The term strategy is very common in business but many do not understand it properly. In addition to it, the strategies used in any big company are different from those used in startup ventures and it is important to select the correct strategy if a start up venture has to survive.
Strategies for Large Companies
If we look at large companies, their aim is maximizing returns for shareholders, and to accomplish the same, they need to make two strategic choices:
Selecting Industry to Compete:
The Company tries to select an industry, which is big, has fast growth rate, stable and profitable. An example of such industry is transportation of oil through pipelines, where ROE is more than 100%.
Plan to Capture the Chosen Market:
Here we look at two things, first implementing differentiation in which customers get more of what they require and secondly charging lowest prices in the market for the product.
Strategies for Startup Ventures
On the other hand, for a small startup venture, the goals are quite different and the strategic choices it makes are separate as well. They have to make survival plans first and generate funds, so that people working in the company can be compensated properly.
Let us now look at some of the decisions that startups need to take to improve their chances of success.
In case your startup is able to commit to any acquisition or IPO then it will be enough to convince investors that they will be able to make profits by investing in the company.
Select the Market:
The market should be a profitable one as well as big enough so that even with 10% VC, the startup is able to turn into a profitable one.
Company can crowdfund until it is able to prove that consumers are going to pay for the product and then owner can sell major stake in the company to any venture capitalist before going for an IPO.
Selecting the Team:
It is important to hire good talent, as the entrepreneur cannot do everything on his own. A good way to attract talent is to provide stock options that will keep the new joiners interested.
Getting the Market Share:
Consumers do want to purchase from some company that will close down in another 6 months. The solution is to make a product, which consumers direly need and provide it at prices that are lower than what competitors are charging.
There are separate strategies for large organizations and small startup ventures. Startups need to take special care and use specific strategies to build up their presence and market share.