Three Levels Of Strategy: Key Differences Explained (2024)

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?

There are typically three levels of strategy in an organization, all working together to help a business grow, scale, and compete for market dominance.

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 to 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.

Three Levels Of Strategy: Key Differences Explained (1) 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.

Three Levels Of Strategy: Key Differences Explained (2)

What is corporate level strategy?

The corporate level is the highest point in an organization, so the decisions made here will ultimately inform the business’ main goal, as well as the goals of the levels further down the organization.

“Corporate level strategy involves the decisions that top managers make to enter and gain competitive advantage in multiple industries or markets,” says Sunkee Lee (pictured), assistant professor of organizational theory and strategy at Carnegie Mellon University’s Tepper School of Business. Three Levels Of Strategy: Key Differences Explained (3)

Corporate level strategy ensures that all business units are working towards a main overarching goal. The corporate level is also responsible for directing different business strategies across multiple business units.

“This top-level strategy is concerned with how the corporate parent can add value to its business units across multiple dimensions, such as the product or market scope, vertical scope, and geographical scope,” says Florian Bauer, professor of strategic management at Lancaster University Management School.

Corporate level strategy examples

There are several key questions that corporate level strategy is aiming to answer.

One corporate level strategy decisionis whether to forward or backward integrate, which is about identifying which stages in the industry value chain the firm is going to participate in, explains Sunkee from Carnegie Mellon.

Tesla is a good example. Here, Florian from Lancaster (pictured) explains that backward integration would involve entering more ‘upstream’ businesses, such as the lithium mining business for the battery production needed for the company’s electric vehicles. Three Levels Of Strategy: Key Differences Explained (4)

Meanwhile, forward integration would involve entering businesses that are more ‘downstream’. Think distribution or online dealerships.

Another key question answers how to manage the degree of diversification, says Florian.

A prime example of diversification at the corporate level is Amazon—the big tech giant has diversified into different business areas, covering ecommerce, streaming, grocery stores, and cloud-based web services.

A third core corporate level strategy decision relates to the geographic scope of the business. For example, Nike has retail stores all over the world, while the Macy’s department store has few stores outside the US.

Three Levels Of Strategy: Key Differences Explained (5)

What is business level strategy?

Business level strategy is concerned with designing ways for a business to gain a competitive advantage in a specific market.

“Business strategy is how a firm creates value for a defined activity on its market. It shows the way a firm competes, positions, and masters its rivalry interactions and industrial structure. For this purpose, the firm has to configure its value chain and [manage] its resources and capabilities to create a sustainable competitive advantage,” says Damon Golsorkhi (pictured), professor of strategy at Emlyon Business School. Three Levels Of Strategy: Key Differences Explained (6)

“Once you decide what business you’re in, then you need to decide who your customers are going to be, how you will attract them, and then encourage them to buy your product or service within an environment where other companies may be looking to capture those same customers’ attention, commitment, and money,” adds Jim Walsh, area chair of strategy at Michigan Ross School of Business.

If an organization consists of several business units operating in different business areas—like Amazon—specific goals and objectives need to be designed for each unit while also meeting the overarching goals set at the corporate level.

Three Levels Of Strategy: Key Differences Explained (7)

Business level strategy examples

There are three interrelated questions that must be considered within business level strategy, says Jim (pictured) from Michigan Ross. Three Levels Of Strategy: Key Differences Explained (8)

The first is about focusing on the customers. Jim says this involves asking what they need or want, and whether they have the desire to pay for high quality or coveted brands?

Take a designer clothing brand like Balenciaga, for instance, who sell trainers for upwards of $800 to a market of people willing to pay more for high quality products. Luxury brands like that will have conducted thorough market research to understand their value proposition, what their customers want, and the most they’re willing to pay for an item.

Secondly, organizations need to consider what resources and capabilities their organization can offer. Jim says this is about asking whether they can innovate and reliably produce a high quality good or service and whether they can do this at scale.

Lastly, firms need to scope out the competition and continue to provide a product or service that consumers choose over other similar products.

Take Apple, for example. Even though there are multiple tablets on the market with much more competitive pricing than an iPad, Apple’s product remains the market leader. This is largely due to the company's brand recognition and the image the firm has as a creator of quality technological devices.

What is functional level strategy?

Regardless of whether it’s the sales, marketing, or finance department, each functional area of a business should implement a functional level strategy to achieve its own goals, enhance operations, and support the wider business level strategy.

“Department managers or heads are usually responsible for functional strategies. Their formulation and implementation should connect to the organizational (or business level) strategy. For example, organizational level strategy should guide the research and development (R&D) department to focus on either new product development or existing product refinement,” says Chengwei from ESMT Berlin.

Functional level strategy examples

For functional level strategy to be successful, department managers will need to ensure the daily operations within each department align with the defined corporate outcomes. This will involve implementing specific measures to track whether each area is meeting broader objectives.

Functional strategy examples include a company’s marketing strategy, financial strategy, production strategy, or R&D strategy. Each of these separate strategies will require different tactical decisions to meet the wider corporate level strategy.

“A key skill or quality for departmental leaders responsible for functional level strategy is communication: understand how to translate organizational level strategy into strategies at the functional level and at the same time provide feedback when organizational level strategy needs to be revised,” says Chengwei.

Whether you’re making decisions at the corporate level, the business level, or the functional level, to be successful in business you need to become a confident strategic manager. This requires an in-depth understanding of the customers’ wants and needs, your business’ position in the market, and your own firm’s mission.

All three levels of strategy are equally important to meeting the overall corporate goals, and if you’re someone looking to run their own business one day, you’ll need to inspire all business levels to work in symbiosis to reap business success in a competitive market.

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Three Levels Of Strategy: Key Differences Explained (2024)


What are the different levels of strategy explain? ›

► Strategy can be formulated at three levels, namely, the corporate level, the business level, and the functional level. At the corporate level, strategy is formulated for your organization as a whole. Corporate strategy deals with decisions related to various business areas in which the firm operates and competes.

What is the difference between business level strategy and functional level strategy? ›

Business strategy sets goals for departments or divisions: financial strategy, manufacturing strategy or sales strategy, for example. At small companies, business strategy may be identical to corporate strategy. Functional strategies lay out how the company will meet the goals of the corporate and business strategies.

What are the 3 levels of decision making? ›

Decision making can also be classified into three categories based on the level at which they occur. Strategic decisions set the course of organization. Tactical decisions are decisions about how things will get done. Finally, operational decisions are decisions that employees make each day to run the organization.

What are the 3 types of strategy? ›

Three Essential Types of Business Strategy - How You Can Apply Them
  • Business strategy.
  • Operational strategy.
  • Transformational strategy.
Jan 29, 2023

What are the 3 key processes in business? ›

Typically, key processes are operational processes that fall within the following buckets: Developing vision and strategy. Developing and managing products and services. Marketing and selling products and services.

What is the main difference between business level and corporate level strategy? ›

Business and corporate-level strategies differ primarily in their objectives. A business strategy focuses on competing in the marketplace, while a corporate strategy focuses on business growth and profits. Corporate strategies function at a higher level than business strategies.

What are the differences between business level vs corporate level strategies? ›

Business strategy is concerned with strategic decisions concerning the choice of product, competitive advantage, customer satisfaction, etc. Corporate strategy is concerned with the overall objective and scope of business to fulfil stakeholders' expectations.

What are the three levels of strategy used in organizations quizlet? ›

The board of directors oversees the three levels of strategy in organizations: corporate, strategic business unit, and functional. See Figure 2-1.

What are the three 3 levels of planning? ›

Three major types of plans can help managers achieve their organization's goals: strategic, tactical, and operational. Operational plans lead to the achievement of tactical plans, which in turn lead to the attainment of strategic plans.

What are the 3 levels of decisions and what types of information systems support each level of the decisions? ›

Three main categories of information systems serve different organizational levels: operational-level systems, management-level systems, and strategic-level systems.

What is Stage 3 the decision stage? ›

Stage three, called the decision stage, involves a single technique, the Quantitative Strategic Planning Matrix (QSPM). A QSPM uses input information from stage one to objectively evaluate feasible strategies identified in stage two.

What are the different strategy schools? ›

The strategy is explained in different approaches which includes design school, positioning school, and planning school, learning school or emergent school, configuration school or transformation school, cultural school, cognitive school, environmental school, power school and entrepreneurial school.

What are the different school of strategic management? ›

In strategic management, the Ten Schools of Thought model by Henry Mintzberg is a framework that explains approaches of defining a strategy; it can be in the form of a design, a plan, positioning, consumerist, cognitive (subjective); it can be learning; it can be power-centric; it can be culture-centric; it can be ...

What is primary focus of strategic management? ›

The primary goal of strategic management is resource allocation—creating an action plan for how the organization will budget resources to leverage its competitive advantage and achieve organizational goals.

What is functional level of strategy? ›

Functional level strategies are the actions and goals assigned to various departments that support your business level strategy and corporate level strategy. These strategies specify the outcomes you want to see achieved from the daily operations of specific departments (or functions) of your business.

What is operational level strategy? ›

An operations strategy refers to the system an organization implements to achieve its long-term goals and mission. It involves decisions based on multiple factors, including product management, supply chain, inventory, forecasting, scheduling, quality, and facilities planning and management.

What is the difference between core and support processes? ›

Core processes are those processes, which are part of the core business and deliver customer value. For example, a core process for a manufacturer might be to deliver parts. Supporting processes are those processes that support the core processes.

What is the difference between core process and support process? ›

The main difference between support and core processes is that support processes add value to internal customers and do not directly deliver value to external customers, while core processes do.

What is the main difference between corporate level strategy and business level strategy quizlet? ›

What is the difference between corporate, business and functional strategy? Corporate strategy deals with the organisation as a whole. Business strategy deals with decisions that are linked to specific products and markets that can be differentiated from other products and markets in the same organisation.

What is the difference between corporate objective and corporate strategy? ›

Business objectives establish what the company wants to accomplish, and business strategies form the plan for how it will accomplish those objectives.

What is the difference between corporate strategy and business unit strategy? ›

While the business strategy held by each unit is concerned with competitive advantage for the particular product or service offered by that unit, the corporate strategy of the overall company is about which businesses (industries, markets) the organization wants to be active in.

Which of the following summarizes the difference between corporate strategy and business strategy? ›

Corporate strategy deals with where to compete; business strategy deals with how to compete.

What is the difference between strategy at the three different levels of the organization? ›

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.

What are the three levels corporate planning is generally identified? ›

As you develop your strategies, you will plan on three levels: corporate, business (or division), and department (or functional).

What are three characteristics of strong strategic leaders? ›

To recap, effective, good strategic leaders are strong communicators, active listeners, passionate, positive, innovative, collaborative, honest, diplomatic, empathetic, and humble. By taking the steps to embody these qualities, you're already becoming a better leader and can help move your team towards success!

What are the levels of planning explain each level? ›

The four main plans are strategic, tactical, operational, and contingency. The four main plans of business are strategic, tactical, operational and contingency. Strategic planning looks at the long-term issues of the organization, and helps develop a plan for growth or change of business function.

What are different levels of planning? ›

There are four phases of a proper organizational plan: strategic, tactical, operational, and contingency. Each phase of planning is a subset of the prior, with strategic planning being the foremost.

What is strategic level tactical level and operational level? ›

In management, there are varying levels of control: strategic (highest level), operational (mid-level), and tactical (low level). Imagine the president of a company decides to build a new company headquarters. He enlists the help of the company's officers to decide on the location, style of architecture, size, etc.

What are the 4 levels of strategy? ›

Several components are involved in developing a comprehensive corporate strategy. The four most widely accepted key components of corporate strategy are visioning, objective setting, resource allocation, and prioritization.

What are the different types of strategies? ›

Following are 12 different strategy types that can help a business reach its unique goals:
  • Structuralist. ...
  • Differentiation. ...
  • Price-skimming. ...
  • Acquisition. ...
  • Growth. ...
  • Focus. ...
  • Cross-selling. ...
  • Operational.
Nov 30, 2021

What are the 4 levels of strategy as outlined in the strategy hierarchy? ›

Individual strategies are arranged hierarchically and logically consistent at the level of vision, mission, goals, and metrics. Sometimes the designation "logical framework" of strategic planning and management is used.

What are the five 5 different phases of strategy? ›

The five stages of the process are goal-setting, analysis, strategy formation, strategy implementation and strategy monitoring.

What are the 3 stages in the strategy formulation framework? ›

Techniques of strategy formulation can be integrated into a decision making framework. Strategies can be identified, evaluated and selected by this framework that includes three stages: (1) input stage, (2) matching stage, and (3) decision stage (Figure 1) (David, 2007).

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