Strategic Management:

Enterprise Strategy

Hierarchical Levels of Strategy

Corporate Level, Business Unit Level, and Functional or Departmental Level

By: Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited!

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

Hierarchical Levels of Strategy Enterprise Strategy Business Strategy Enterprise Strategy 3 Levels of Enterprise Strategies: Corporate Strategy, Business Strategy, Functional Strategy

Three Hierarchical Levels of Strategy5

  1. Corporate Strategy What business should you be in? Looks at the whole range of business opportunities

  2. Business Strategy Battle plans, tactics used to fight the competition in the industry that your company currently participates in (see Competitive Strategies and  Competitive War Games)

  3. 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:

  1. Reach

  2. Enterprise-wide cross-business process management

  3. Competitive Contact

  4. Managing Activities and Business Interrelationships

  5. Management Practices

 

 

Business Unit Level Strategy

At the business unit level, the strategy formulation and implementation deals with:

  1. Positioning and differentiating the business and/or products against rivals

  2. Business-level cross-functional process management

  3. Anticipating changes in technology and customer perceptions and adjusting the strategy to accommodate them.

  4. Influencing the nature of competition through strategic actions such as virtual integration and through political actions

  5. Building strategic partnerships and co-innovating with other business units, partners, and customers.

The Three Levels of Enterprise Strategy

Enterprise strategy can be formulated and implemented at three different levels:

  1. Corporate level

  2. Business unit level

  3. Functional or departmental level

 

At the corporate level, you are responsible for creating value through 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 Strategy

Products 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

Surprise To Win: 3 Strategies

Corporate Level Strategy

Corporate 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 corporation competition 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 Strategy

A 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 Strategy

The 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 and value chain. Functional 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

 

 

References:

  1. "What is Strategy?", Michael Porter

  2. "Strategic Achievement", Andrew Spanyi

  3. "Hierarchical Levels of Strategy", QuickMBA.com

Mini-courses

  1. Strategic Management, Vadim Kotelnikov

  2. 3 Strategies of Market Leaders, Vadim Kotelnikov

  3. SMART Business Architect, Vadim Kotelnikov