Navigating the Different Business Strategy Levels: Understanding Corporate, Business Unit, and Functional Strategies
Developing effective business strategies is an essential part of running a successful organization. To create a well-rounded approach, companies must make decisions at every level of the organization. Corporate-level strategy, business unit strategy, and functional level strategy are three distinct levels that require different skill sets. This article explains each of these levels, delves into the challenges of implementing them, and provides relevant examples to help readers understand the nuances of navigating business strategies.
Corporate-Level Strategy
Corporate-level strategy is developed to determine how to maximize the overall success of the company. This type of strategy considers the organization’s core strengths and weaknesses, market trends, and the competition. Decisions made at this level have a significant impact on the entire organization, including business units, subsidiaries, and management teams.
There are various implementing strategies at the corporate level, such as growth through acquisitions, diversification of the business, or market penetration. The critical challenges involve finding a balance in resources allocation, understanding the diversification, and assessing the risks associated with new markets.
One common example of corporate-level strategy is the Walt Disney Company. Disney’s corporate-level strategy focuses on building and managing an entire entertainment ecosystem. This ecosystem is composed of resorts and theme parks, media networks, television channels, film studios, and merchandising. This strategy diversifies the company’s revenue streams while leveraging Disney’s core competencies and delivering unique experiences to customers.
Business Unit Strategy
Business Unit Strategy is the process of taking corporate strategies and applying them to individual business units. This level of strategy mainly concerns the division of the company and is typically managed by business unit managers. Business unit strategies aim to align unit goals with the company’s objectives while accounting for in house competencies and the market position.
One common challenge in developing a business unit strategy is making sure that the company’s decisions are reflective of customer needs. Furthermore, keeping an eye on the competition to maintain or gain market share while exploring new opportunities and synergies can be difficult.
A prime example of Business Unit Strategy is Apple’s iPhone business unit. Apple’s overall corporate strategy lies in designing and selling premium user experience-focused products. In contrast, the iPhone business unit strategy involves building on Apple’s brand power to create a premium smartphone with a strong ecosystem that works together seamlessly.
Functional Level Strategy
Functional-Level Strategies entail the steps taken by functional teams to implement a company’s business unit strategies. They include strategies for the overall customer experience, financial management, marketing, research and development, information technology, and supply chain. This level of strategy optimizes the functional roles to execute the business unit strategy successfully.
Challenges at the functional level include ensuring company-wide adherence to policies, retaining employees with in-demand skills, and operationalizing strategies to be realized in a reasonable time frame.
A classic example of functional-level strategy is Zara’s supply chain strategy. The strategy involves maintaining an agile supply chain that ensures shorter lead times, lower inventory costs, and more frequent product rollouts. The Supply chain strategy executes the business unit strategy by giving Zara the ability to consistently release new designs and fulfill customer demand in a speedy manner.
Conclusion
Navigating the different levels of business strategies can be challenging, but implementing them effectively is crucial to the long-term success of any organization. Understanding the relationship between corporate-level strategy, business unit strategy, and functional-level strategy is essential. Companies must build a comprehensive strategy that aligns with their goals, company values, and understanding of market trends. Doing so will help businesses achieve their objectives, gain a competitive edge, satisfy customers and stakeholders, and create a rewarding work culture.
