Defining the scope of your business should be an integral part of your strategy.
The scope of your business encompasses a wide range of elements, from a business’s main strategic direction, to the products or services it offers, and its target markets.
Without a clearly defined scope, your business will struggle to make informed decisions, identify opportunities, and ultimately achieve success.
What Is the Scope of a Business?
When starting a business, there are many important factors to consider. One of the most crucial is defining your business scope. At its core, business scope summarises in a few words what the company does. This can refer to the main strategic direction of the company and its overall objectives. It should cover every company’s business activity, from sales to contracting.
Examples of business scope statements
These are just a few examples of business scope statements, but they demonstrate how businesses can define their scope, including their target market, industry focus, product or service offerings, and mission or purpose.
- “The provision of software and application design and development, providing software solutions encompassing risk management, financial and people management software to small and medium-sized businesses in the finance industry, worldwide.”
- “ The sale and supply of luxury home decor items and accessories to affluent customers in urban areas, across the UK.”
- “The provision of business management consulting services assisting businesses with streamlining their operations and improving their overall efficiency to a commercial client base, worldwide.”
- “A nonprofit organisation providing access to education and resources for underserved communities in developing countries.”
Why Define the Scope of a Business?
Defining your business scope is vital for several reasons. It can help you ensure that everyone in the company is working towards the same objective. Here are some of the benefits of defining your scope of business:
Provides clarity
Defining a scope of business helps business owners and stakeholders understand the specific products or services the business offers, target markets, and overall strategic direction. This clarity can help align business operations and decision-making.
Identifies opportunities
A well-defined business scope can help businesses identify new opportunities for growth and expansion. For example, if a company has expertise in a particular product or service, it can use that expertise to expand into new markets or product lines.
Targets resources
A clear scope helps businesses allocate resources more effectively. It enables them to identify which areas of the business require more investment or resources to achieve the desired results.
Enhances communication
A defined scope of business can help businesses communicate effectively with stakeholders, including employees, customers, investors, and partners. It clearly explains the company’s direction and objectives, assisting stakeholders to work together towards common goals.
Facilitates decision-making
A well-defined business scope can help businesses make better decisions. When there is clarity around the company’s objectives and strategic direction, decision-making becomes more straightforward and effective.
Provides a competitive advantage
Defining a unique and clear scope of business can help businesses stand out from their competitors. It can help establish a brand identity and a clear value proposition, attracting customers and differentiating the company in the market.
Helps with legal requirements
Scopes should help to define how a business has considered the legal requirements within its sector within its business strategy and give an indication as to what the management system has been designed to control in terms of legal and legislative requirements.
Dimensions of Business Scope
When it comes to understanding the scope of a business, there are different dimensions to consider. These will depend on the size and nature of the business. The scope may also need to be defined per department, region, product line, or for the entire company.
One dimension of business scope is the physical locations covered by the business. For example, a company with multiple offices or stores may need to define its scope per location. This could involve specifying which products or services are offered at each location, and any applicable policies or procedures.
Another dimension of business scope is the products and services – the specific areas responsible for creating, designing, or manufacturing products or services.
Industries, markets and sectors may also be applicable. Depending on the nature of the business, you may need to define its scope by sector, such as healthcare, finance, or retail. This is particularly relevant if your company operates in a highly regulated industry and needs to adhere to industry-specific regulations and standards.
Ultimately, a scope covers what the business wants it to cover.
Business Scope and Business Strategy
Business scope and business strategy are closely intertwined concepts. Business scope refers to the area in which a company operates and its specific products or services. On the other hand, the business strategy is the plan a company creates to achieve its long-term goals and objectives.
The relationship between business scope and business strategy is that a company’s business scope influences its business strategy. A company’s scope defines what it does, while its strategy outlines how it does it.
For example, if a company’s business scope is to provide affordable sports shoes to sports amateurs and athletes, then its business strategy would focus on developing and promoting high-quality sports shoes at an affordable price point. The company’s strategy might include sourcing high-quality materials, investing in innovative designs, and targeting specific customer segments.
Types of Business Scope
Understanding the different types of business scopes is essential if you’re to develop a comprehensive business strategy that aligns with the company’s overall goals. By defining each of these dimensions, you can better target the business’s efforts and resources, identify new opportunities for growth, and remain competitive in today’s ever-changing business landscape.
Here are the various types of business scopes:
Geographical scope
This type of business scope refers to the geographical area in which a business operates. It defines the physical boundaries within which a company conducts its operations, such as a single location or multiple locations in different countries or regions.
Product or service scope
Product or service scope defines the range of products or services a business offers its customers, from individual products or services to complete product lines.
Market scope
Market scope refers to the specific market or industry a company operates within.
Customer scope
This refers to the specific group of customers a business targets with its products or services. It encompasses everything from customer demographics and psychographics to purchasing behaviours and needs.
Technology scope
Technology scope is the specific technology or technologies a business uses to operate and produce its products or services. It defines the specific tools, software and hardware a company relies on to achieve its goals and objectives.
Integration scope
Integration scope defines the extent to which a business integrates its operations across different functional areas. It encompasses everything from supply chain management and logistics to marketing and sales, and involves coordinating and integrating different business functions to achieve overall goals and objectives.
Factors That Determine Business Scope
Determining the right business scope is critical because it sets the direction and boundaries of a company’s operations. Several factors contribute to determining business scope, including the competitive environment, resources and capabilities, technology, regulations and legal considerations, along with social and cultural factors.
Consider the following before developing your scope of business.
Competitive environment
Companies may analyse their competitors and identify areas where they can differentiate themselves. For example, a local grocery store may focus on providing fresh, locally sourced produce to differentiate itself from larger chain supermarkets.
Resources and capabilities
A company may choose to consider what it is good at and what resources it has at its disposal.
Technology
New technologies can create new opportunities and lead to the development of new products and services. For example, the rise of e-commerce has led to new businesses operating exclusively online.
Regulations and legal considerations
You should operate within the confines of the law and must ensure that your operations comply with all relevant regulations. For example, companies operating in the healthcare industry must comply with various regulations related to patient privacy and data security.
Social and cultural factors
Be aware of changing societal norms and adapt to these changes. For example, a company may offer more eco-friendly products in response to growing environmental concerns.
Creating a Business Scope Statement
Elements of a business scope statement
The elements of a scope of business are the specific areas of the company’s operations that are included in its overall strategy and objectives. These elements can vary depending on the company’s size, industry, and target market. Common elements of a business scope include:
Products or services
The specific products or services that the company offers to customers.
Geographic reach
The geographical areas where your company operates, such as a city, region, or country.
Target market
The specific demographic or customer segments the company targets with its products or services.
Sales and distribution channels
The methods your company uses to sell and distribute its products or services to customers.
Competitive advantage
The unique advantages your company has over your competitors, such as superior technology, a strong brand, or a lower cost structure.
Resources and capabilities
This refers to the company’s internal resources, such as its workforce, technology, financial resources, and capabilities, such as its ability to innovate or execute efficiently. By defining these elements of its business scope, you will be able to focus your efforts on achieving your strategic objectives.
How To Define Your Scope of Business
Defining your business scope is critical to achieving success in the marketplace. Here’s a comprehensive step-by-step guide to help you define your business scope:
Outline your vision and mission
Start by clearly defining your company’s vision and mission. These statements are the foundation of your business operations and should reflect your values, principles, and direction.
Conduct thorough market research
Market research helps you understand your target audience, competitors, and market trends. It also enables you to identify potential opportunities and threats in the industry.
Define your product or service offerings
Define your product or service offerings to create value for your target audience. Ensure that your offerings are unique, offer value, or address identified gaps in the market.
Establish a unique selling proposition
Determine your unique selling proposition (USP) to differentiate your business from competitors and highlight why customers should choose your products or services.
Determine your target market
Identify your target market to streamline marketing efforts, minimise costs, and tailor strategies to best reach potential customers.
Establish realistic financial and growth goals
Establish realistic financial and growth goals to focus on achieving profitability and monitor progress towards success. Define financial goals, including revenue and profit targets, cost management objectives, and investment plans. Establish growth goals such as market share, expansion plans, or customer base growth.
Develop a detailed business plan
Develop a detailed business plan that acts as a roadmap for business operations. This should contain an executive summary, company description, market analysis, marketing and sales strategies, organisational structure, and financial projections.
Regularly review and adjust your business scope to ensure that the company remains agile and responsive to changes in the market or industry. This continuous process helps to maintain a competitive edge and achieve sustainable growth. It’s important to note that businesses can have multiple scopes of business depending on their products or services, market, and target audience.
Scope of Business, ISO and BMS
The scope of business and a Business Management System (BMS) are interconnected, as the BMS is a framework for managing the scope of a business. The BMS defines the procedures and policies for ensuring that a company’s products or services meet customer requirements and comply with relevant regulations and standards.
The scope of a BMS typically includes the processes, products and services that the company intends to cover under its quality management program. This can include anything from product design and development to production, delivery and customer service. The scope can also extend to suppliers and contractors involved in the company’s operations. A good scope of certification will cover three elements; what a company does, who they offer it to, and in what geographical boundary they operate.
As a business owner, it’s essential to understand the role of ISO (International Organisation for Standardisation) and BMS in defining the scope of your business. Together, ISO and BMS can help your business operate more efficiently, provide better quality products and services, and establish a clear business scope.
The role of ISO in defining the scope of your business is to provide a framework for quality management that is recognised worldwide. By adhering to ISO standards, your business can demonstrate a commitment to quality and build trust with customers and stakeholders. ISO certification is also increasingly becoming a requirement for many companies when working with government entities or larger corporations. Learn more with our various ISO 9001 training courses.
Interestingly, defining your business scope is also an integral step in implementing ISO and BMS standards because it provides a framework for establishing quality management processes and ensures that your business consistently meets customer expectations. A clear business scope also helps you identify areas for improvement and focus your efforts on achieving your business objectives.
Incorporating ISO and BMS into your business operations can also help you stay ahead of the competition. As customers become more discerning and quality-conscious, implementing these standards can set your business apart and increase your market share.
Scope of Business FAQ
What happens if a business does not have a clear scope?
If a business does not have a clear scope, it may struggle to identify its purpose and goals. Without a clear direction, the business may waste time and resources on activities not aligned with its objectives, leading to poor performance and low profitability.
Without a clear scope, a business may have difficulty securing financing, as investors and lenders typically prefer companies with a well-defined strategy and a clear understanding of their target market. This can limit the company’s ability to grow and expand.
It can also be challenging to align employees and ensure that everyone is working towards the same objectives without a clear scope. This can lead to inefficiencies, lack of motivation and conflicts between teams.
Can a business change its scope over time?
Yes, a business can change its scope over time. In fact, it is common for businesses to adjust their scope as they grow and evolve. As a company grows, it may need to expand its scope to pursue new opportunities or address changing market conditions, or it may need to narrow its scope if it struggles to compete in a particular area.
Changing the scope of your business can be a complex process and requires careful planning and execution. You must evaluate the potential risks and benefits of changing your scope and communicate the changes clearly to your stakeholders, including customers, investors, and employees. By adapting your scope over time, your business will remain competitive and continue to grow and thrive in their respective markets.
Is business scope more important for small or large businesses?
Small and large businesses need a clear and defined scope to succeed. However, the specific importance of business scope can still vary depending on the company’s size. For small businesses, having a clear scope is crucial because they often have limited resources and must focus on a specific market or product to succeed.
This is often more complex for larger businesses as they may have multiple product lines, markets and departments to consider. If you’re a large business you may need to adjust your scope over time as you grow and evolve, but it is vital to maintain a cohesive and unified direction across all aspects of the company.
Can businesses have multiple scopes?
Yes, businesses can have multiple scopes of business. In fact, many companies have various scopes to reflect the different areas of their operations. For example, a company producing cars and motorcycles may have different scopes for each product line. Some companies have different scopes for different departments or business units.
The important thing is that each scope is aligned with the overall business strategy.
