Understanding the Levels of Strategy in Strategic Management

Strategy in the business world works at many levels to enable all parts of an organisation to drive towards the same goals. Each layer of strategy has its role, from the high-level corporate to the implementation of daily tasks at the operational level. Organisations wishing to achieve long-term success will need to align various levels of strategy in strategic management, concisely covered in this article.

Levels of Strategy

Corporate-Level Strategy

The corporate-level strategy, as such, concerns high-level, overarching goals. Senior management gives direction to the way the organisation is going to go. At this level, common objectives include growth, expansion into new markets, mergers and acquisitions, and restructuring. Corporate-level strategies are very useful for large organisations with more than one business unit because they merge their business activities with their mission and vision.

• Portfolio Management: Deciding which businesses or products to retain, invest in or divest is a key part of corporate-level strategy. For instance, big conglomerates like General Electric employ portfolio management to control several business units spread across different industries based on how they match corporate goals.
• Growth Strategies: Corporate-level strategy is exerted on expanding into new markets or launching new products. An example of a corporate-level strategic decision involves Amazon transforming its business model by expanding from online retail to cloud computing (Amazon Web Services).

Corporate-level strategy will define the organisation’s future and start building all other levels of strategy.

Business-Level Strategy

At the business level, strategy is adopted by an individual business unit or product line within an organisation. In this case, the focus is on putting the necessary total competitive position in place for achieving competitive advantage in the specific markets and demonstrating how each business unit needs to compete. Cost leadership, differentiation, or focus are often classified as business-level strategies.

• Cost Leadership: The business units can adopt cost leadership to battle providing products at lower prices than competitors. For example, Walmart uses economies of scale and supply chain efficiency to keep costs low.
• Differentiation: This strategy provides unique products or services in the market. For instance, Apple differentiates through design and innovation, creating a strong brand identity (and therefore leveraging its brand equity) directed to a specific consumer segment.
• Focus Strategy: Business units may concentrate on a narrow market segment. High-income consumers are the target audience of luxury brands such as Rolex, who jock products on exclusivity and quality.

It is critical to stay aligned with and realise corporate objectives and position individual units to do this effectively through business-level strategies.

Functional-Level Strategy

Strategies at the functional level deal with a particular business unit department like marketing, finance, HR, and operations. Business-level objectives drive each functional area to develop strategies that support and optimise operations to generate value.

• Marketing Strategy: This is where strategies which focus on brand awareness, getting customers, and increasing market share are developed in the marketing department. For example, Coca-Cola’s marketing strategy is to run entertaining and memorable ads, which are ways to get their brand visibility through social media.
• Finance Strategy: The results are that if the finance department is customer-focused, then the finance department will prepare budgets, check out costs, ensure the available resources for the business activities, and so on, and the financial strategies will ensure resource allocations by the strategic priorities.
• Human Resources Strategy: Recruitment, employee engagement and retention is the essence of an HR strategy. Whether a company knows how to invest in employee well-being has much to do with why they compete in the jobs market.

At the functional level, strategies are created so that each department in an organisation works very well and helps achieve the selected objectives at the corporate and business levels.

Also Read: Different Levels of Management

Operational-Level Strategy

At the operational level, the strategy involves day-in and day-out activities directly affecting an organisation’s output. This level is concerned with implementing functional strategy at the street level while ensuring employees’ work down the street takes place according to the higher-level strategy.

• Process Improvement: From an operational economics perspective, process efficiency is a major focus of priorities in operational strategies. An example is Toyota’s use of lean manufacturing techniques to eliminate waste.
• Resource Management: Resource effectivity (workforce and material) is critical at the operational level. The basic part of McDonald’s strategy is fast service, efficient workflows and the same product quality for all outlets.
• Quality Control: Operational, functional strategies for ensuring product and service quality using rigorous quality cheques. Like most pharmaceutical companies, Pfizer rigorously controls product quality for regulatory purposes and to protect its brand reputation.

At the operational level, the strategy ensures that all actions performed at the ground level align with the organisation’s strategic goals in promoting efficiency at every department level.

The straggling of strategy levels, in terms of design and implementation, does not lead to successful strategic management, and it should result in a thoughtful integration of these different levels to achieve organisational objectives. They work together and help support each other so everyone at the organisation is on the same page and working towards the same goals.

Business-level strategies help a corporate-level decision to enter a new market. Then, the functional-level strategies will outline how each department will help with this expansion, and operational-level strategies will ensure these daily activities are aligned with this new direction. This interconnected approach allows organisations to adapt quickly to changes, leverage their strength across all levels, and achieve sustainable growth.

Also Read: The Stages & Process of Strategic Management

Key Takeaways for Businesses

• Top-Down Alignment: Make certain that corporate decisions trickle down and that business, function, and operation strategies match the greatest objectives.
• Clear Communication: You need to be able to communicate across all levels of strategy. Employees should understand how their job fits the organisation’s objectives.
• Flexibility and Adaptation: At all levels, strategies must adapt to the internal and external changes of the business environment. It ensures that the organisation can retain its competitiveness and agility.
• Continuous Monitoring: Each strategy level should be regularly evaluated to deliver on deed outcomes. Also, time is honed so it can be made quickly and steered as one, keeping all the strategies on the same track.

Businesses create a structured yet flexible long-term approach by knowing and using multi-level strategies. A framework integrating all of these levels of strategy allows organisations to react to challenges, gain from opportunities and build sustainable competitive advantage.

Also Read: Strategic Management Process

Conclusion

Companies must achieve long-term success by knowing the corporate, business, functional, and operational strategy levels. Each has a different role, from helping define the direction across the organisation at the corporate level to executing day-to-day at the operational level. When these strategies align, it creates a coordinated path for the organisation to reach goals. Effective strategic management combines these layers well, making communication as clear as possible and allowing one to be flexible to changes outside the organisation.

When businesses have acquired the power to create a resilient structure between these levels by mastering the play between them, it empowers constant growth and increased competitiveness. It puts businesses in a good position to sustain their excellence in a changing market. If you are interested in strategies and want to learn more about strategy management, choose the Certificate Program in Strategic Management and Business Essentials With INSEAD by Hero Vired.