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  • Writer's picturePatricia Peprah

Understanding the Levels of Organizational Strategy

Once upon a time, a small company called Butty Ltd, sold electronic products in my favorite city Accra. There were times the company made profits and, at times, huge losses. It took much work for them to get a foothold in the market.

One day, Edward, the company's CEO, realized they needed a good plan to remain competitive and reach their goals; he needed to figure out where to start.

After researching, Edward found that successful organizations have 3 strategy levels: corporate, business, and functional. He discovered that each level of the strategy was essential and that they all had to work together to reach the company's goals.

So, for Butty Ltd, Edward made a corporate strategy that set the company's overall direction. He created the mission, vision, and core values, and decided to whom the company would try to sell its products and services. Then, he reviewed the company's competitive advantage, where it stood in the market, and how it would set itself apart from its competitors. With the data gathered and the corporate strategy in mind, Edward made a business plan focused on the company's goals. He then made a strategy on how the company would operate daily and how the various roles, sales, accounting, and engineering, would function to achieve the goals set.

Edward understood the three levels of organizational strategy. He created a complete and efficient plan that unified them, making the business snowball with a steady flow of profits.

Levels of Organizational strategy

There is a relationship between a company's distinctive capabilities and strategies required to succeed. Understanding the different levels of strategies and how each level influences the other is the key to an effective organizational plan. Among the three main strategies most practiced: that is Corporate-level, business-level, and functional-level strategies, the business-level strategy is the most popular.

Corporate-Level Strategy

The Corporate level strategy involves the choices the company must make regarding which products, businesses or industries the company should compete in, how it should enter and which value creation it should perform to maximize profits. It is usually long-term and considers how environmental and marketplace changes might affect the current positioning. Common strategies at this level include vertical integration, horizontal integration, strategic outsourcing and related or unrelated diversification.

Business-Level Stratety

The Business Level strategy covers the entire business situation, which is whom the company wants to serve, what needs and desires the company intends to satisfy and how the company will satisfy these needs. Strategies at this level usually consider cost and differentiation; these factors, when combined, effectively allow for more significant value to customers. For example, Toyota achieved a competitive advantage when it pioneered lean production systems that improved the quality of their vehicles whiles lowering cost; this created value for the customer and made their cars affordable for the lower to middle-income earner.

When done correctly, business-level strategies will help the company focus more on what the customer needs and make the production process more efficient, leading to profitability. Depending on the type of business-level strategy the company pursues, research, development and resource mobilization may increase its cost. For growth and expansion, some business-level strategies an organization can pursue include acquisitions and mergers.

Functional-Level Strategy

The Functional level strategies shape the organization's competencies to gain a competitive advantage. It's handled mainly by the various departments, which usually focus on efficiency, quality, product or service innovation and customer responsiveness. An effective strategy must consider how these translate into differentiation and lower cost. A focus on efficiency, for example, should improve quality while lowering cost, translating into value creation for the customer. The functional-level strategies must also align with the organization's culture and strategic priorities. For example, a company that requires its staff to work in self-managing teams will have as a strategy to employ individuals who are self-reliant and goal-oriented.

Irrespective of the sector or industry you operate in, knowing the different levels and how to plan for each is essential to the survival and growth of your business. Developing a strategy requires careful analysis of the environmental situation, identification of potential opportunities and challenges, and determining the best course of action to achieve the desired outcome; understanding how to develop and implement a strategy is critical to success.


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