Strategy Decisions Levels: Corporate, Business Unit, Functional

Strategy Decisions: Understanding Corporate, Business Unit, and Functional Levels

Strategy is the blueprint that guides an organization towards achieving its goals. To effectively steer a business in the right direction, decision-makers must tackle strategic challenges at various levels. In this article, we'll delve into three major levels of strategy: corporate, business unit, and functional.

Corporate Level Strategy

At the corporate level, strategic decisions focus on the overall direction of the organization. This level determines the organization's objectives, the industries or markets in which it will compete, and the ways in which it will allocate its resources. A successful corporate strategy provides a clear vision, mission, and values, which serve as a compass for the entire organization.

For instance, consider a conglomerate like Berkshire Hathaway. Warren Buffett, its CEO, employs a corporate-level strategy by investing in a diverse range of industries, such as energy, finance, and retail. Each of these industries has its own business unit, which we'll discuss next.

Business Unit Level Strategy

Business unit strategy is centered on a specific product, service, or group of related products, known as the business unit. Here, strategic decisions revolve around how to compete effectively in a specific market, and how to optimize the performance of each business unit.

Take Amazon's e-commerce platform as an example. Each business unit represents a different product category, like books, electronics, or clothing. Each business unit has its own brand, pricing strategy, and distribution network. An effective business unit strategy helps Amazon capture market share in different categories.

Functional Level Strategy

Functional level strategy focuses on specific functional areas within an organization, such as marketing, finance, human resources, or operations. Strategic decisions at this level aim to improve efficiency, effectiveness, and productivity within each functional area, as well as to enhance coordination and collaboration between functions.

For example, consider P&G's marketing strategy for its detergent brands, such as Tide or Ariel. At the functional level, marketing strategists make data-driven decisions about product positioning, pricing, advertising, and promotions. These efforts aim to improve demand, profitability, and brand loyalty for P&G's detergent business units.

Aligning Strategies

It's crucial to ensure that strategy decisions at each level align with one another. An overarching corporate strategy must guide the business unit and functional level strategies to achieve its objectives. In turn, these lower-level strategies must support the corporate strategy.

For instance, a corporate strategy that emphasizes sustainability and social responsibility will influence business unit and functional level strategies, which in turn, will focus on eco-friendly products, green supply chains, and employee training programs.

In conclusion, strategy decisions at the corporate, business unit, and functional levels are interconnected. Each level must be aligned and complementary to the others, to ensure that an organization's overall strategy is cohesive and effective. By understanding these strategy levels, decision-makers can better navigate the strategic challenges that their organizations face, and devise effective strategies for long-term success.