Strategic

Corporate Strategy and its Three Levels

Strategy is the direction and scope of an organization over the long term, which achieves advantage for the organization through its configuration of resources within a changing environment, to meet the needs of markets and to fulfil stakeholder expectations.’ (Johnson, Scholes and Whittington).

Corporate strategy

Corporate strategy is concerned with an organization’s basic direction for the future, its purpose, its ambitions, its resources and how it interacts with the world in which it operates (Lynch). Theories of strategy and of strategic management must be used with caution. They don’t apply in all situations and the evidence for them is not always clear cut. Therefore this writing draws attention to the limitations of some to help you decide how far you can apply them in the business.

Levels of strategy

Strategy can exist at several levels in an organization. Typical 3 levels are as shown below:

1. Corporate strategy

Corporate strategy is generally determined at head office/main board level. The types of matters dealt with include:

 Determining the overall corporate mission and objectives

 Overall product/market decisions, e.g. expand, close down, enter new market, develop new product etc via methods such as organic growth, merger and acquisition, joint venture etc

 Other major investment decisions besides those for products/markets, e.g. information systems, IT development

 Overall financing decisions – obtaining sufficient funds at lowest cost to meet the needs of the business

 Relations with external stakeholders, e.g. shareholders, bondholders, government, etc.

2. Business strategy

Business strategy This normally takes place in strategic business units (SBUs). An SBU is ‘a section, within a larger organisation, which is responsible for planning, developing, producing and marketing its own products or services’. Competitive strategy is normally determined at this level covering such matters as:

 How advantage over competitors can be achieved

 Marketing issues, such as the 4Ps (product, price, promotion, place).

3. Functional (operational) strategies

This refers to the main functions within each SBU, such as production, purchasing, finance, human resources and marketing, and how they deliver effectively the strategies determined at the corporate and business levels.

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