Final answer:
Business strategy focuses on choosing the sectors for competition and managing the company's involvement in these sectors. It often involves honing in on core competencies, or the areas where the company excels. As the company matures, its strategy's effectiveness makes the need for personal relationships with managers less critical for attracting investors.
Step-by-step explanation:
The focus of the business strategy is on determining the businesses in which a company intends to compete as well as how it will manage those businesses. This involves deciding on the company's core competencies, which are the products or services that it does best, to gain a competitive advantage. Companies often find that focusing on a small range of products or services leads to greater success than if they attempt to offer a wide variety. This is because specialization allows them to develop expertise and efficiency in their chosen area.
Developing a business strategy begins with understanding and defining the problems the company faces and formulating a plan to address them. Strategy is the initial stage where the foundation for future actions is laid, encompassing not only the selection of products and services but also how the business will achieve its financial and market objectives.
As a firm grows and its strategy proves viable, its relationships with managers and the understanding of their business plans become less personal. This shift occurs because the firm’s financial information, such as products, revenues, costs, and profits, becomes more accessible to external investors like bondholders and shareholders. Therefore, they are more likely to provide financial capital to the firm.