A business can have a groundbreaking new idea, a life-changing product, or even a much-needed service, but without a sustainable strategy to support it, it runs the risk of failure.
A comprehensive, well-planned strategy should be found at the heart of any business. Strategies enable organisations to utilise their environment and maximise their resources to cement themselves in their niche and stay ahead of competitors.
But what are the levels of business strategy?
In an organisational context, the word “strategy” takes on several different meanings. It may refer to the overall mission of the organisation, or it may refer to daily departmental activities.
Sometimes these differentials can confuse, and if strategies found throughout the business are not working together, they actually risk running the business off of the tracks.
So in this blog, we’re going to use The Three Levels of Strategy, first developed by Gerry Johnson and Kevan Scholes in their book Exploring Corporate Strategy (2005) to define the different layers of strategy – which when working in unison – do roadmap the success of an organisation.
Business strategies must be correctly applied no matter the business model. Check that you have the right one, here.
What are the 3 levels of strategy?
1. The Corporate Level
If we think of the levels of business strategy as the three layers of a pyramid, the very top, pointy layer is the corporate level. The corporate level oversees all other levels of business strategy because it is defined by the very people at the top – the managing directors and executive boards.
As the overseer, the corporate level strategy, therefore, defines the organisation’s main purpose and will then direct all other downstream decision-making. The goals, mission, values and purpose of the organisation defined in the corporate strategy should all be aligned with other strategic decisions made and should influence all other goals decided.
So to summarise, the corporate strategy level defines:
- Your businesses overall strategy and general direction
- The markets in which your organisation will operate
- How your organisation will enter the identified markets
- How the general activities of the organisation align with those markets
Creating and understanding the corporate level strategy is a must for a business of any size.
New, or small organisations whose market is either niche or specific will have a much easier corporate strategy development process because there are fewer variables.
Businesses with multiple arms, however, for example, where one arm produces a product and the second sells the product, will require a separate business strategy for each but the corporate-level strategy will apply to both. This is because it details overall why both arms are necessary and how their interaction furthers the mission and goals of the business.
Overall then in the corporate-level strategy, there are 2 requirements that corporate-level business owners and executives must action. They are:
A) To confirm the businesses overall mission and its vision
The business mission and vision define the entire organisation, so must be carefully decided upon. Remember, the mission statement describes what the business does and how it differs from competitors, and the vision statement describes how you see the state of the business at a future point in time.
B) Create corporate objectives
Corporate objectives refer to the high-level goals which will help the organisation achieve its mission and vision. Objectives could include revenue, customer satisfaction, internal, productivity and growth.
2. The Business Unit Level
The middle level of our pyramid is where we’ll find the Business Unit strategy level. Business unit strategies are adapted and used across different areas of the business, including departments, products and services.
Strategies at the business unit level allow you to scrutinise the costs and benefits of each business unit to better decide where to spend business resources. Depending on how the business progresses towards its goals, business unit strategies could even identify whether some business units should be divested or sold to focus on areas of the business that are important to achieving the overall company corporate strategy.
In essence, business unit strategies support corporate-level strategies by:
- Defining the specific tactics and strategies needed for each market the organisation is involved in
- Defining how each business unit will deliver the planned tactics
To create their business unit strategies, business owners must:
A) Differentiate the business from competitors
Differentiating the business is easily achieved through undertaking a SWOT analysis. A SWOT analysis identifies Strengths, Weaknesses, Opportunities and Threats to a business, making it easy to see which features of the organisation set it apart from others in the same industry.
B) Curate initiatives and objectives that aid the business
The goal whilst creating any business unit strategy should be to identify initiatives and objectives that both work for the unit and further drive the initiatives and objectives of the organisation.
For example, if one of the corporate level goals is to provide a collaborative and high-achieving environment, your business units must understand what duties they’ll need to perform this, like clarifying values and reinforcing positive behaviours.
3. The Functional Level
The final, bottom layer in our strategy pyramid is the functional level, sometimes known as the Market-Level Strategy. The functional level serves to create a strategy that encompasses the day-to-day operations of the organisation, and more specifically, the departments which make up the organisation to support corporate level goals.
Surprisingly, some organisations who have an encompassing, comprehensive corporate strategy still fail because they have overlooked their functional level strategies – perhaps the most important of all!
Functional level strategies therefore define:
- The day-to-day actions required by the organisation to meet corporate targets and align with business-unit strategies
- The relationships between departments, units and teams
- How operational goals will be met and monitored
Whilst business unit strategies are created and evaluated by senior leadership, functional strategies can be produced by heads of departments. Just make sure that these leaders know how their departments support the long term missions and objectives of the corporate-level strategies.
To correctly implement your functional strategies, ensure you:
A) Detail the required measures and projects
Measures will provide answers to questions regarding the meeting of particular objectives. Projects meanwhile will identify the key actions the organisation can take to support its overall objectives. Measures and projects will be present at every level of your strategy, but just make sure they go into the most detail at the functional level.
B) Align functional strategy goals with corporate-level objectives
If functional level strategic goals align with corporate objectives set by senior-level management, leaders will gain significant support from the top-level management, as well as being able to better see how the functional goals are contributing to the success of the organisation.
As you develop your levels of business strategy, ensure that you are always giving and gathering feedback. Without adequate support, the creation of strategies, such as at fundamental and business-unit levels could accidentally not contribute as needed to the goals and objectives of the organisation as a whole.
As a business growth consultancy, we can design and implement a strategy that works for your organisation by using our High Performance Executive Board. We give you expert advice, leadership and strategic decision making to ensure that your business reaches the next level. Read more from the plethora of clients we’ve helped, or book a free business strategy review with us now.