Strategic Management:

Enterprise Strategy

Hierarchical Levels of Strategy

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

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.

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.

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.

• 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

 Case in Point  Textron Inc.

Source: "Hierarchical Levels of Strategy", QuickMBA.com

Textron Inc. is a successful conglomerate corporation that pursues profits through a range of businesses in unrelated industries. Textron has four core business segments:

1. Aircraft – 32% of revenue

2. Automotive – 25% of revenue

3. Industrial – 39% of revenue

4. Finance – 4% of revenue

While the corporation must manage its portfolio of businesses to grow and survive, the success of a diversified firm depends upon its ability to manage each of its product lines. While there is no single competitor to Textron, you can talk about the competitors and strategy of each of its business units. In the Finance business segment, for example, the chief rivals are major banks providing commercial financing. Many managers consider the business level to be the proper focus for strategic planning.