The Three Levels of Business Strategy

The Three Levels of Business Strategy

Strategies can be formulated on three different levels:

· Corporate level,

· Business unit level, and

· Functional or departmental level

Strategy may be about competing and surviving as a firm, products are

developed by business units. The role of the corporation is to mange

its business units and products so that each is competitive and so

that each contributes to corporate purposes.

Corporate Level Strategy

Corporate level strategy fundamentally is concerned with the selection

of businesses in which the company should compete and with the

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 goals of the corporation,

the types of businesses in which the corporation should be involved,

and the way in which businesses will be integrated and managed.

· Competitive contact – defining where the 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. Igor Ansoff introduced the

concept of synergy to corporate strategy.

· Management Practices – corporations decide how business units are to

be governed: through direct corporate intervention (centralization)or

through more or less autonomous government (decentralization) that

relies on persuasion and rewards

Corporations are responsible for creating value through their

businesses. They do so by managing their portfolio of businesses,

ensuring that the businesses are successful over the long-term,

developing business units, and sometimes ensuring that each business

is compatible with others in the portfolio.

Business Unit Level Strategy

A strategic business unit may be a division, product line, or other

profit center that can be planned independently from the other

business units of the firm.

At the business unit level, the strategic issues are less about the

coordination of operating units and more about developing and

sustaining a competitive advantage for the goods and services that are

produced. At the business level, the strategy formulation phase deals

with:

· Positioning the business against rivals

· Anticipating changes in demand and technologies and adjusting the

strategy to accommodate them.

· Influencing the nature of competition through strategic actions such

as vertical integration and through political actions such as

lobbying.

Michael porter identified three generic strategies (cost leadership,

differentiation, and focus) that can be implemented at the business

unit level to create a competitive advantage and defend against the