide real-life examples to equip you with the practical knowledge you need to develop your plan.
Business strategy development is the process of formulating a comprehensive and cohesive plan to guide an organisation's actions and decisions in order to achieve its long-term goals and objectives. It involves analysing the internal and external factors that impact the business, setting clear priorities, and defining the approaches and tactics that will be employed to achieve sustainable success. Unfortunately, not all businesses succeed in their goals. Bridges Business Consultancy released a study that showed that nearly 50% of companies failed to meet their strategic targets. Developing a well-thought out business strategy can help to address these issues.
It’s important to understand that business strategy development isn’t a one-time event. Instead, treat it as an ongoing process where you continuously adapt to evolving customer needs, market dynamics, and technological advancements. It is the guiding framework that connects and directs all aspects of your startup toward a shared purpose.
For instance, suppose you run a climate tech startup aiming to resolve waste management issues in urban cities of South Africa. Your business strategy development process should include the following:
These are only some of the steps you would need to perform. Your business strategy development will include more steps for innovation, scalability, implementation, etc.
Developing a business strategy can provide you with several benefits:
Your business strategy provides a framework that can help you identify and produce high-value leads. One way to generate quality leads is to use market analysis and segmentation to understand customer preferences and needs, and customise your offerings accordingly. Strategic networking and referral programs can also help you cultivate valuable relationships within the African business industry.
For example, Salesforce has an annual event called Dreamforce. This conference attracts hundreds of IT professionals and thought leaders from around the world. The event helps Salesforce build credibility with its audience. This is done by announcing new events that can address business challenges, offering training, providing a platform for connecting with other experts, having Q&A sessions, and even hosting a party.
Attendees spread the word about their positive experiences via social media platforms, allowing the company to generate brand awareness and earn new leads. In the future, many of these leads will become Salesforce users and future Dreamforce attendees. Some of the contacts made during these events may even turn into strategic partnerships.
Business strategy development employs a unified framework to synchronise business development objectives with strategic goals. It promotes resource prioritisation — allocating time, finances and manpower to initiatives that are tied to your strategic goals. As a result, you can avoid wasteful spending on non-essential activities and spend your time and money where it creates the most traction.
Performance measurement, another aspect of business strategy development, helps you align business processes with your goals. When you set KPIs and metrics, it allows you to identify areas of success and pinpoint opportunities for improvement.
Take, for example, Amazon’s third–party seller program. One of Amazon’s missions is to be Earth’s most customer-centric company. To do this, Amazon has set up a strategic goal of expanding its product selection.
One business development process that meets this goal is the third-party seller program. Amazon invites sellers to create accounts, establish seller metrics, and ensure smooth order fulfilment and delivery. This allows the company to sell to more users without holding the inventory.
A well-defined business strategy helps identify and seize market opportunities while leveraging competitive advantages. Business strategy development makes your decision-making more data-driven. These informed choices can help you to grow your profits.
Data-driven decision making is crucial because it ensures that your decisions are derived from concrete facts and figures, as opposed to guesswork. This boosts the likelihood of successful outcomes and minimises inherent business risks. Starbucks has one of the most well-known loyalty programmes in the world. It uses its app to collect and analyse customer data, including where they live, what they order most, or how much they spend. The company analyses these insights to personalise its promotions and recommendations. By doing so, Starbucks manages to retain customers and boosts its profits.
Creating a strategic plan is a vital process that helps businesses establish a clear roadmap for meeting long-term goals and objectives. Here are the essential steps you need to take to create an actionable business strategy.
The foundation of business strategy development lies in establishing clear goals and objectives to achieve your desired outcomes. Goals and objectives are used interchangeably in some scenarios, but they have distinct definitions.
A goal is a desired outcome that you plan to accomplish over a long period, which can usually take several years. It’s a broad statement that encapsulates your startup’s vision and can’t be quantified. On the other hand, objectives are measurable and specific goals that you must achieve within a particular time. Objectives encompass activities or actions that help you to achieve a goal.
For instance, you want to create a startup in Kenya that can become a leading e-commerce platform for small businesses nationwide. This is your goal. Your objectives are:
Companies worldwide use a popular framework to set objectives: SMART framework. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-Bound.
In the modern African business landscape, business strategy development involves an in-depth understanding of the external environment and a cogent analysis of internal factors. The external environment includes technological, demographic, and political factors. There are several assessment frameworks to choose from.
All startups, especially those operating in dynamic and diverse markets like Africa, can benefit from conducting a PEST analysis. A PEST (political, economic, social, and technological) analysis provides insight into what external forces can impact your startup. For example, if you plan to expand to multiple African countries, geopolitical issues should be an external factor to consider in your business operations.
So, when is the best time to do a PEST analysis? When you:
STEEP analysis is an extension of PEST analysis with an additional “e” that represents environmental. It also looks into factors including resource availability, ecological worries, environmental regulations, and the impact of climate change.
SWOT analysis helps you to identify your startup’s strengths, weaknesses, opportunities, and threats. You can use it to identify threats and opportunities for your external environment. For instance, your e-commerce startup in Nigeria might have the opportunity to partner with local craftspeople and sell their hand-made products to local and international customers. You can also leverage social media platforms like Tiktok to promote your venture.
Conversely, SWOT analysis helps identify threats including political instability, currency exchange risks that can affect customer spending, and changing regulations like government compliance policies.
The internal environment encompasses tangible and intangible factors, capabilities, and resources within your company. Analysing this environment is crucial because it provides an understanding of your company’s core competencies and unique features that make it stand out from competitors. Key components of your startup’s internal environment include:
Gap analysis is a framework used to determine the gaps or differences between your startup’s current and future desired state. Gap analysis allows you to identify areas to improve and build action plans to address them.
To illustrate, suppose you manage a fintech startup in South Africa with the following business metrics:
After one year, your desired future state is:
Your gap analysis reveals:
Now, you can devise action plans to fill this gap including:
You can also use SWOT analysis to assess the strengths and weaknesses of your internal environment. Strengths are internal attributes that make your product/service unique or competitive. Weaknesses are internal factors that put your startup at a disadvantage.
For example, a Nigerian e-commerce startup may have the following strengths:
In contrast, weaknesses may include:
Defining a unique selling point (USP) can gain you a competitive advantage. A USP is a distinct value proposition that differentiates a company from other businesses in its industry. It acts as a compelling reason for your potential and existing customers to use your products/services over your competitors.
The following steps can help you create a competitive advantage:
1. Identifying your startup’s competitive advantage: Identify your startup's unique strengths and capabilities that competitors cannot easily replicate. Use the frameworks discussed above to find your USP.
2. Growing demand: After determining your USP, take a look at the group of people you want to sell to and understand their different and specific requirements. This is especially important if you're doing business in two or more African countries. You can conduct thorough market research and gather customer feedback via focus groups, emails, social media, and interviews. By identifying untapped opportunities and gaps in the market, you can customise your products or services to meet customer demands more effectively.
3. Boosting sales: A competitive advantage is only valuable when it reflects an increase in sales.You can attract potential customers by using different sales and marketing strategies to highlight your USP. These include free shipping, personalised product recommendations, free samples, and referral bonuses.
4. Increasing margins: A strong USP allows you to set premium pricing as customers find your offerings more valuable. In addition, if your USP leads to operational efficiencies, you can cut product costs. As a result, your profit margins rise.
Not every startup succeeds on its own. In many cases, one has to look for strategic alternatives to grow their venture. Developing these alternatives requires generating different options that align with business goals.
Often, a business opts for these alternatives if they struggle to increase profits or when the company risks bankruptcy or dissolution. In these critical moments, you must proactively identify a viable future pathway. Alternative strategies include:
Choosing the best course of action is a critical step in determining the direction and success of your company. This process assesses various strategic alternatives, considering budget, time, and impact while making decisions that align with the organisational goals and objectives. Follow the steps below to guide your decision-making:
Take for example an Edtech startup that has the strategic goal of partnering with a school or to diversify with online courses. Since the startup’s mission is to provide accessible education, they choose online courses to educate people worldwide. A cost-benefit analysis reveals the potential revenue exceeds the expected development costs.
Based on the market competitiveness, the startup management observes a rising demand for remote learning in different parts of Africa. They talk with stakeholders – students and teachers – to collect valuable insights, including what content format they favour (e.g., slides, videos). This entire collaborative process improves the course content, generating profits for the startup.
Implementing the strategic plan refers to the effective execution of the proposed strategy. This includes
1. Aligning resources: Allocate the necessary resources, including human capital, financial investments, and technological infrastructure, to support the execution of the strategic plan. Ensuring the right resources are available at the right time is vital to achieving the outlined objectives.
2. Communicating with stakeholders: Transparent communication is vital for the implementation phase. Communicate the strategic plan to all stakeholders, including executives, employees, investors, and external partners.
3. Monitoring progress: Establish key performance indicators (KPIs) that measure the success of the strategic plan. These metrics help track progress and ensure that your startup remains on course.
4. Making necessary adjustments: Review the performance of the strategic plan and assess its effectiveness intermittently. Analyse whether the plan is delivering the expected results and if any adjustments are required.
Business strategy development is crucial for companies looking to increase profitability and drive growth across African markets like Kenya, Nigeria, and South Africa.
A well-crafted business strategy plan can act as a guiding compass across the African continent. When companies adjust their business strategy to fit these countries' unique cultures, economies, and competition, they can set up strong positions and make the most of the opportunities in the African market.
FFA has established an extensive track record for enabling African businesses and startups to thrive through business strategy development. We can help you too.