December 14, 2014  
 
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Three Levels of Strategy

Written by Rahul Kumar for Gaebler Ventures

Strategy in business can be understood to be split into three different levels -- Corporate Unit level, Business Unit level and the Operational level, the main difference between them being due to their sphere of influence. A brief introduction to these levels is necessary for estimating the scope of strategy and the power it wields on various business and operational activities.

We can look at strategy at any of three levels: Corporate, Business Unit, or Operational.
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Let us begin with corporate level strategy which has the largest domain. By definition, corporate level strategy concerns itself with the whole corporation as a unit and consequently, aims to answer the purpose or the mission of the organization.

Corporate level strategy makers analyze the commonalities of various business units and work to add value to the whole system besides individual growth of participating business units. In other words, corporate level strategy takes a view at the overall scope of an organization and how to enhance stakeholder value. Issues concerning the introduction of new products or expansion into new markets or segments are all a part of this strategic level. Assessing the value of a business unit in the overall portfolio of activities is also a corporate level decision alongside optimal resource allocation for units.

Corporate level strategy forms the trunk of the strategic decision tree and the management has to be fully aware of its implications as well as the sensitivity of all succeeding strategies, no matter at what level. It is of prime importance that corporate level strategy is fully aligned with the overall vision of the organization and the values and expectations of stakeholders. Any deviation can result in serious repercussions for the management as also the stakeholders. A detailed analysis of corporate level strategy shall be dealt with in detail later.

Business level strategies are essentially positioning strategies whereby businesses tend to secure for themselves an identity and position in the market. The aim here is to increase the business value for the corporate and stakeholders by increasing the brand awareness and value perceived by the customers. If we understand products or a services offered by a business unit as a deck of cards, then we can safely decipher that businesses do not have many suits to play with.

In fact, they can either focus on pricing or product differentiation to increase the perceived customer value. It is a different thing that for either of the suit there are many parameters that need to be studied which is a painstakingly complex and time consuming process.

The third level of strategy is the operational level which primarily is concerned with successfully implementing the strategic decisions made at Corporate and business unit level through optimal utilization of resources and competencies of the business unit. This level of strategy is extremely significant in shaping the success of other strategies as it translates strategic decisions into strategic actions by directly impacting the design of operational processes and networks, human and other resources etc.

A thorough understanding of the three levels of strategy makes their strong co-dependence and non-hierarchical nature evidently clear. All strategies have to be in complete harmonization with each other since the success of one is inseparably linked to the other. So instead of being in a top-down order, the inter-linking can be visualized as a triangle with the three corners representing the three levels. The impact of one node on the other is judged by the flexibility of their relationship which further depends upon the success of the adopted business framework.

Rahul Kumar writes about entrepreneurial topics while he completes his Masters in Management degree at the ESCP-EAP European School of Management. He completed his undergraduate studies at the Indian Institute of Technology (IIT) in Delhi, India.


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