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A business strategy is the set of choices a company makes about where to compete and how it plans to win in the market against the competition.
Those choices get harder when growth itself is the brief. In a 2025 Diligent Institute survey of US public company directors, 76% named growth as a top priority, while 42% said strategy was their biggest oversight challenge.
The more opportunities you have, the more directions you can take your business. Whether your focus is figuring out which customers to serve or how to build a competitive advantage, a business strategy gives your company a basis for choosing between those viable directions.
This article defines what a business strategy is, including what it contains, how to develop one, and some common business strategy examples.
What is a business strategy?
A business strategy connects a company’s long-term goals to how it plans to compete in the industry, and then directs resources toward that plan.
For retailers, the strategy can shape the buying experience itself. IBM says that companies should think in terms of commerce rather than ecommerce. Since customers move between digital and physical touchpoints, treating each channel as a separate operation no longer reflects how they shop.
IBM’s model centers the retail experience on trust, relevance, and convenience. The same thinking starts much earlier: Marketing and finding customers top the list of first-year challenges in Shopify’s 2025 survey of store owners,* cited by 37% and 36% of merchants, respectively.
Fashion brand Petal & Pup, for example, wanted to expand into markets including North America and New Zealand. They upgraded to Shopify Plus to give the business more capacity to scale, and subsequently increased production and marketed more heavily overseas. Their international sales eventually reached 20% of revenue, with orders shipped to more than 80 countries.
“We just hadn’t expected the business to grow this quickly. Quite frankly, we’re at a level beyond where we’d hope to be probably in 10 years’ time,” says Philip Scarff, CEO.
Business strategy vs. business model vs. business plan
A business strategy, business model, and business plan describe different parts of running a business:
| Business strategy | Business model | Business plan | |
|---|---|---|---|
| What does it define? | How the company will compete, allocate resources, and pursue its long-term goals. | How the company creates value for customers and makes money from it. | How the business intends to operate and execute its plans. |
| What questions does it answer? | Where will we compete? What advantage can we build? Where should we invest? | Who will pay us, for what, and how will revenue come in? | What will we sell? How will we market it? What will it cost to run? |
| What’s the typical scope? | Long-term direction and major business decisions. | Customers, value proposition, revenue streams, and cost structure. | Market research, business operations, marketing, financial projections, and funding needs. |
| When does it change? | When the company’s goals, competitive position, or market conditions change. | When the economics of how the business creates or captures value change. | As assumptions, forecasts, milestones, and operating plans are updated. |
| What’s an example? | A retailer decides to expand internationally rather than open more domestic stores. | They sell products directly to consumers through their own online store. | They map expected sales, marketing spend, inventory needs, and cash flow for the expansion. |
What’s covered in a successful business strategy?
A business strategy is more than just the tactics used to achieve said strategy. A business strategy sits above the individual projects on a company’s calendar. If the strategy calls for getting more revenue from existing customers, launching a loyalty program could be one tactic for doing it. Tactics should be flexible so they can change when needed without changing the broader direction of your strategy.
Most business strategies cover:
Your high-level goals
Set out what the business wants to achieve over the next several years, then put numbers against the goals you can measure. Shopify stores can set targets for metrics such as gross sales, orders, or conversion rate and track performance against them over a chosen time period.
Your analysis
Build the strategy from what you know about the company and the market around it. This business intelligence can come from sales and customer data alongside competitor and market research. Shopify Analytics brings store activity, visitor behavior, web performance, and transaction data into its dashboards and reports.
Your market positioning
Define how the business intends to compete and why its target customers would choose it over the alternatives. The answer can, and does, differ by market. In Shopify’s 2025 survey of store owners,* 57% of food and beverage businesses cited brand reputation as a competitive advantage, while 62% of home and garden businesses pointed to product quality.
Your resource allocation
Decide where money, staff time, inventory, technology, and other resources need to go to support the strategy. An international growth strategy, for example, may require investment in localization or additional fulfillment capacity before expansion generates substantial revenue.
Your strategic initiatives
Identify the larger pieces of work required to move from the current business to the intended one. These should be specific enough to guide budgets and ownership. The campaigns, channel experiments, and other day-to-day actions that follow are tactics.
David’s Bridal, for example, positions themself somewhere between retail and hospitality, with an ambition to give brides a more personalized experience across online and physical stores.
But before moving to Shopify, their aging technology was getting in the way: maintenance and technical debt were consuming resources that could otherwise go toward new ideas. David’s then made Shopify the foundation of a nine-month digital transformation that included a complete ecommerce replatform, a Canadian site launch, and a new bridal concept store built around unified customer profiles and an endless-aisle experience.
“It’s hard to find a technology partner where you could actually change your corporate business strategy based on the functionality they have, but that’s where we are with Shopify,” says Elina Vilk, president and CBO.
The 3 levels of business strategy
IBM groups business strategy into three broad levels: corporate, business, and functional.
1. Corporate level
A corporate-level strategy sets the direction for the company as a whole. IBM describes it as the domain of top management, covering major decisions such as mergers, acquisitions, portfolio management, and diversification.
A company might pursue diversification by entering a new product category or market; horizontal integration by acquiring or combining with a competitor at the same stage of the industry; or market penetration by trying to sell more of its existing products in a market it already serves.
2. Business-unit level
A business-unit strategy explains how a particular business, brand, or product line will compete in its chosen market. IBM calls this business-level strategy and connects it directly to competitive advantage, whether through differentiation, competitive pricing, or expansion into new markets.
3. Functional level
A functional strategy turns the broader business strategy into plans for individual departments. IBM gives functions such as HR and finance as examples and notes that these strategies support corporate- or business-level objectives.
For example, a marketing team may shift budget toward retention campaigns and set targets for returning customers if the wider strategy calls for increasing repeat purchases.
Tip: Shopify’s full manual on developing a marketing plan covers the next layer of decisions: choosing tactics and channels, setting measurable goals, budgeting, and analyzing results.
How to develop an effective business strategy in 6 steps
You can build a business strategy as a sequence of six decisions. Work through them in order the first time; when the market or the business changes, return to the relevant step.
1. Decide where you want the business to go
Start with the destination. What should be materially different about the business in three to five years?
IMD recommends beginning with the company’s desired market position, then turning that direction into top-level objectives. The objective should be specific enough to shape a decision, not just sound good on paper.
The output: A small number of long-term objectives with dates and measurable targets.
SMART goals can help you clarify and focus your objectives. This clarity makes it easier to prioritize resources, hold teams accountable, and course-correct quickly when something isn’t working.
2. Establish where you are now
Pull together the evidence that could change those objectives or how you pursue them. Look at financial performance, customer behavior, operational capacity, competitors, and changes in the market.
The Business Development Association (BDA) recommends combining an internal capability audit with an assessment of the external landscape. A SWOT analysis (which identifies strengths, weaknesses, opportunities, and threats) can help organize what you find, but the analysis itself should come from real business data and market research.
The output: The constraints and advantages your strategy has to account for.
3. Choose the target market and target customer
Decide whose business you want and where you intend to find it. The US Chamber of Commerce recommends examining your existing customer base before researching the needs, alternatives, and competitors in the market you want to pursue.
For an ecommerce business, this could mean choosing between increasing penetration among existing US customers or putting resources behind expansion into Canada.
For example, Bug Bite Thing Founder Kelley Higney initially expected male outdoorsmen to be a strong online audience. When the response fell short, she looked back at who had been buying the product offline and found that mothers were driving much of the demand. She shifted her social targeting accordingly and said traffic began moving in the right direction almost immediately.
The output: A defined target customer and market.
4. Decide how you will compete
Now make the competitive decision. Why should that customer buy from you instead of another available option?
IMD puts competitive advantage at the center of this stage. Your answer might come from a lower cost structure, a product competitors struggle to replicate, or an experience customers value enough to pay for. This should also survive comparison with what competitors already offer.
The output: A clear competitive position you can defend.
5. Put resources behind the strategy
Translate the direction into a handful of major initiatives, then assign money and people accordingly. For example, a differentiation strategy may put more of the budget into product development.
This is where strategy starts imposing limits: funding one initiative can mean declining another.
The output: Funded initiatives with owners, budgets, and a time frame.
6. Measure what happened and revise
Choose key performance indicators (KPIs) before execution begins so you know what evidence would support (or challenge) the strategy. BDA recommends setting KPIs and reviewing strategy regularly, while the US Chamber recommends using those results to adjust the strategy over time.
Set a review cadence and record what would trigger a change.
The output: KPIs, review dates, and conditions for revisiting the strategy.
What are common business strategy examples?
Many business strategies describe how a company intends to compete. Michael Porter’s classic framework identifies three broad approaches: cost leadership, differentiation, and focus. Companies may also build strategies around goals such as expansion or digital transformation.
IBM provides an overview of Porter’s generic strategies and several contemporary variations.
Cost leadership
Compete by maintaining a lower cost structure than rivals, which can give the business room to charge lower prices while protecting its margins. But pricing still has to work economically. Shopify’s Smart Pricing app uses machine learning to suggest product markups and markdowns and, for eligible stores, run A/B pricing experiments before you commit to a change.
Home goods brand Coop Sleep Goods built cost leadership around premium materials instead of cutting them: cofounder Kevin Chung says the foam cost up to $5 per pound, against an industry standard of 25 to 50 cents per pound. A lean team absorbed thinner margins early on, and rising sales volume brought better supplier pricing and reinvestment in fill, fabric, and liner quality. "Our volume increased and so the unit economics everything got better to a much healthier position," Kevin says.
Differentiation
Give customers a reason to choose the business that competitors cannot easily reproduce, whether that comes from the product itself, service, design, technology, or the wider brand experience. The direct-to-consumer (DTC) cookware brand Our Place, for example, has more than 200 patents and trademarks and has built their flagship Always Pan to replace multiple pieces of cookware.
Focus
Concentrate on a narrower customer group, product category, or geographic market rather than trying to serve the broadest possible audience. Gymshark grew from a garage-founded fitness apparel company by building closely around the fitness community, including a large social following and in-person events where customers can meet athletes.
Porter’s framework focuses on how a business competes, but companies can also develop strategies around other objectives like growth, digital transformation, or sustainability:
Growth strategy
Here you increase the size of the business through new markets, products, channels, or acquisitions. Irish cosmetics company KASH Beauty expanded from a small stock room to multiple warehouses and began scaling internationally with localized storefronts. Shopify Markets lets you manage elements such as currency, language, pricing, and product availability across different markets.
Digital business strategy
Decide how technology will change the way the company sells, operates, or serves customers. David’s Bridal, for example, undertook what they called an “Aisle to Algorithm” transformation, replacing aging technology with a unified commerce foundation spanning ecommerce and their physical stores.
Sustainability strategy
Build environmental or social goals into decisions about products, operations, or the customer experience. Sweden’s agood company extends sustainability into their supply chain and checkout experience, where customers can select Eco Delivery and see information about the carbon footprint associated with an order.
*Based on a November 2025 survey of 500 Shopify merchants conducted in English across Australia, Canada, the United Kingdom, Ireland, New Zealand, and the United States. Respondents were established merchants with two or more years on the platform. Results reflect the experiences of this specific sample and may not be representative of all merchants.
Business strategy FAQ
What role does competition play in developing a business strategy?
Your competition helps you understand where you can build a competitive edge. During business strategy development, businesses compare rivals on factors such as product, customer experience, and pricing strategy before deciding whether to pursue a cost leadership strategy, differentiation, or a niche market.
How often should a business review and update its strategy?
Review the overall business strategy at least annually, with more frequent check-ins against key metrics and strategic objectives. A major shift in customer demand, costs, technology, or competition can justify an earlier review so the company can allocate resources effectively.
How can a company determine which business strategy is right?
Start with the company’s business objectives, customer and market data, competitive position, and available resources. A well-defined business strategy should fit the company’s strengths and economics while giving it a credible route toward its business goals and sustainable growth.
What is an exit strategy in business?
An exit strategy is a plan for how an owner or investor may eventually leave or reduce their stake in a business. A few common options include selling the company, transferring ownership, merging with another business, or closing that business. The right choice depends on the owner’s goals and the company’s value and structure.
What is a growth strategy in business?
A growth strategy sets out how a company plans to increase revenue, customers, market share, or geographic reach over time. The key components might include entering new markets, launching new products, improving sales channels, or pursuing an innovation strategy, depending on the company’s broader strategic management priorities.
