Top 3 Levels of Strategy; Corporate Strategy, Business Strategy & Function Level Strategy.
What is the strategy?
A strategy, by definition, is an integrated and coordinated set of actions. These actions are taken to exploit core competencies and gain a competitive advantage or, more broadly, to achieve goals and objectives.
Contrary to popular belief, a strategy is not actually a plan.
A business idea, for instance, does not become a business just because you have the idea. Likewise, until of action, you do not have a strategy.
Different Levels of Strategy
- Corporate Level,
- Business Level And
- Functional Level.
Functional Levels of Strategy
The functional level strategist name implies deals with the various functions of the business. For instance, those interested in marketing should be aware of the marketing strategy of the organization.
This marketing strategy deals with informing and educating potential customers about the company’s goods and services. What likely comes to mind is the marketing mix of 4 Ps (Price, Place Promotion, Product).
Similarly, those interested in human resource is would ideally be more acquainted with the HR strategy organization, which includes hiring and training, benefits compensation, etc
A functional level strategy that might be more universally interesting and similar to understand would be the pricing strategy.
In terms of pricing in functional level strategy, we might employ penetration pricing.
The obvious way of thinking about this pricing strategy is that it uses low prices to stimulate demand and build the customer base our market share.
In contrast, penetration pricing is skimming pricing in the skimming pricing strategy, you choose to be the price leader and thus charge the industry’s highest prices.
The obvious benefit of this pricing strategy is the ability to put it potentially maximize profits.
Other forms of pricing strategy include value-based pricing and closely related incentive-based pricing.
Value-based pricing is a higher price due to something of additional value associated with the good or service; for instance, organic products might be perceived as more viable than a conventional product.
Similarly, incentive-based pricing, a lower total price, is an incentive for some customers to pay a higher up-front amount rather than aim or costly month to month.
However, most of the time, we are faced with competitive pricing, which is simply what everyone else charges.
This is also important because we do not want to get into a pricing war, which is about attracting customers via lower prices than our competitors.
The basic purpose of the business-level strategies is to create differences between your company’s position and that of a competitor, thereby attracting customers and earned profits.
Interestingly, the business level strategies are oftentimes not fully understood nor appropriately applied.
Keep in mind; the two companies can charge the exact same price for service is good, regardless of having different business-level strategies.
For instance, a bargain store can carry a high price well and keep it at a high cost.
Similarly, a medical services company such as a dentist can utilize what we call a low-cost business-level strategy and still provide high-quality service.
When business strategies mentioned, what probably comes to mind for most people are the generic business-level strategies, low cost, differentiation, and integrated strategy. A strategy such as the low-cost business that will strategy is not about the prices but about our cost.
It is a strategy designed to provide goods or services at the lowest cost relative to competitors. Thus, the actions associated with this strategy emphasized removing costs from our operations.
When the airline offers meals, it adds costs, and when it removes meals, it eliminates costs.
The airline ticket price may not reflect this difference, but your choice to fly with one or the other represents successfully attracting you as a customer.
You might decide you adopt a particular functional level strategy because you believe it compliments your business.
That was strategy, but they’re not the same.
Similarly, the business strategy is not the corporate level strategy, corporate level strategies about diversification.
Corporate Level Strategies
In contrast, a company might seek to find new markets for existing products and find new products for existing markets.
These activities, although important to growth, represent the market for our product development.
For instance, McDonald’s Corporation engages in lots of product and market development. Indeed, this worldwide popular American fast-food burger chain competes directly in the fast-food industry, particularly the burger industry.
Of course, like many others, it also sells other things. That’s the term dominant business more appropriate in most cases than a single industry.
However, a corporate-level diversification is about entering a new are a different business.
Indeed, a diversified corporate level strategy means that the company directly competes in multiple business arenas.
The corporate level strategy addresses the simple question:
In what business areas do you want t to compete?
A group of businesses all targeting the same market segment comprising industry.
When you have one arena in which you compete and generate revenues, you are organized around what is called a single or at least dominant business.
A large conglomerate, by definition, competes in multiple industries. While a new startup business, by definition, competes in a single business.
Therefore, for a new startup business, the corporate level strategy is virtually irrelevant.
It is not until the decision to diversify is made that the corporate level strategy truly becomes relevant. The decision to diversify might be supported by the opportunity to acquire and assumed related business.
The related corporate Level of diversification strategy represents relatively moderate levels of diversification
In the strategy, many business units share connections and thus are considered linked.
Or it may be that all the business unit share connections and are thus considered constrained, the Highest Level of diversification for a corporate level strategist called Unrelated
In such a corporate level strategy, there are basically no common links between business units. An extreme example might be something like only the restaurant business.
The car rental business and a nursery constrained and linked types of related diversification to capture connections between business units.
The fundamental difference is that the related linked strategy represents a higher level of operational relatedness or sharing of activities for the organization While the related constrained strategy represents a higher level of corporate relatedness or the transferring of core competencies for the organization
In practice, any differences are really of significance.
The actual value and significance of a corporate level of diversification strategy is performance enhancement via operational relatedness and corporate relatedness.
This potential is captured in the synergy concept, reflecting the performance above and beyond the simple financial economies of having a more extensive business due to the number of companies and the portfolio.
in summary, corporate-level strategies about diversification and identifies whether you compete in a single are dominant business or in multiple related or unrelated companies representing different industries.
How you position each business unit and attract customers is the specific business-level strategy decision.
Lastly, we have various business functions and their associated policies and any set of decisions and actions and strategies.