What is the Three Levels of Strategy
Three levels of strategy are the different levels of strategic management that run across the organization from the highest corporate level to the bottom functional level. The three levels of strategy include the corporate-level strategy, business-level strategy, and functional-level strategy.
The difference between the three levels of strategy is who to implement the strategy. Since they are affecting in the different levels;
- Corporate level strategy involves top-level management.
- Business level strategy involves the ability to compete of each business unit.
- Functional level strategy involves every single function in every business unit.
Corporate Level Strategy
Corporate level strategy is the highest level of all three levels of strategy. The corporate level strategies are used to define and guideline the direction for the company in the big picture. To put it simply, the corporate strategy is the main theme of all strategies within an organization.
There are three main themes of the corporate level strategy includes growth strategy, stability strategy, and retrenchment strategy.
- Growth strategy is a strategy that focused on expanding the business to increase the revenue in various ways: find new customers, selling existing products to the new market, merger, acquisition, and diversification. The growth strategies are simply found in the Ansoff Product-market matrix.
- Stability strategy is a strategy that focused on stable the business (as its name) to improve the current business without investment or divestment.
- Retrenchment strategy is a strategy that focused on stable the company’s financial position by stop unprofitable operations to cut the company’s expenses.
Business Level Strategy
Business level strategy is how the company competes with others in the market with its products or services. For the business level strategy, the company needs to determine what is the competitive advantage for each business unit.
There are 4 types of competitive advantages for the business level strategy following the Porter’s generic model: cost leadership, differentiation, cost focus, and focus differentiation.
- Cost leadership is a strategy that the company produce products in huge amounts or with low-cost labor to compete.
- Diffetentiation is a strategy that seeks advantage from the different by developing brands that stand out from the competitor.
- Cost focus is similar to the cost leadership strategy but focused on the niche market insead of the mass market.
- Focus differentiation is similar to differentiation strategy but focused on the niche market insead of the mass market.
Functional Level Strategy
The functional level strategy is a strategy that is implemented by each function in a business to support the business-level strategy. Functional level strategies typically are developed by functional area executives. A business’s functional are include accounting, finance, production, marketing, procurement, service, research and development (R&D), human resources, and logistics.
To put it simply, the functional level strategy is a strategy that uses in each department of a single business unit.
Additionally, if you ever heard about the Value Chain (by Michael E. Porter), the functional level strategy is strategies that are implemented in each element of the Value Chain.
