Strategic Management | 3 Levels of Strategy That a Large Organization Must Develop

List and discuss the three levels of strategy that a large organization must develop. 

Answer: 

a.     Corporate strategy—this strategy seeks to determine what businesses a company should be in or wants to be in. Corporate strategy determines the direction that the organization is going and the roles that each business unit in the organization will plan in pursuing that direction.

b.     Business strategy—this strategy seeks to determine how an organization should compete in each of its businesses. For a small organization in only one line of business or the large organization that has not diversified into different products or markets, the business strategy typically overlaps with the organization’s corporate strategy. For organizations with multiple businesses, however, each division will have its own strategy that defines the products or services it will offer and the customers it wants to reach.

c.      Functional strategy—this strategy seeks to determine how to support the business strategy. For organizations that have traditional functional departments such as manufacturing, marketing, human resources, research and development, and finance, these strategies need to support the business strategy.

Strategy Basics for Business Owners3 Levels of StrategyThere are three basic levels of business strategy:

CorporateDefining what business the company is inSetting the overall structure, systems and processes

Business Level

Deciding how to competeIdentifying competitive advantageSelecting key success factors

Functional(marketing, finance HR, operations, R&D)

Coordination of company departments or areas to support achievement of business strategy and objectives.

Describe the Three Levels of Strategy for a Single-Business Companyby Bert Markgraf, Demand Media

A single-business company is both agile and vulnerable.

Related Articles How to Describe the Three Levels of Management Differences Between Single Business & Business Diversification Strategies The Advantages of Single Business Strategy How to Describe a Marketing Strategy Generic Business-Level Strategies Three Levels of Ethical Standards in a Business Organization

The three levels of strategy for a company are corporate, business and functional. Corporate strategy focuses on determining which businesses the company should be in. Business strategy develops competitive advantages within a businesses segment. Functional strategy operates at the level of marketing, operations and finance to ensure that each part of the company has strategies to support the business. For single-business companies, corporate strategy consists of continuously evaluating the benefits of remaining in a single business versus becoming active in complementary industries.

Ads by GoogleiPage® Web HostingWeb Hosting, Email & Free Domains! Trusted by Millions.www.iPage.comCorporate StrategySingle-business companies have the advantage of focus and rapid response but are vulnerable to problems in their industry. Their corporate strategy must demonstrate the advantages of remaining active in only one industry while evaluating business opportunities in areas with complementary activities. With a goal of optimizing company operations, profitability and growth, the corporate strategy must compare the return of a continuing investment in the single business with the acquisition or starting up of complementary businesses.

Business StrategyThe business strategy of a single-business company is similar to that of a business unit of a diversified company except that the business strategy must support corporate strategic initiatives aimed at the single business. The business strategy sets goals for performance, evaluates the actions of competitors and specifies actions the company must take to maintain and improve its competitive advantages. Typical strategies are to become a low-price leader, to achieve differentiation in quality or other desirable features or to focus on promotion.

Related Reading: Three Levels of Ethical Standards in a Business OrganizationMarketing Functional StrategyIn companies that are marketing oriented, the marketing strategy on a functional level influences the other functions and their strategies. A typical marketing strategy is to determine customer needs in an area where the company has a natural competitive advantage. Such advantages might be in location, facilities, reputation or staffing. Once the marketing strategy has identified the kind of product customers

want, it passes the information to operations to design and produce such a product at the required cost. The advertising department must develop a promotional strategy, sales must sell the product and customer service must support it. The marketing strategy forms the basis for the strategies of these other departments.

Other Functional StrategiesThe non-marketing functional strategies must support the marketing strategy that, in turn, is a component of the overall business strategy. In a single-business company, those strategies are tightly focused on one industry, but they must also deliver data that allows the corporate strategy to examine possible diversification. Single-business companies are usually either highly ranked in their single business or dominant in their niche. The strategies at the functional level try to maintain such a position but also look for external danger signs. If events outside the company's control lead to a deterioration of its position, strategic components from a functional level must signal to the corporate level that an implementation of alternative strategies is required.

"The most important thing is to set goals. Training is a waste of time if you don't have goals." ~ Samantha Riley 

The Three Levels of Enterprise StrategyEnterprise strategy can be formulated and implemented at three different levels:

1. Corporate level2. Business unit level3. Functional or departmental level

At the corporate level, you are responsible for creating valuethrough your businesses. You do so by managing your portfolio of businesses, ensuring that your businesses are successful over the long term, developing business units, and sometimes ensuring that each business is compatible with others in your portfolio.

 Competitive Strategies: 2 Types

 Creating Customer Value: 9 Questions

 Blue Ocean vs. Red Ocean StrategyProducts and services are developed by business units. The role of the corporation is to manage its business units, products and services so that each is competitive and so that each contributes to corporate purposes.

 Differentiation Strategies

 

Three Hierarchical Levels of Strategy5

Corporate Strategy – What business should you be in? Looks at the whole range of business opportunitiesBusiness Strategy – Battle plans, tactics used to fight the competition

in the industry that your company currently participates (seeCompetitive Strategies and  Competitive War Games)

Functional Strategy – Operational methods and value adding activities that you choose for your business (venture strategies, technology strategies, diversification strategies, marketing strategies,differentiation strategies, etc.)

Corporate Level Strategy

Corporate level strategy is concerned with:ReachEnterprise-wide cross-business process managementCompetitive ContactManaging Activities and Business Interrelationships

Management Practices

 

Business Unit Level Strategy

business unit level, the strategy formulation and implementationdeals with:

Positioning and differentiating the business and/or products against

Business-level cross-functional process managementAnticipating changes in technology and customer perceptions

and adjusting the strategy to accommodate them.Influencing the nature of competition through strategic actions

such as virtual integration and through political actionsBuilding strategic partnerships and co-innovating with other

business units, partners, and customers.

 Surprise To Win: 3 Strategies

Corporate Level StrategyCorporate level strategy fundamentally is concerned with selection of businesses in which your company should compete and with development and coordination of that portfolio of businesses.Corporate level strategy is concerned with: Reach – defining the issues that are corporate responsibilities. These might include

identifying the overall vision, mission, and goals of the corporation, the type of business your corporation should be involved, and the way in which businesses will be integrated and managed.

Competitive Contact – defining where in your corporationcompetition is to be localized.

 Jack Welch's 5 Strategic Questions Managing Activities and Business Interrelationships – corporate strategy seeks to

develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities.

Management Practices – corporations decide how business units are to be governed: through direct corporate intervention (centralization) or through autonomous government (decentralization).

Business Unit Level StrategyA strategic business unit may be any profit center that can be planned independently from the other business units of your corporation. At the business unit level, the strategic issues are about both practical coordination of operating units and about developing and sustaining a competitive advantage for the products and services that are produced.

Functional Level StrategyThe functional level of your organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to functional business processes andFunctional level strategies in R&D, operations, manufacturing, marketing, finance, and human resources involve the development and coordination of resources through which business unit level strategies can be executed effectively and efficiently.Functional units of your organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing information on customer feedback or on resources and capabilities on which the higher level strategies can be based. Once the higher level strategy or strategic intent is developed, the functional units translate them into discrete action plans that each department or division must accomplish for the strategy to succeed.3