Levels of Strategy-Corporate, Business and Functional 

A strategy is a framework for an organization’s future growth, achieved through well-defined objectives, strategic resource allocation, and defensible decision-making. The concept of levels of strategy in strategic management is fundamental to understanding how organizations can achieve sustainable competitive advantage. The levels of strategic management provide a framework for understanding and analyzing an organization’s strategic initiatives. Each strategy level shapes a company’s direction, competitive advantage, and operational efficiency in a different way. This Amrita AHEAD article delves into the three primary levels of strategy: corporate, business, and functional along with the key strategies used 

Levels of Strategy 

The different levels of strategy in an organization employs can significantly impact its overall performance. Three distinct stages combine to create a thorough foundation for organizational performance in the extremely intricate fabric of business strategy. The levels of strategy in strategic management provide a framework for aligning the organization’s goals, resources, and capabilities with its external environment. By examining the levels of strategic management, businesses can identify opportunities, mitigate risks, and allocate resources effectively. Below are the different types of strategies that an organization employs. 

• Corporate Strategy: Defines the overall direction and scope of an organization, addressing questions like market entry/exit, diversification, and resource allocation.  
• Business Strategy: Focuses on how a specific business unit competes within its market, employing tactics like cost leadership, differentiation, or focus. 
• Functional Strategy: Outlines how individual departments (e.g., marketing, finance, operations) contribute to the overall business strategy.  

These different types of strategies work together to guide an organization towards its desired outcomes. 

Corporate-Level Strategy 

An organization’s mission, vision, and values are established by the corporate level strategy, which is the highest level of strategy and defines the general direction of the organization. It also determines which businesses the company will be involved in and how they should be integrated. Some of the important questions that the corporate level strategy addresses are as follows: 

1. What businesses should we be in? 
2. How should these businesses be related to each other? 
3. How should resources be allocated among different business units? 

Corporate-level strategy is primarily concerned with portfolio management and value creation across diverse business units. It involves decisions such as acquisitions, divestments, mergers, and strategic alliances. The key strategies at the corporate level include: 

• Growth Strategy: This strategy focuses on expanding the organization’s operations through organic growth or acquisitions.  
• Stability Strategy: This strategy prioritizes maintaining the current position of the organization, focusing on efficiency and cost control. 
• Retrenchment Strategy: This strategy involves downsizing operations, divesting non-core assets, and focusing on core competencies.  
• Diversification Strategy: This strategy involves entering new markets or industries to spread risk and capitalize on new opportunities.  

Business-Level Strategy 

The business level strategy focuses on how to compete in a particular market. It takes into account the company’s competitive environment, customer needs, and resources. Here are some of the key questions that business level strategy addresses: 

1. How should we compete in this market? 
2. What is our competitive advantage? 
3. What is our value proposition to customers? 

Business-level strategy is concerned with gaining and sustaining a competitive advantage over rivals. It involves decisions related to product positioning, pricing, distribution channels, and marketing strategies. The key strategies at the business level include: 

• Cost Leadership Strategy: This strategy focuses on achieving the lowest cost position in the industry.  
• Differentiation Strategy: This strategy focuses on creating unique products or services that customers perceive as superior to competitors’ offerings.  
• Focus Strategy: This strategy targets a specific niche market segment and tailors products or services to meet the unique needs of that segment. 

Functional-Level Strategy 

The functional level strategy focuses on how to support the business-level strategy within functional departments. Functional strategies are developed for each department, such as marketing, finance, operations, and human resources. Here are some of the key questions that functional level strategy addresses: 

• How can we improve efficiency and effectiveness in our operations? 
• How can we leverage technology to gain a competitive advantage? 
• How can we attract and retain top talent? 

Functional-level strategy involves decisions related to marketing, finance, human resources, operations, and other functional areas. It focuses on day-to-day operations and tactical decisions that support the broader business strategy. The key strategies at the functional level include: 

• Marketing Strategy: This strategy focuses on creating and implementing marketing plans to attract and retain customers.  
• Financial Strategy: This strategy focuses on managing the organization’s financial resources to achieve long-term financial goals. 
• Human Resource Strategy: This strategy focuses on attracting, developing, and retaining talented employees. 
• Operations Strategy: This strategy focuses on improving the efficiency and effectiveness of the organization’s operations.  

A deep understanding of the levels of strategic management is crucial for long-term success.  

The Interconnectedness of the Three Levels 

The three levels of strategy are interconnected and interdependent. Corporate-level strategy provides the overall direction, business-level strategy defines the competitive approach, and functional-level strategy supports the execution of both. A well-aligned strategy across all three levels is essential for organizational success. By effectively managing the levels of strategy in strategic management, organizations can enhance their overall performance and long-term viability. 

Difference between Policy and Strategy 

 Listed below are the differences between Policy and Stragey 

Policy 

• What it is: A general guideline or principle that dictates decision-making within an organization or system.  
• Focus: Provides a framework for consistent behavior and decision-making.  
• Scope: Broader, overarching principles that guide actions.  
• Examples: 
• Environmental policy  
• Company policy on harassment  
• Government policy on immigration  

Strategy 

• What it is: A comprehensive plan of action designed to achieve specific goals and objectives.  
• Focus: Outlines the specific actions and steps needed to achieve desired outcomes.  
• Scope: More specific and action-oriented than a policy. 
• Examples: 
• A marketing strategy to increase brand awareness. 
• A business strategy to enter a new market. 
• A military strategy to win a battle. 

In essence: 

• Policy sets the ground rules and principles.  
• Strategy determines how those principles will be applied to achieve specific objectives.  

Analogy: 

Think of a policy as the constitution of a country, outlining fundamental rights and freedoms. The strategy, on the other hand, would be the government’s plan to implement those rights and freedoms, such as building schools, providing healthcare, and ensuring national security. 

Conclusion 

By understanding the three levels of strategy, organizations can develop a comprehensive and integrated approach to strategic planning and execution. Effective strategy formulation and implementation require a clear understanding of the organization’s strengths, weaknesses, opportunities, and threats, as well as the dynamic nature of the external environment. By effectively balancing the long-term vision of corporate strategy, the competitive focus of business strategy, and the operational efficiency of functional strategy, organizations can achieve sustainable competitive advantage and long-term success. 

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