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Types of Strategies

The document discusses three levels of strategy that are important for organizations: corporate strategy, business strategy, and functional strategy. Corporate strategy is the highest level and deals with objectives and resource allocation. Business strategy operates at the business unit level. Functional strategy relates to single functions like marketing or production.

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37 views

Types of Strategies

The document discusses three levels of strategy that are important for organizations: corporate strategy, business strategy, and functional strategy. Corporate strategy is the highest level and deals with objectives and resource allocation. Business strategy operates at the business unit level. Functional strategy relates to single functions like marketing or production.

Uploaded by

manuelaliana20
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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TYPES OF STRATEGY

There are three basic levels of strategy that interest organizations. These are corporate strategy,
business strategy and functional strategy. These are described below.

Corporate Level Strategy Corporate level strategy occupies the highest level of strategic decision-making
and covers actions dealing with the objective of the firm, acquisition and allocation of resources and
coordination of strategies of various SBUs for optimal performance. Top management of the
organization makes such decisions. The nature of strategic decisions tends to be value oriented,
conceptual and less concrete than decisions at the business or functional level. Corporate strategy can
be defined as the way a company creates value through the configuration and coordination of its
multimarket activities.

Business-Level Strategy Business-level strategy is - applicable in those organizations, which have


different businesses-and each business is treated as strategic business unit (SBU). The fundamental
concept in SBU is to identify the discrete independent product/market segments served by an
organization. Since each product/market segment has a distinct environment, a SBU is created for each
such segment. For example, Madson group of companies operates in insurance, general services,
investment, financial services etc. For each product group, the nature of market in terms of customers,
competition, and marketing channel differs. There-fore, it requires different strategies for its different
product groups. Thus, where SBU concept is applied, each SBU sets its own strategies to make the best
use of its resources (its strategic advantages) given the environment it faces. At such a level, strategy is a
comprehensive plan providing objectives for SBUs, allocation of re-sources among functional areas and
coordination between them for making optimal contribution to the achievement of corporate-level
objectives. Such strategies operate within the overall strategies of the organization. The corporate
strategy sets the long-term objectives of the firm and the broad constraints and policies within which a
SBU operates. The corporate level will help the SBU define its scope of operations and also limit or
enhance the SBUs operations by the resources the corporate level assigns to it. There is a difference
between corporate-level and business level strategies. In other words, business strategy relates to the
‘how’ and corporate strategy to the ‘what’. Corporate strategy defines the business in which a company
will compete preferably in a way that focuses resources to convert distinctive competence into
competitive advantage.’ Corporate strategy is not the sum total of business strategies of the corporation
but it deals with different subject matter. While the corporation is concerned with and has impact on
business strategy, the former is concerned with the shape and balancing of growth and renewal rather
than in market execution.

Functional-Level Strategy Functional strategy, as is suggested by the title, relates to a single functional
operation and the activities involved therein. This deals with decisions according to functional lines such
as R&D, marketing, production, finance etc. Decisions at this level within the organization are often
described as tactical. Such decisions are guided and constrained by some overall strategic
considerations. Functional strategy deals with relatively restricted plan providing objectives for specific
function, allocation of resources among different operations within that functional area and
coordination between them for optimal contribution to the achievement of the SBU and corporate-level
objectives. Below the functional level strategy, there may be operations-level strategies as each function
may be dividend into several sub functions. For example, marketing strategy, a functional strategy, can
be subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy
contributing to functional strategy. Strategies at all the three levels are interlinked in which a higher
level strategy generates a lower-level strategy and a lower-level strategy contributes to the achievement
of the objectives of higher-level strategy.

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