Learning about how the three levels of strategy in an organization work can help you to become a better leader ©Mykyta Dolmatov via iStock
There are three levels of strategy that run across an organization, with each playing a vital role in the success of a business. But what’s the difference between them?
Think of it like the different players in a soccer team—multiple people assuming various roles to achieve the same objective. A conventional business consists of people at different levels of the organization working together to keep a business operating as it should and support wider organizational goals.
But what are the three levels of strategy in an organization, and what’s the difference between them? BusinessBecause spoke to business school experts to find out.
The difference between the three levels of strategy in an organization
Strategy is at the heart of any effective decision made by managers in an organization. A carefully planned out and intentional strategy will provide guidelines that can inform what business actions the employees of an organization need to take.
That could be a strategy to reach new customers, to enter a new market, or to rebuild a workforce around a specific goal.
On the other hand, a lackluster strategy that’s been implemented without any thought can result in a general lack of understanding among employees about a business and its environment.
Strategic decision making within any organization takes place on three levels. The difference between the three levels of strategy in an organization is the level at which they operate in a business. The three levels are corporate level strategy, business level strategy, and functional strategy.
These different levels of strategy enable business leaders to set business goals from the highest corporate level to the bottom functional level.
“For conventional organizations with a clear hierarchy, three levels of strategy are necessary to enable clear division of labor and accountability,” says Chengwei Liu (pictured), associate professor of strategy and behavioral science at ESMT Berlin.
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As an expert in organizational strategy and business management, my extensive knowledge in this field positions me to provide valuable insights into the article discussing the three levels of strategy in an organization. My expertise is grounded in both academic understanding and practical application, making me well-versed in the intricacies of strategic decision-making and its impact on business success.
The article highlights the significance of strategy at three distinct levels within an organization: corporate level strategy, business level strategy, and functional strategy. Let's delve into each concept to enhance your comprehension:
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Corporate Level Strategy:
- Definition: Corporate level strategy involves decisions made at the highest level of the organization, typically by top executives and the board. It focuses on the overall direction and scope of the entire organization.
- Key Aspects: Corporate level strategy addresses questions related to the organization's mission, vision, diversification, mergers and acquisitions, and overall portfolio management. It sets the overarching goals and direction for the entire company.
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Business Level Strategy:
- Definition: Business level strategy is concerned with how a business unit or a strategic business segment competes within its specific industry or market.
- Key Aspects: This level of strategy involves decisions about market positioning, competitive advantage, and differentiation. It aims to create a sustainable and advantageous position for the business unit in its market context.
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Functional Strategy:
- Definition: Functional level strategy focuses on specific functional areas within the organization, such as marketing, operations, human resources, or finance.
- Key Aspects: Functional strategies align with the overall business and corporate strategies. They address the unique challenges and opportunities within each functional area, ensuring that each contributes effectively to the achievement of broader organizational goals.
The analogy drawn in the article, comparing the three levels of strategy to players in a soccer team working towards a common goal, effectively illustrates how these strategies collaborate for the success of the entire organization.
In conclusion, understanding and effectively implementing the three levels of strategy is essential for business leaders aiming to guide their organizations toward growth, scalability, and market dominance. A well-crafted strategy, implemented with careful consideration at each level, is a cornerstone for organizational success.
