Levels of Strategy: Corporate, Business, and Functional
In order to understand a business’s strategic options, it is important to first understand the different levels of strategy that exist within an organisation. These levels include corporate strategy, business strategy, and functional strategy. Each level of strategy focuses on different aspects of the organisation and plays a crucial role in achieving the overall objectives.
Corporate Strategy
Corporate strategy is the highest level of strategy within an organisation. It involves making decisions at the corporate level that determine the direction and scope of the entire organisation. Corporate strategy focuses on questions such as:
- What industries should the organisation compete in?
- What products or services should the organisation offer?
- Should the organisation diversify into new markets?
Corporate strategy is typically developed by top-level executives and is aimed at creating value for the shareholders and stakeholders of the organisation as a whole. It sets the overall direction and goals for the organisation and provides a framework for decision-making at lower levels.
Business Strategy
Business strategy is the level of strategy that focuses on individual business units or divisions within the organisation. It involves making decisions that determine how a business unit will compete within its specific industry. Business strategy focuses on questions such as:
- How can the business unit gain a competitive advantage?
- What market segments should the business unit target?
- What products or services should the business unit offer?
Business strategy is developed by mid-level managers and is aimed at achieving the objectives set out in the corporate strategy. It provides a roadmap for how the business unit will achieve its goals and objectives, and guides decision-making at the operational level.
Functional Strategy
Functional strategy is the level of strategy that focuses on the specific functions or departments within the organisation. It involves making decisions that determine how each function will support the overall business and contribute to the achievement of the business and corporate strategies. Functional strategy focuses on questions such as:
- How can the marketing function support the business unit’s strategy?
- What resources are needed by the operations function to achieve its goals?
- How can the human resources function attract and retain top talent?
Functional strategy is developed by lower-level managers and is aimed at achieving the objectives set out in the business strategy. It provides guidance for how each function will contribute to the overall success of the organisation and guides decision-making at the operational level.
Conclusion
Understanding the different levels of strategy is essential for understanding a business’s strategic options. Corporate strategy sets the overall direction and goals for the organisation, business strategy determines how individual business units will compete, and functional strategy guides the specific functions or departments in supporting the overall business objectives. By considering these different levels of strategy, businesses can make informed decisions and choose the most appropriate strategic options to achieve their goals.