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APC Mandatory > Level 1 - Business planning > Flashcards

Level 1 - Business planning Flashcards

What are the three levels of business management?

• Corporate Level
• Management Level
• Operational Level

What is a business plan?

A document that defines the business objectives and suggests steps to be taken to realise the business strategy over the next 3 years.

Components of a Business Plan: • Division of the business into service type or client segment • Financial performance targets • Plan business opportunities and allocate staff resource • Budgeting and cash forecasting money in vs. money out to understand what you can afford to pay because you estimate what you will earn • Plan business opportunities, identify the resource required.

A business plan could help to: • Seek funding, • To gain new instructions, new clients, new customers • To help focus on key priorities • To allow the organisation to respond to change • For budgeting, and • To set targets for staff.

What are the business objectives of your company?

• To develop and grow the business sustainably in the sectors:

How do you contribute to business planning within your company?

• By preparing responses to invitations to tender.
• I took part in a tender interview for Project Management services for development works at the Britannia Leisure centre, Hackney .

How do you manage your time so that you do not work beyond your fee allowance?

Recording my time weekly in timesheets spent against each job allows my workload to be reviewed by senior managers in monthly team meetings.

Does the RICS have a business plan?

Yes the current plan covers the three years from 2014-2017:

Our primary focus over the next three years

Does the RICS have a Corporate Strategy?

Yes, the current strategy covers 2012 to 2017.

It sets out long term strategic goals of the organisation.

N1. What should you do when starting a business?

Create a Business Plan, such as a 3 – 5 year business plan.

N2. What is a business plan?

A formal statement of the business goals, how they are obtainable and the plan for reaching these goals.

N3. Why would you create a business plan?

• To help achieve funding.
• Set business objectives.
• Create a business direction.

N4. What would you expect to be included within this business plan?

• Method Statement.
• Goals and Objectives.
• SWOT analysis.
• Key Performance Indicators.

N5. What is a Mission Statement?

A formal summary of the company aims and values.

N6. What is a SWOT analysis?

internal study undertaken by a business to identify its strengths, weaknesses, opportunities and threats.

N7. What goals and objectives would you likely see?

• Expected profit margin.
• Expected Turnover.
• Markets the company are looking to move into.

N8. What is a Key Performance Indicator?

A measureable value to determine the success of project/venture.

N9. How is a business plan laid out?

• Executive summary.
• Financial Forecasts.
• Management team.
• Description of business opportunity.
• Market and Sales Strategy.

N10. What is Natta’s 5 year business plan?

• £60,000,000.00 turnover by 2018.
• Build the company’s main-contracting business, i.e. more Turn Key residential and care home builds.
• Maintain Health and Safety Record.
• Obtain three new clients a year.

N11. Why is Market Analysis important?

Increase sales through identifying areas of strength, and aligning these with opportunities.

N12. How does an up-to-date business plan help an organisation?

• Helps achieve funding.
• Market previous work to clients.
• Bring focus the company priorities.
• Allows staff to align their goals with the company’s.
• Help set budgets.

N13. In terms of Business Planning, how does your management ensure that you make a profit?

• Regular reporting.
• Forward planning.
• Accounting systems to track all costs.

N14. What is a PESTLE Analysis?

• Technological.
• Environmental.

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The Three Levels of Business Planning Are ________

The three levels of business planning are ________.

A) managerial,operational,promotional B) strategic,functional,operational C) portfolio,strategic,functional D) SWOT,strategic,tactical E) operational,functional,tactical

Correct Answer:

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Q4: Which of the following is a true

Q5: Vice presidents of large companies are typically

Q6: _ is the first, or "big picture,"

Q7: Which of the following is true about

Q9: Orkin Pest Control Service knows homeowners skimp

Q10: Market planning is a type of _. A)

Q12: A business plan _. A) is a document

Q14: Kimball Gardens is a company that operates

Q18: The CEO, president, and top executive officers

Q20: _ is the third, or "nuts-and-bolts," level

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The Levels of Management

Management is essential for an organized life and necessary to run all types of management. Good management is the backbone of successful organizations. Managing life means getting things done to achieve life’s objectives and managing an organization means getting things done with and through other people to achieve its objectives.

Management is a set of principles relating to the functions of planning, organizing, directing, and controlling, and the application of these principles in harnessing physical, financial, human, and informational resources efficiently and effectively to achieve organizational goals.

Segmenting the management of an organization into levels is vital to maintaining the productivity and work performance of employees. Although when there is a change in the size of the business or the workforce, there would also be a change in the number of levels of the management.

What Are The Three Levels of Management?

1. Top-Level Management/ Administrative level

1. Top Level Management

Top-Level Management is also referred to as the administrative level. They coordinate services and are keen on planning. The top-level management is made up of the Board of Directors, the Chief Executive Officer (CEO), the Chief Financial Officer (CFO) and the Chief Operating Officer (COO) or the President and the Vice President.

Top-level management is accountable to the shareholders for the performance of the organization. There are several functions performed by the top-level management, but three of them are the most important, and they are:

2. Middle Level of Management

The middle-level managers are in charge of the employment and training of the lower levels. They are also the communicators between the top level and the lower level as they transfer information, reports, and other data of the enterprise to the top-level. Apart from these, there are three primary functions of the middle-level management in the organization briefed below:

3. Lower Level of Management

They are the intermediary, they solve issues amidst the workers and are responsible for the maintenance of appropriate relationships within the organization. They are also responsible for training, supervising, and directing the operative employees.

Briefed below are the primary functions of lower-level management:

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Breaking Down The Three Levels Of Strategy In Any Business

Ted Jackson

Ted is a Founder and Managing Partner of ClearPoint Strategy and leads the sales and marketing teams.

Understanding the levels of your business strategy can help align your company goals

Table of Contents

“How ‘far down’ into the company does our strategy really need to go?” In other words, in what areas of the company should the groundwork for strategy be laid?

This is a question we’ve heard repeatedly from people at companies that are either in the beginning phases of strategy creation or are updating an outdated strategy. Regardless of which of those two camps you belong to, you should have a clear understanding of the three levels of strategy in your business.

Introducing ClearPoint Strategy , the ultimate tool to help you define, track, and manage your strategic goals across all levels of your organization. ClearPoint ensures that your strategy is seamlessly integrated from the corporate level down to individual departments, enhancing alignment and execution throughout the company.

See ClearPoint Strategy in action! Click here to watch a quick DEMO on the software

The three levels of strategy.

• Level 1: The Corporate Level
• Level 2: The Business Unit Level
• Level 3: The Functional Level

Having a solid understanding of these levels of strategy will help you break your strategy into the correct levels, so you can align your company-wide goals from the top of your organization (the corporate level) to the bottom (the functional level).

Additionally, if you approach your strategy using these three levels, leaders across your organization will have a better understanding of how their strategic activities impact your company’s high-level strategy.

Strategy Level 1: The Corporate Level

The corporate level is the highest, and therefore the most broad, level of strategy in business.

Corporate-level strategy should define your organization’s main purpose. It should also direct all your downstream decision-making. For example, the objectives (e.g. high-level goals) in the levels below this one should all have a direct line to the goals defined here.

Creating and understanding your corporate-level strategy is particularly important for organizations that have multiple lines of business. For example, if one arm of your business manufactures a product and another arm sells that product, you’ll have a separate business unit strategy for each—but one single corporate-level strategy that describes why those two arms are important, and how those businesses interact for the good of the organization.

There are a handful of things to do as you work on your corporate-level strategy:

1. Confirm your overall mission and vision. These two elements define your entire organization, and so should be done at the corporate level:

• Your mission statement describes what your company does and how it is different from other organizations in your competitive space.
• Your vision statement describes the desired future state of your organization at a certain point in time.

To create these elements, you may want to write out an OAS statement ( Objective, Advantage, Scope) or use a tool known as Strategic Shifts. You can read about both here.

2. Create your corporate objectives. Your objectives describe the high-level goals that will help you achieve your mission and vision. Take, for example, a bank. This bank used the Balanced Scorecard to outline objectives across four perspectives (from the top of the scorecard to the bottom): financial, customer, internal, and learning and growth (L&G). You can see their objectives written in the sample strategy map below.

Strategy Level 2: The Business Unit Level

Your business unit strategy is used for different areas of your business (like services and products, or multiple departments or divisions, for example). The complexity of this level will depend on how many businesses you are in, and how your company is structured. It’s important to create a strategy for each business unit so that you can see which units are excelling and which need improvement.

Having a strategy at the business unit level allows you to weigh the costs and benefits of each business unit and to decide where you should spend your resources. Depending on the progress towards your goals and your analysis of the market, you may even decide it’s time to divest or sell some of your business units so you can focus on the areas that are most important to achieving your company’s corporate strategy.

There are a few things to do as you work on your business unit strategies:

1. Differentiate yourself from your competitors. One of the best ways to tell if you’ve done this adequately is through a SWOT analysis , which allows you to review your competitive environment and define a strategy based on what sets your organization—and specifically, the business unit—apart from the competition.

Claim your FREE 41-page Strategy Execution Toolkit for enhanced strategic performance

2. Create objectives and initiatives that support your business unit and the corporate level. Your goal while creating a business unit strategy is to create objectives and initiatives that support the unit while simultaneously contributing to the objectives and initiatives of the organization as a whole.

For example, at the corporate level for the learning and growth perspective, one of the bank’s main priorities (in the example above) is to “provide valuable skills training.” With this objective in mind, your business units will be able to determine what activities they’ll need to do to support this—like providing customer training services relevant to its specific function.

Strategy Level 3: The Functional Level

The functional level of your strategy involves each department —and what those at the department level are doing day-to-day to support corporate initiatives. Whereas your business unit strategy would be defined and evaluated by senior leadership, your functional strategy is typically produced by department heads (e.g. leaders in marketing, operations, finance, IT, etc.).

These individuals can help ensure that the departments execute the defined strategic elements, and that the components laid out at the functional level help support both the department level and corporate level strategies.

There are a few things to consider as you work on your functional strategies:

1. Understand that this level has the most detailed measures and projects . Measures help you answer the question, “How are we doing toward meeting a particular objective?” Projects (or initiatives ) help you answer, “What are the key actions we can take to support our objectives?” While you’ll have measures and projects at every level of your strategy, they should be extremely detailed at the functional level. You can leverage a RACI matrix to ensure everyone knows who is responsible for completing your projects and who they need to go to for help or direction.

2. Make sure the goals in your functional strategy align with the goals at the corporate level. Corporate goals are set by the most senior members of your organization, and those goals drive decision making. You’ll gain support from the top level of executives if your projects and goals align with their goals. You’ll also be able to see how the work you are doing contributes to the overall success of the company.

3. Don’t get too “measure happy.” We’ve seen organizations measure hundreds of data points at the functional level. But keep in mind what your bigger goals are and measure only the things that help you determine if you’re progressing toward those goals. ( This blog gives detailed instructions on selecting the right measures, if you need a hand. )

Going back to our bank example, this organization may decide that, at the functional level, measuring the number of service calls responded to and the response time for customer service calls are the most effective measures for customer service training, which rolls up to support the skills training corporate-level initiative.

Don’t Forget to Constantly Give and Gather Feedback as You Create Your Strategies at Every Level

Providing support and feedback during strategy creation is critical, as it’ll help those involved to fine-tune things and emphasizes the importance of the activity to the organization as a whole. And don’t forget to ask for feedback as well.

For example, if customer service is a focus, talk to those who are actually speaking to the customers and gather concerns and comments from them as well.

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Ready to align your entire organization’s strategy from top to bottom? ClearPoint Strategy is here to help. Our comprehensive software solution ensures seamless integration and execution of your strategic goals across all levels of your company.

Book a personalized demo with our experts and discover how our software can help you effectively manage and track your corporate, business unit, and functional level strategies.

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What are the three levels of strategy in organizations.

The three levels of strategy in organizations are:

- Corporate Strategy: Determines the overall scope and direction of the organization. - Business Strategy: Focuses on competing successfully in specific markets or industries. - Functional Strategy: Involves detailed, short-term operational plans for key functional areas.

What are the four levels of strategy?

The four levels of strategy, sometimes recognized in larger or more complex organizations, include:

- Corporate Strategy: The overarching strategy for the entire organization. - Business Strategy: Strategies for individual business units or market segments. - Functional Strategy: Departmental strategies that support business strategies. - Operational Strategy: Day-to-day operations and processes that support functional strategies.

What are the three levels of strategy with examples?

The three levels of strategy with examples are:

- Corporate Strategy: Example: A conglomerate decides to enter new international markets to diversify its business portfolio. - Business Strategy: Example: A retail company adopts a differentiation strategy by offering unique, high-quality products. - Functional Strategy: Example: The marketing department of a tech company develops a social media campaign to increase brand awareness and drive sales.

How many different levels of strategy are there?

There are generally three different levels of strategy recognized in most organizations:

- Corporate Strategy - Business Strategy - Functional Strategy In larger or more complex organizations, an additional fourth level, Operational Strategy, may also be recognized.

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Three Levels of Strategy: Corporate Strategy, Business Strategy and Functional Strategy

Strategy is at the foundation of every decision that has to be made within an organization. If the strategy is poorly chosen and formulated by top management, it has a major impact on the effectiveness of employees in pretty much every department within the organization. In our previous article on ‘ What is Strategy?! ‘ we have already tried to define and explain what business strategy refers to and what is NOT considered to be part of strategy. In this article, we will dissect strategy in three different components or ‘ Levels of Strategy ‘. These three levels are: Corporate-level strategy, Business-level strategy and Functional-level strategy. Together, these three levels of strategy can be illustrated in a so called ‘ Strategy Pyramid ’ (Figure 1). Corporate strategy is different from Business strategy and Functional strategy. Even though Corporate-level strategy is at the top of the pyramid, we start this article by explaining Business-level strategy first.

Figure 1: Three Levels of Strategy Pyramid

Business-level strategy

The Business-level strategy is what most people are familiar with and is about the question “How do we compete?”, “How do we gain (a sustainable) competitive advantage over rivals?”. In order to answer these questions it is important to first have a good understanding of a business and its external environment. At this level, we can use internal analysis frameworks like the Value Chain Analysis and the VRIO Model and external analysis frameworks like Porter’s Five Forces and PESTEL Analysis . When good strategic analysis has been done, top management can move on to strategy formulation by using frameworks as the Value Disciplines , Blue Ocean Strategy and Porter’s Generic Strategies . In the end, the business-level strategy is aimed at gaining a competitive advantage by offering true value for customers while being a unique and hard-to-imitate player within the competitive landscape.

Functional-level strategy

Functional-level strategy is concerned with the question “How do we support the business-level strategy within functional departments, such as Marketing, HR, Production and R&D?”. These strategies are often aimed at improving the effectiveness of a company’s operations within departments. Within these department, workers often refer to their ‘Marketing Strategy’, ‘Human Resource Strategy’ or ‘R&D Strategy’. The goal is to align these strategies as much as possible with the greater business strategy. If the business strategy is for example aimed at offering products to students and young adults, the marketing department should target these people as accurately as possible through their marketing campaigns by choosing the right (social) media channels. Technically, these decisions are very operational in nature and are therefore NOT part of strategy. As a consequence, it is better to call them tactics instead of strategies.

Corporate-level strategy

At the corporate level strategy however, management must not only consider how to gain a competitive advantage in each of the line of businesses the firm is operating in, but also which businesses they should be in in the first place. It is about selecting an optimal set of businesses and determining how they should be integrated into a corporate whole: a portfolio. Typically, major investment and divestment decisions are made at this level by top management. Mergers and Acquisitions (M&A) is also an important part of corporate strategy. This level of strategy is only necessary when the company operates in two or more business areas through different business units with different business-level strategies that need to be aligned to form an internally consistent corporate-level strategy. That is why corporate strategy is often not seen in small-medium enterprises (SME’s), but in multinational enterprises (MNE’s) or conglomerates.

BCG Matrix and Levels of Strategy Video Tutorial

Example Samsung

Let’s use Samsung as an example. Samsung is a conglomerate consisting of multiple strategic business units (SBU’s) with a diverse set of products. Samsung sells smartphones, cameras, TVs, microwaves, refrigerators, laundry machines, and even chemicals and insurances. Each product or strategic business unit needs a business strategy in order to compete successfully within its own industry. However, at the corporate level Samsung has to decide on more fundamental questions like: “Are we going to pursue the camera business in the first place?” or “Is it perhaps better to invest more into the smartphone business or should we focus on the television screen business instead?”. The BCG Matrix  or the GE McKinsey Matrix  are both portfolio analysis frameworks and can be used as a tool to figure this out.

Figure 2: Hierarchy of Strategy

Levels of Strategy In Sum

The most common level of strategy is Business strategy and exist within strategic business units with as goal to gain competitive advantage in a certain market. If a company has multiple SBU’s, there needs to be an overarching Corporate strategy that ties all SBU’s together through corporate configuration. Here, top management must decide on resource allocation and where to invest and where to divest. Lastly, Functional strategy exist within departments such as Marketing, HR and Production. Ideally, we should refer to tactics instead of strategies because of the operational nature of the decisions made within these departments.  

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12 thoughts on “ Three Levels of Strategy: Corporate Strategy, Business Strategy and Functional Strategy ”

I can see how a business wants to build up its cooperation and they want to make sure that they can grow and build and get more revenue. Getting some better strategies to do so and to prevent them from losing money in a crisis with some help from a professional. It was interesting to learn about how there are some better investments and divestments so that they can be integrated into a portfolio.

Great Articles

Well explained with examples.. Thank you Keep posting such an articles

Such a wonderful blog about levels of strategy corporate business functional and I appreciate your effort for bringing this in to notice. Great blog indeed, will visit again future to read more!!

I appreciate your help in bringing this information or strategy and marketing framework to my notice.

A good insight indeed. So it literally means they is no how you can think of your business strategy before you study your environment ?Internal by VRIO,SWOT etc. and external by PESTEL or Porters 5 forces

Well explained the BCG model with suitable example . Thank you for uploading the video. It will be great help for all the students of strategic management. looking towards more such videos on strategic management area.

well simplified

thank you for the well explained BCG matrix, can you also look at Parenting advanrage concept and the Ashridge theory

As a student,I now knows that the ability to learn is an ultimate competitive advantage.Thanks for the simplicity and it’s very nice to invest my energy and time to read such instilling articles.

A commercial effectiveness strategy is critical for every business’s success, but it is especially critical for small businesses. A commercial effectiveness strategy, by definition, is a method for finding and delivering value to consumers through the production and distribution of goods or services.

thank you very much, very helpful information

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Three levels of strategy: key differences explained.

Learning about how the three levels of strategy in an organization work can help you to become a better leader ©Mykyta Dolmatov via iStock

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?

Sat Feb 19 2022

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 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.

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.

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. 

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 decision is 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. 

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.

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. 

“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. 

Business level strategy examples

There are three interrelated questions that must be considered within business level strategy, says Jim ( pictured ) from Michigan Ross. 

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 and a master of innovation strategy.

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. 

Next Read:  How To Implement A Successful Innovation Strategy

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ESMT Berlin

Well qualified professors and great connectons with the industry

Well structured programs, great facilities and very good career development team. The alumni relations with the school are great and well maintained and fostered. Overall a great school right in the middle of Berlin.

Friday 7th October 2022, 00.13 (UTC)

thank you for this information it helps me a lot

Thursday 16th June 2022, 14.48 (UTC)

Very insightful and highly educative piece of article. Thanks

Monday 30th May 2022, 11.20 (UTC)

that's an amazing article

Monday 28th February 2022, 14.29 (UTC)

Ooh, I was totally impressed when you pointed out that offering encouragement to our members can make them perform their job better. This reminds me of my nephew's friend keeps looking for a way to join his neighborhood association. I'll make him read this article first so he can be more well-prepared.

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What are the three levels of strategy in organizations.

Table of contents

What is corporate strategy, what is business level or business unit strategy, what is functional level strategy, what are the differences between corporate, business unit, and functional strategy.

Strategy is a very broad term and can mean a lot of different things depending on who you talk to. In this article, we will cover strategy through the lens of management consulting based on our experience at Bain, BCG, and McKinsey. In this context, there are three main levels of strategy in an organization:

The corporate level strategy that focuses on the company as a whole and is the overarching strategy.

The business level or business unit strategy that focuses on a specific business unit within the broader organization. If you’re a small organization, then corporate strategy and business unit strategy are often fused together in a single cohesive business strategy.

The functional level strategy focuses on a specific functional area or team, which is often closer to a tactical plan. You can argue that functional strategy is not actually a strategy level in itself, but for completeness, we include it here.

In the following we will cover what these three levels of strategy mean and how they are different.

Apart from these three core levels of strategy, there are various permutations and subcategories of strategy like digital strategy or growth strategy. These are not part of this article but in essence follow the same principles of a corporate or business unit strategy, where you create a plan within a context.

You can also take a look at our blog post “5 Key Elements of a Successful Strategy Document” to get tips and tricks on creating a strategy presentation.

Corporate strategy has many names, including portfolio strategy, organizational strategy, or simply company strategy.

A typical organization is made up of business units (or teams in a smaller company) that act as varying degrees of stand-alone entities. Together, the business units form the corporation, unified by a corporate head office.

The corporate strategy is the overarching strategy for the entire organization. It sets guardrails and direction for business unit strategies and should ideally be a set of objectives and actions that enable the group to create more value than the sum of its parts.  

The famous strategy scholar Michael Porter defines corporate strategy as 

A diversified company has two levels of strategy: business unit (or competitive) strategy and corporate (or companywide) strategy. Competitive strategy concerns how to create competitive advantage in each of the businesses in which a company competes. Corporate strategy concerns two different questions: what businesses the corporation should be in and how the corporate office should manage the array of business units. Corporate strategy is what makes the corporate whole add up to more than the sum of its business unit parts.

The ultimate goal of a corporate strategy is to create a roadmap for sustained value creation across its entire portfolio.

For an in-depth discussion on corporate strategy, see our article " Corporate Strategy: What Is It and How To Do It (With Examples) ". There are five key elements of a corporate strategy:

1. Setting a unified vision and ambition

Your corporate strategy should begin by defining your organization’s mission, vision, and purpose. This provides a unified direction for all subsequent choices in both your existing portfolio of businesses and in where, when, and how to invest in growth or divest assets.

Furthermore, your corporate strategy should include specific goals, both quantitative (externally or market-driven) and qualitative (internally or company-driven), to guide the organization and energize stakeholders.

2. Making portfolio choices

The second key element of a corporate strategy involves conducting a comprehensive portfolio review. This review assesses all the business units, products, or brands within the organization. It determines where to focus efforts, which industries and markets to enter, and how to diversify the product and service offerings.

The goal of your portfolio review should be to identify businesses or assets with the highest strategic potential, either as stand-alone entities or as part of the larger organization. This means making hard decisions on where to acquire, divest, and transform the portfolio, and importantly, how to allocate resources at a high level across business units (i.e. which businesses do you invest in for innovation and growth versus which businesses should be optimized for efficiency and cash-maximization). 

While the allocation of resources is a topic addressed separately in the next section, the portfolio review serves as a blueprint for determining which businesses or assets should be allocated resources.

To conduct a portfolio review effectively, you need a deep understanding of each business unit's current potential and future opportunities and threats, often informed by their individual business unit strategies. You can see more on this under the Business Level Strategy section further down.

The results of the portfolio review are typically presented in a matrix format, with one axis evaluating a business unit's current ability to grow or succeed internally and the other axis assessing the market conditions and external factors affecting the business unit.

3. Allocating resources

The third component of a corporate strategy involves how to allocate resources, particularly financial decisions related to investments in acquisitions, balancing investments with shareholder returns, and distributing resources among various business units or product lines. 

For public companies, this typically entails three primary financial considerations:

A. Capital structure

Capital structure is defined as a company’s mix of debt and equity. On a corporate strategy level, you need to decide how much funding will be allocated across your portfolio and which financial guardrails you want to put in place for that funding.

B. Capital deployment

Once the amount of available funding and associated guardrails are in place, the corporate strategy should allocate that funding across portfolio businesses according to the outcomes of the portfolio review. This typically means investing and acquiring aggressively in businesses or assets that have a lot of strategic potential, and minimizing costs through efficiencies and other optimizations in businesses that have less of a gap to their full potential.

C. Capital markets communication

If you’re a public company (or with external stakeholders like VC funds), then the final piece of your financial strategy is summarizing your other choices in a compelling story that makes strategic sense and should hopefully push your external value up.

4. Maximizing parenting advantages

The fourth element of a good corporate strategy is a thorough discussion of how the corporate entity can maximize each business unit (i.e. making the whole more than the sum of its parts) and consequently what role or form the corporate parent should take to achieve that.

This falls into three categories:

• Best portfolio operator: How can you from a corporate side facilitate cooperation between business units and portfolio companies? Which synergies can be leveraged? How can you share costs? Which customers can be cross-linked?  
• Best owner: How can you add differential value developing and managing the portfolio? How can you best capture value across the different businesses and allocate this to lift the entire portfolio? Which acquisitions and divestments should you make to bring the full organization to a better value creation point?  
• Best culture champion: How can you create energy and mobilize latent talent across the organization? Which values and principles should you instill, and which people should you hire to lead each business on this path?

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5. Creating the overall roadmap

The fifth and final element of a corporate strategy is laying out an overall roadmap for sustained value creation.

This can be done in more or less detail depending on how involved the corporate parent is in each business unit strategy. But a well-known schema for roadmaps at this level is to break them down into three time horizons: short-, medium-, and long-term.

This typically corresponds to three levels of opportunities: a) immediate opportunities, b) bigger opportunities that need more work to realize, and c) long-term, transformational initiatives and ideas.

Each opportunity should be broken down into initiatives and actions and put together in a cohesive roadmap. The level of detail will become less and less the further out in time the roadmap goes.

Business level strategy is what most people think of when you mention the word strategy .

Business unit or business level strategy focuses on how to create a competitive advantage for that specific business in their specific market. You can also call this a business model strategy, as it often examines the elements of a business model as exemplified in e.g., the Business Model Canvas .

There are many ways to approach business level strategy and each method has its own merits. We would recommend not thinking too much about following a rigid framework, but rather working through your particular strategy in the way that seems most logical to you.

In addition, it helps to distinguish between the process of creating your strategy and creating your subsequent strategy presentation that summarizes that strategy.

Here, we will first go over a simple approach to creating a business level strategy and then briefly touch on translating that to a cohesive strategy document. For more information on how to write a strategy presentation and a template for creating one, see our Business Strategy template .

Defining the starting point

The first step of any strategy process is understanding your point of departure. Without a solid view on your starting point you’ll be operating blindfolded and not taking advantages of your current strengths nor adequately adapting to potential weaknesses or threats.

There are in general three components to creating a clear picture of your starting point and strategic arena:

A. Defining the guardrails of your strategic option space

B. understanding your current situation, c. mapping out your potential areas of growth.

Before you start looking at goals and initiatives for your new strategy, you need to understand your overall playing field. You can think of this playing field along two dimensions; Your strategic and financial degrees of freedom.

Along the strategic dimension, ask yourself questions like:

• To what extent are you playing offence (upside value creation) vs. defence (downside value protection)? And is it the right priority going forward?
• What is the right balance of growth inside and outside your core businesses?
• What is the urgency to pursue opportunities vs. managing downside risk of disruption?
• Do you need to consider radically different strategic directions, or can you stay within your current strategy with optimizations and tweaks?
• How does this fit into the overall corporate strategy?

Along the financial dimension, ask yourself question like:

• How do you define value? What is your value creation goal (and how does this fit into the overall corporate picture)?
• What is your risk appetite?
• What is your time frame?
• How much funding or cash reserves do you have to invest in new initiatives?

The answers to these questions will help you define the perimeters of your strategic option space.

Now that you have a clear picture of the overall playing field you can maneuver in, it’s time to build a baseline of your current situation on which to base your strategy.

This means creating a data-driven overview of where you stand in terms of both your industry and your competitive position now and in the future.

More concretely, you can answer the questions outlined in the picture below:

The final piece of the puzzle when defining your point of departure is understanding your potential areas of growth in terms of new opportunities, or areas where you’re losing market share or revenues in an otherwise stable or growing market.

This can typically be divided into two main buckets where bucket A means optimizing your current business and bucket B means finding new pools of revenue/experimenting with new business models. In consulting speak, you’ll often hear the terms grow (or reinvent) the core and new growth engines to describe buckets A and B, respectively, so we’ll use the same terms here.

Growing (or reinventing) the core

Once you understand your current situation and your strategic arena it becomes easier to identify ways to grow your core. Growing your core in basic terms means doing your current business better. This can be done with classic competitive levers like being cheaper than competitors, becoming more sustainable, optimizing your current processes and value chain to become more efficient and faster, expanding your products and services to include add-ons or adjacent value propositions etc. These are all examples of business level strategies that you can use to create a differentiated, competitive advantage. You can also talk about reinventing your core, where you typically stay within the broader boundaries of your business model in terms of customer segment and industry/area but completely transform the way you serve your customer needs to protect or increase your share of the profit pool (see e.g., this McKinsey article for inspiration).

A great, non-digital example of reinventing the core is the global beer brewery Carlsberg, which has effectively moved into both the artisanal and alcohol-free beer markets in addition to their traditional beers.

Apply the three strategic levels using our Business Strategy template .

Unlocking future growth

However, growing your core business is just one way to create value. The second and equally important bucket is the new growth engine bucket. This essentially means creating new sources of revenue for your business by creating/moving into entirely new products or services (like Amazon’s AWS business).

There are a multitude of great articles and inspiration videos on creating new growth engines and too many . See e.g., this Harvard Business Review article for a discussion on growth engines or this McKinsey article for tips on actually incorporating a growth strategy in your overall process.

Creating your strategy on a page

The final piece of a business level strategy is creating a strategy document that effectively summarizes the BU strategy and allows it to be easily communicated to both employees and across the rest of the organization.

Irrespective of the framework you have chosen to follow, developing a strategy document entails addressing five fundamental questions:

• What is our current situation in terms of our own performance, industry, competition, and the broader macro environment, and how will it affect us in the future? (I.e., a summary of your starting point)  
• Where do we have an existing competitive edge (or high potential for one) in e.g., customer segments, markets, or geographic areas, and how can we enhance this advantage through our solution delivery, differentiation in our value proposition, and the efficiency of our go-to-market approach?  
• What are our primary strategic choices required to establish and maintain these competitive advantages? How do these choices translate into strategic pillar areas and opportunities? What does success in these areas look like?  
• Which strategic initiatives must be implemented to realize these choices and achieve our goals? What organizational enablers or structures are needed to support these initiatives?  
• How do we integrate all of this into a comprehensive plan to ensure we have the appropriate resources and governance in place to drive strategic change effectively?

Examples of what a strategy-on-a-page can look like from our Business Strategy template

For most businesses, strategy essentially means focus – aligning their business model with customer value, competitive differentiation, and improving return on investment. Crafting a strategy often involves deciding what activities to forgo in order to allocate resources to more impactful initiatives. This process also highlights strengths and weaknesses within the business model. By concentrating on specific customer segments and aligning various components, companies can tap into their growth potential.

See our blog post “5 Key Elements of a Successful Strategy” for more practical tips or download our full Business Strategy template to get a jumpstart on your own strategy presentation.

The third and final level of strategy is functional strategy. Functions in an organization typically refer to the teams that are organized around a specific operational element of the business, or individuals in multi-function teams that have specific roles.

You can think of functions as both support functions that run across an organization, e.g., HR, procurement, technical infrastructure, and as functions related to the specific parts of the value chain, e.g., sales, marketing, customer service. Taken together, the collaborative work of the functions are what produce and deliver the value proposition and go-to-market.

The goal of a functional strategy is to best support and enable each business unit within the organization to achieve their strategic potential, while making sure the overall portfolio prioritization is adhered to.

Put simply, your functional strategy level is the strategy that guides the daily efforts of your employees and ensures your organization stays on the right path. Without well-defined functional strategies, your organization can quickly lose momentum and become stagnant while competitors forge ahead.

For larger organizations, it becomes crucial to consider how different functions can contribute to growth and collaborate effectively while adhering to the corporate strategy. Each function or department, including marketing, finance, IT, and operations, has its own set of goals and responsibilities. Establishing visible functional strategies that are consistent and align with the overarching corporate strategy significantly increases the likelihood of success.

Depending on the way your organization and business units are structured, the functional level strategy is sometimes closer to a tactical day-to-day plan (focused on execution rather than direction-setting). Regardless of whether this is the case, is it still important to have a systematic planning process in place for functional strategies to make sure the entire organization is aligned and consistent across strategic ambition, governance, and KPIs.

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Functional level strategy examples

Depending on how your company is organized, examples of functional strategies could be:

• HR strategy: HR strategies can range from simple “center-of-excellence”-type strategies where you provide the best systems and processes for businesses to use in their own people departments, to detailed complete HR strategies around recruitment, training, performance management, compensation, retention etc.
• Marketing strategy: Marketing strategies typically focuses on planning and executing marketing campaigns including identifying and understanding target customer groups, understanding the value propositions, and creating and running the actual campaigns or efforts to gain more customers. The larger an organization becomes, the more likely it is that marketing is kept within each business individually.
• R&D strategy: Depending on the industry, you may have a need for a distinct R&D strategy to help determine how resources are invested in creating new products, technologies, and services.
• IT strategy: Oftentimes it makes sense for an organization to have a shared technology infrastructure. Here, and IT strategy means planning for and managing the organization’s technology resources and includes decisions on which systems to use, how to store and manage data, how to address cybersecurity etc.
• Production strategy: You may also have a setup where a shared production facility and infrastructure are most beneficial. In this case, a production strategy often sets goals and initiatives around supply chain management, production planning, quality control, logistics, and inventory management in a way that best support the business units’ strategies.

These are just a handful of examples. Others could be strategies around distribution, sales, partnering or more. It all depends on how big and decentralized your particular organization is set up. If you don’t have specific functional strategies due to size or structure, then they’ll often be implicit in the business level strategy and the individual functional teams will have KPIs and tactical plans related to the business unit strategy.

Delve deeper into strategy formulation with our guide on the 5 Key Elements of Successful Strategy.

Corporate strategy is about your portfolio as a whole, deciding which businesses to be in, how to allocate capital, and how shareholders are rewarded.

Business unit strategy is the classic business model strategy of creating and maintaining a competitive advantage in your specific market. As mentioned, depending on the size of the organization, corporate and business unit strategy may be one and the same.

And finally, functional strategy is the operating level of the organization. Here the strategies are centered around how to best support and enable each business within the portfolio to achieve their strategic potential as outlined in the overall portfolio prioritization.

Building and executing a succesful strategy requires you to make sure all three levels of strategy are aligned and work in tandem. You may not necessarily need each business unit strategy to be mutually exclusive or for business units to have completely different markets etc. (in fact, sometimes you may want to run somewhat competing businesses to both run and reinvent your overall competitive advantage at the same time), but you do want to make sure that both your corporate strategy and functional strategies don’t undermine the efforts of the business unit strategies that are closest to customers and bring in revenues to the organization.

By creating consistent strategies on all three levels you’ll be able to better gain and sustain your overall competitive position and future-proof your organization.

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Chapter 9 Structuring Organizations

Learning Objectives

• Identify the three levels of management and the responsibilities at each level.
• Discuss various options for organizing a business, and create an organization chart.
• Understand how specialization helps make organizations more efficient.
• Discuss the different ways that an organization can departmentalize.
• Explain other key terms related to this chapter such as chain of command, delegation of authority, and span of control.

If you read our chapter on Management and Leadership, you will recall developing a strategic plan for your new company, Notes-4-You. Once a business has completed the planning process, it will need to organize the company so that it can implement that plan. A manager engaged in organizing allocates resources (people, equipment, and money) to achieve a company’s objectives . Successful managers make sure that all the activities identified in the planning process are assigned to some person, department, or team and that everyone has the resources needed to perform assigned activities.

Levels of Management: How Managers Are Organized

A typical organization has several layers of management . Think of these layers as forming a pyramid like the one in figure 9.1, with top managers occupying the narrow space at the peak, first-line managers the broad base, and middle-managers the levels in between.

As you move up the pyramid, management positions get more demanding, but they carry more authority and responsibility (along with more power, prestige, and pay). Top managers spend most of their time in planning and decision making, while first-line managers focus on day-to-day operations. For obvious reasons, there are far more people with positions at the base of the pyramid than there are at the other two levels. Let’s look at each management level in more detail.

Top Managers

Top managers are responsible for the health and performance of the organization. They set the objectives, or performance targets, designed to direct all the activities that must be performed if the company is going to fulfill its mission. Top-level executives routinely scan the external environment for opportunities and threats, and they redirect company efforts when needed. They spend a considerable portion of their time planning and making major decisions. They represent the company in important dealings with other businesses and government agencies, and they promote it to the public. Job titles at this level typically include chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), president, and vice president.

Middle Managers

Middle managers are in the center of the management hierarchy: they report to top management and oversee the activities of first-line managers. They’re responsible for developing and implementing activities and allocating the resources needed to achieve the objectives set by top management. Common job titles include operations manager, division manager, plant manager, and branch manager.

First-Line Managers

First-line managers supervise employees and coordinate their activities to make sure that the work performed throughout the company is consistent with the plans of both top and middle management. It’s at this level that most people acquire their first managerial experience. The job titles vary considerably but include such designations as manager, group leader, office manager, foreman, and supervisor.

Let’s take a quick survey of the management hierarchy at Notes-4-You. As president, you are a member of top management, and you’re responsible for the overall performance of your company. You spend much of your time setting performance targets, to ensure that the company meets the goals you’ve set for it—increased sales, higher-quality notes, and timely distribution.

Several middle managers report to you, including your operations manager. As a middle manager, this individual focuses on implementing two of your objectives: producing high-quality notes and distributing them to customers in a timely manner. To accomplish this task, the operations manager oversees the work of two first-line managers—the note-taking supervisor and the copying supervisor. Each first-line manager supervises several non-managerial employees to make sure that their work is consistent with the plans devised by top and middle management.

Organizational Structure: How Companies Get the Job Done

Building an organizational structure engages managers in two activities: job specialization (dividing tasks into jobs) and departmentalization (grouping jobs into units). An organizational structure outlines the various roles within an organizational, which positions report to which, and how an organization will departmentalize its work. Take note than an organizational structure is an arrangement of positions that’s most appropriate for your company at a specific point in time. Given the rapidly changing environment in which businesses operate, a structure that works today might be outdated tomorrow. That’s why you hear so often about companies restructuring —altering existing organizational structures to become more competitive once conditions have changed. Let’s now look at how the processes of specialization and departmentalization are accomplished.

Specialization

Organizing activities into clusters of related tasks that can be handled by certain individuals or groups is called specialization . This aspect of designing an organizational structure is twofold:

• Identify the activities that need to be performed in order to achieve organizational goals.
• Break down these activities into tasks that can be performed by individuals or groups of employees.

Specialization has several advantages. First and foremost, it leads to efficiency . Imagine a situation in which each department was responsible for paying its own invoices; a person handling this function a few times a week would likely be far less efficient than someone whose job was to pay the bills. In addition to increasing efficiency, specialization results in jobs that are easier to learn and roles that are clearer to employees. But the approach has disadvantages, too. Doing the same thing over and over sometimes leads to boredom and may eventually leave employees dissatisfied with their jobs. Before long, companies may notice decreased performance and increased absenteeism and turnover (the percentage of workers who leave an organization and must be replaced).

Departmentalization

The next step in designing an organizational structure is departmentalization —grouping specialized jobs into meaningful units. Depending on the organization and the size of the work units, they may be called divisions, departments, or just plain groups.

Traditional groupings of jobs result in different organizational structures, and for the sake of simplicity, we’ll focus on two types—functional and divisional organizations.

Functional Organizations

A functional organization groups together people who have comparable skills and perform similar tasks. This form of organization is fairly typical for small to medium-size companies, which group their people by business functions: accountants are grouped together, as are people in finance, marketing and sales, human resources, production, and research and development. Each unit is headed by an individual with expertise in the unit’s particular function. Examples of typical functions in a business enterprise include human resources, operations, marketing, and finance. Also, business colleges will often organize according to functions found in a business.

There are a number of advantages to the functional approach. The structure is simple to understand and enables the staff to specialize in particular areas; everyone in the marketing group would probably have similar interests and expertise. But homogeneity also has drawbacks: it can hinder communication and decision making between units and even promote interdepartmental conflict. The marketing department, for example, might butt heads with the accounting department because marketers want to spend as much as possible on advertising, while accountants want to control costs.

Divisional Organizations

Large companies often find it unruly to operate as one large unit under a functional organizational structure. Sheer size makes it difficult for managers to oversee operations and serve customers. To rectify this problem, most large companies are structured as divisional organizations . They are similar in many respects to stand-alone companies, except that certain common tasks, like legal work, tends to be centralized at the headquarters level. Each division functions relatively autonomously because it contains most of the functional expertise (production, marketing, accounting, finance, human resources) needed to meet its objectives. The challenge is to find the most appropriate way of structuring operations to achieve overall company goals. Toward this end, divisions can be formed according to products, customers, processes, or geography.

Product divisions

Product division means that a company is structured according to its product lines. General Motors, for example, has four product-based divisions: Buick, Cadillac, Chevrolet, and GMC. [1] Each division has its own research and development group, its own manufacturing operations, and its own marketing team. This allows individuals in the division to focus all their efforts on the products produced by their division. A downside is that it results in higher costs as corporate support services (such as accounting and human resources) are duplicated in each of the four divisions.

Customer divisions

Some companies prefer a customer division structure because it enables them to better serve their various categories of customers. Thus, Johnson & Johnson’s 200 or so operating companies are grouped into three customer-based business segments: consumer business (personal-care and hygiene products sold to the general public), pharmaceuticals (prescription drugs sold to pharmacies), and professional business (medical devices and diagnostics products used by physicians, optometrists, hospitals, laboratories, and clinics). [2]

Process divisions

If goods move through several steps during production, a company might opt for a process division structure. This form works well at Bowater Thunder Bay, a Canadian company that harvests trees and processes wood into newsprint and pulp. The first step in the production process is harvesting and stripping trees. Then, large logs are sold to lumber mills and smaller logs are chopped up and sent to Bowater’s mills. At the mill, wood chips are chemically converted into pulp. About 90 percent is sold to other manufacturers (as raw material for home and office products), and the remaining 10 percent is further processed into newspaper print. Bowater, then, has three divisions: tree cutting, chemical processing, and finishing (which makes newsprint). [3]

Geographical divisions

Geographical division enables companies that operate in several locations to be responsive to customers at a local level. Adidas, for example, is organized according to the regions of the world in which it operates. They have eight different regions, and each one reports its performance separately in their annual reports. [4]

Summing Up Divisional Organizations

There are pluses and minuses associated with divisional organization. On the one hand, divisional structure usually enhances the ability to respond to changes in a firm’s environment. If, on the other hand, services must be duplicated across units, costs will be higher. In addition, some companies have found that units tend to focus on their own needs and goals at the expense of the organization as a whole.

The Organization Chart

Once an organization has set its structure, it can represent that structure in an organization chart : a diagram delineating the interrelationships of positions within the organization. An example organization chart is shown in figure 9.3, using our “Notes-4-You” example from chapter 8.

Imagine putting yourself at the top of the chart, as the company’s president. You would then fill in the level directly below your name with the names and positions of the people who work directly for you—your accounting, marketing, operations, and human resources managers. The next level identifies the people who work for these managers. Because you’ve started out small, neither your accounting manager nor your human resources manager will be currently managing anyone directly. Your marketing manager, however, will oversee one person in advertising and a sales supervisor (who, in turn, oversees the sales staff). Your operations manager will oversee two individuals—one to supervise note-takers and one to supervise the people responsible for making copies. The lines between the positions on the chart indicate the reporting relationships ; for example, the Note-Takers Supervisor reports directly to the Operations Manager.

Although the structure suggests that you will communicate only with your four direct reports, this isn’t the way things normally work in practice. Behind every formal communication network there lies a network of informal communications —unofficial relationships among members of an organization. You might find that over time, you receive communications directly from members of the sales staff; in fact, you might encourage this line of communication.

Now let’s look at the chart of an organization that relies on a divisional structure based on goods or services produced—say, a theme park. The top layers of this company’s organization chart might look like the one in figure 9.4A (left side of the diagram). We see that the president has two direct reports—a vice president in charge of rides and a vice president in charge of concessions. What about a bank that’s structured according to its customer base? The bank’s organization chart would begin like the one in figure 9.4B. Once again, the company’s top manager has two direct reports, in this case a VP of retail-customer accounts and a VP of commercial-customer accounts.

Over time, companies revise their organizational structures to accommodate growth and changes in the external environment. It’s not uncommon, for example, for a firm to adopt a functional structure in its early years. Then, as it becomes bigger and more complex, it might move to a divisional structure—perhaps to accommodate new products or to become more responsive to certain customers or geographical areas. Some companies might ultimately rely on a combination of functional and divisional structures. This could be a good approach for a credit card company that issues cards in both the United States and Europe. An outline of this firm’s organization chart might look like the one in figure 9.5.

Chain of Command

The vertical connecting lines in the organization chart show the firm’s chain of command : the authority relationships among people working at different levels of the organization. That is to say, they show who reports to whom. When you’re examining an organization chart, you’ll probably want to know whether each person reports to one or more supervisors: to what extent, in other words, is there unity of command ? To understand why unity of command is an important organizational feature, think about it from a personal standpoint. Would you want to report to more than one boss? What happens if you get conflicting directions? Whose directions would you follow?

There are, however, conditions under which an organization and its employees can benefit by violating the unity-of-command principle. Under a matrix structure , for example, employees from various functional areas (product design, manufacturing, finance, marketing, human resources, etc.) form teams to combine their skills in working on a specific project or product. This matrix organization chart might look like the one in the following figure.

Nike sometimes uses this type of arrangement. To design new products, the company may create product teams made up of designers, marketers, and other specialists with expertise in particular sports categories—say, running shoes or basketball shoes. Each team member would be evaluated by both the team manager and the head of his or her functional department.

Span of Control

Another thing to notice about a firm’s chain of command is the number of layers between the top managerial position and the lowest managerial level. As a rule, new organizations have only a few layers of management—an organizational structure that’s often called flat . Let’s say, for instance, that a member of the Notes-4-You sales staff wanted to express concern about slow sales among a certain group of students. That person’s message would have to filter upward through only two management layers—the sales supervisor and the marketing manager—before reaching the president.

As a company grows, however, it tends to add more layers between the top and the bottom; that is, it gets taller. Added layers of management can slow down communication and decision making, causing the organization to become less efficient and productive. That’s one reason why many of today’s organizations are restructuring to become flatter.

There are trade-offs between the advantages and disadvantages of flat and tall organizations. Companies determine which trade-offs to make according to a principle called span of control , which measures the number of people reporting to a particular manager. If, for example, you remove layers of management to make your organization flatter, you end up increasing the number of people reporting to a particular supervisor. If you refer back to the organization chart for Notes-4-You, you’ll recall that, under your present structure, four managers report to you as the president: the heads of accounting, marketing, operations, and human resources. In turn, two of these managers have positions reporting to them: the advertising manager and sales supervisor report to the marketing manager, while the notetakers supervisor and the copiers supervisor report to the operations manager. Let’s say that you remove a layer of management by getting rid of the marketing and operations managers. Your organization would be flatter, but what would happen to your workload? As president, you’d now have six direct reports rather than four: accounting manager, advertising manager, sales manager, notetaker supervisor, copier supervisor, and human resources manager.

So what’s better—a narrow span of control (with few direct reports) or a wide span of control (with many direct reports)? The answer to this question depends on a number of factors, including frequency and type of interaction, proximity of subordinates, competence of both supervisor and subordinates, and the nature of the work being supervised. For example, you’d expect a much wider span of control at a nonprofit call center than in a hospital emergency room.

Delegating Authority

Given the tendency toward flatter organizations and wider spans of control, how do managers handle increased workloads? They must learn how to handle delegation —the process of entrusting work to subordinates. Unfortunately, many managers are reluctant to delegate. As a result, they not only overburden themselves with tasks that could be handled by others, but they also deny subordinates the opportunity to learn and develop new skills.

Responsibility and Authority

As owner of Notes-4-You, you’ll probably want to control every aspect of your business, especially during the start-up stage. But as the organization grows, you’ll have to assign responsibility for performing certain tasks to other people. You’ll also have to accept the fact that responsibility alone—the duty to perform a task—won’t be enough to get the job done. You’ll need to grant subordinates the authority they require to complete a task—that is, the power to make the necessary decisions. (And they’ll also need sufficient resources.) Ultimately, you’ll also hold your subordinates accountable for their performance.

Centralization and Decentralization

If and when your company expands (say, by offering note-taking services at other schools), you’ll have to decide whether most decisions should still be made by individuals at the top or delegated to lower-level employees. The first option, in which most decision making is concentrated at the top, is called centralization . The second option, which spreads decision making throughout the organization, is called decentralization .

Centralization has the advantage of consistency in decision-making. Since in a centralized model, key decisions are made by the same top managers, those decisions tend to be more uniform than if decisions were made by a variety of different people at lower levels in the organization. In most cases, decisions can also be made more quickly provided that top management does not try to control too many decisions. However, centralization has some important disadvantages. If top management makes virtually all key decisions, then lower-level managers will feel under-utilized and will not develop decision-making skills that would help them become promotable. An overly centralized model might also fail to consider information that only front-line employees have or might actually delay the decision-making process. Consider a case where the sales manager for an account is meeting with a customer representative who makes a request for a special sale price; the customer offers to buy 50 percent more product if the sales manager will reduce the price by 5 percent for one month. If the sales manager had to obtain approval from the head office, the opportunity might disappear before she could get approval—a competitor’s sales manager might be the customer’s next meeting.

An overly decentralized decision model has its risks as well. Imagine a case in which a company had adopted a geographically-based divisional structure and had greatly decentralized decision making. In order to expand its business, suppose one division decided to expand its territory into the geography of another division. If headquarters approval for such a move was not required, the divisions of the company might end up competing against each other, to the detriment of the organization as a whole. Companies that wish to maximize their potential must find the right balance between centralized and decentralized decision making.

Key Takeaways

• Managers coordinate the activities identified in the planning process among individuals, departments, or other units and allocate the resources needed to perform them.
• Typically, there are three levels of management : top managers , who are responsible for overall performance; middle managers , who report to top managers and oversee lower-level managers; and first-line managers , who supervise employees to make sure that work is performed correctly and on time.
• Management must develop an organizational structure , or arrangement of people within the organization, that will best achieve company goals.
• The process begins with specialization —dividing necessary tasks into jobs; the principle of grouping jobs into units is called departmentalization .
• Units are then grouped into an appropriate organizational structure. Functional organization groups people with comparable skills and tasks; divisional organization creates a structure composed of self-contained units based on product, customer, process, or geographical division . Forms of organizational division are often combined.
• An organization’s structure is represented in an organization chart —a diagram showing the interrelationships of its positions.
• This chart highlights the chain of command , or authority relationships among people working at different levels.
• It also shows the number of layers between the top and lowest managerial levels. An organization with few layers has a wide span of control, with each manager overseeing a large number of subordinates; with a narrow span of control , only a limited number of subordinates reports to each manager.

Figure 9.1: Levels of management. Kindred Grey. 2022. CC BY 4.0 . https://archive.org/details/9.1_20220623 .

Figure 9.2: Adidas’ geographical divisions. Kindred Grey. 2022. CC BY-SA 3.0 . Data from https://www.annualreports.com/HostedData/AnnualReports/PDF/OTC_ADDDF_2021.pdf . Added Adidas Logo by Unknown author from WikimediaCommons (public domain) and BlankMap-World-Continents-Coloured by Max Naylor from WikimediaCommons ( CC BY-SA 3.0 ). https://archive.org/details/9.2_20220623 .

Figure 9.3: An organizational chart for Notes-4-You. Kindred Grey. 2022. CC BY 4.0 . Added Woman by verry poernomo from Noun Project ( Noun Project license ) and manager by Chrystina Angeline from Noun Project ( Noun Project license ). https://archive.org/details/9.3_20220623 .

Figure 9.4: Organizational charts for divisional structures. Kindred Grey. 2022. CC BY 4.0 . https://archive.org/details/9.4_20220623 .

Figure 9.5: Organizational charts for functional and divisional structures. Kindred Grey. 2022. GNU General Public license . Added Blank map of the United States by Zntrip from WikimediaCommons ( GNU General Public license ) and Europe blank map by wiki-vr from WikimediaCommons (public domain). https://archive.org/details/9.5_20220623 .

Figure 9.6: Example of a matrix structure. Kindred Grey. 2022. CC BY 4.0 . https://archive.org/details/9.6_20220623 .

• Associated Press (2010). “General Motors Rebuilds with 4 Divisions.” Augusta Chronicle. Retrieved from: http://chronicle.augusta.com/life/autos/2010-10-07/general-motors-rebuilds-4-divisions# ↵
• Johnson and Johnson (2016). “Company Structure.” Retrieved from: http://www.jnj.com/about-jnj/company-structure ↵
• Lakehead University Faculty of Natural Resources Management (2016). “From the Forest to the Office and Home: Bowater—A Case Study in Newsprint and Kraft Pulp Production.” Borealforest.org. Retrieved from: http://www.borealforest.org/paper/index.htm ↵
• Adidas Group (2015). “Adidas Group Annual Report 2015.” Retrieved from: http://www.adidas-group.com/en/investors/financial-reports/#/2015/ ↵

Fundamentals of Business, 4th edition Copyright © by Adapted by Ron Poff is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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The 4 Levels Of Strategy: The Difference & How To Apply Them

Every business leader should be familiar with different levels of strategy. Strategy comes in various forms: the strategy for a multi-national company will differ from that of a startup.

Yet, the principles remain. To understand how strategies shift, we'll examine the existing strategy levels and how an organization can apply them.

The key takeaway from this article is that  strategy is for everyone .

You don't have to wait until your business grows to a certain size to “get strategic.” Be aware of where you are as a business so you can develop a strategy that fits and grows with your organization.

In this article, we'll discuss how the strategy levels in an organization differ and provide context on how to use these  different levels of strategy in  strategic management .

We’ll also show you how you can centralize your strategy in Cascade and ensure the alignment between the different levels for successful and effective strategy execution!

The Levels Of Strategy

Strategists often refer to three levels of strategy:  corporate level  strategy,  business level  strategy, and  functional level  strategy.

But, they are missing a fundamental level that is key for successful strategy execution :  operational level strategy .

This article outlines the basics of the four levels in strategic management, but if you're interested in delving deeper into a specific level, we also offer individual articles dedicated to each one:

Corporate Level Strategy

Business level strategy, functional level strategy, operational level strategy.

No matter the level of strategy, "organizations that promote transparency and a collective culture when it comes to strategy, generate a stronger commitment and sense of accountability from their employees." This statement by Guillermo Hermosillo Cue, Global Innovation Director at Burger King in our state of strategy report echoes the importance of strategic communication regardless of the strategy level.

The  corporate strategy  is the highest-level strategy in an organization. It defines the organization’s overall direction and the high-level ideas of how to move towards it.

These plans are usually created by leadership, such as the CEO and top management. Generally, this is the group involved because they have a deep understanding of the company and the strategic business knowledge needed to steer the organization in the right direction.

A corporate strategy is generally broader than the other strategy levels. Strategies at this level are more conceptual and futuristic than the other levels. They usually span a 3-5 year period.

A corporate strategic plan generally encompasses:

• The core business metrics
• The strategic focus areas
• The corporate goals
• The strategic objectives
• The most important KPIs

⚠️ Important! The corporate level strategy needs to take into account the foundational elements of the organization: its vision statement , mission statement, and company values .

Why create a corporate strategy?

In the corporate strategic plan, you're essentially mapping out where your organization should play.

This master plan sets the stage for developing business unit strategies and functional level strategies, along with nitty-gritty operational plans.

These strategies, in turn, will guide the downstream decisions made by employees of all levels. Therefore, every decision made in the organization should directly or indirectly contribute to the strategy's corporate objectives.

Every organization needs a corporate strategy. There is no such thing as a too-small organization nor a too-large one to define what they want to achieve and how they will do it.

👉🏻 Grab your free  corporate strategy template  to follow a structured approach and create your corporate strategic plan.

The  business level strategy  is the second tier in the strategy hierarchy. Sitting under the corporate strategy, the business strategy is a means to achieve the goals of the specific business units in the organization.

The objectives and strategic initiatives within each business unit’s strategy will be focused on gaining a competitive advantage in the particular market in which the business unit operates.

There are different types of business level strategies organizations adopt depending on the competitive advantage they want to gain. Organizations face crucial decisions here, with options like adopting a growth strategy, differentiation strategy, or embracing a cost leadership approach.

📚 Learn more about the different types of business strategies in our article: What Is A Business Level Strategy? How To Create It + Examples

Each business area must make a strategic decision and define the approach they’ll choose to get closer to their goals.

Business strategy examples

A large bank is a prime example of an organization selling multiple services in different industries.

To name a few, it has business units like  retail banking, investment management, and insurance company . Each of these business units has distinct goals and a distinct business unit strategy to achieve them.

📚 Read more:  The 7 Best Business Strategy Examples I've Ever Seen

Include middle managers in the business strategy

Strategies at the business level should be constructed by VPs and —global or regional— business unit heads. However, also including other middle managers within each business unit is a best practice.

Including a range of managers from each unit to participate in the  strategy process  has two main benefits:

• It increases buy-in: Managers who've had a chance to contribute to the strategy formulation feel included in the decision-making. Therefore, they’re more likely to accept the strategy and jump on board with its execution.
• It improves ownership: Employees who are given the opportunity to contribute to the strategy development are more likely to take ownership of its completion.

💡 Pro Tip: If your organization has multiple business units, this strategy level becomes crucial. However, if you only have one business unit, you don't need to worry about this level and can skip to the functional strategy level.

👉🏻 Grab your free  business strategy template  to follow a structured approach and create your business strategic plan.

This level of strategy designs the approach for the different functional areas or departments —we’ve already given you a little spoiler with the previous image of the bank strategy levels example.  These functions can include the marketing department, finance, supply chain, manufacturing, human resources, and more.

The primary objective of functional strategy is to  align  the activities and efforts of these individual departments with the broader goals and strategic objectives set at higher levels, such as corporate and business strategy.

Functional strategies have a fairly narrow focus. They are designed to address the unique challenges and opportunities within each functional area.

Your finance strategy, marketing strategy, human resource strategy, etc., all have goals and responsibilities to deliver. Having a visible functional level of strategy that aligns with the overarching corporate strategy will increase the chances of success.

These strategies involve  resource allocation , measurable goals, and a focus on continuous improvement, all within the context of individual functions.

The secret to a successful functional strategy

Having each department equipped with a well-defined functional strategy is an excellent beginning. But beware of the pitfalls of isolating each functional area in its own strategy bubble; that's venturing into siloed territory.

There are two pivotal aspects to keep in mind for a successful functional strategy:

• Cross-functional collaboration : The magic happens when different departments join forces. Fostering  collaboration  between these functions opens the door to innovation and synergy.
• Strategic alignment : Ensuring that the strategy of each functional area seamlessly matches the overall corporate strategy goals is the foundation of success.

In  Cascade , you can create  strategic plans  for each function in your organization, which link back to the main corporate plan to ensure everything is moving in the right direction.

"A journey of a thousand miles begins with one step,” as the saying goes.

Check out strategic planning templates for different functions:

• Marketing Strategy Template
• HR Strategy Template
• Financial Strategy Template
• Supply Chain Strategy Template

📚 Explore thousands of other free strategy templates in our  Template Library !

Companies usually stop at the first three levels of strategy, but the fourth level is the most important one to ensure successful execution. These three levels of strategy—corporate, business, and functional—set the foundation, but it's the operational strategy that brings all the plans to life on the ground.

Operational level strategy, situated at the lowest tier of the strategic hierarchy, focuses on the day-to-day actions and  tactics  needed to run the business, manage processes, and implement change effectively . It’s the “boots-on-the-ground” aspect of strategy, ensuring that plans are translated into tangible actions and results.

In simple terms, this is the strategy that will inform the day-to-day work of employees and will ultimately keep your organization moving in the right direction.

It's primarily concerned with short-term objectives and the practical execution of plans, detailing the specific actions, procedures, and activities that need to be executed to meet organizational goals.

The operational strategy involves roles like  PMOs , team leaders, individual contributors, and team members, and plays a pivotal role in the successful  implementation  of broader strategies.

Cascade Strategy Execution Platform improves operational efficiency by eliminating duplication and aligning teams toward common goals. It helps reduce waste caused by misalignment, promoting streamlined operations and optimal performance.

Key characteristics of operational strategy

• Tactical Execution : Operational strategies focus on executing tactical steps to achieve business objectives, offering a detailed  roadmap  for execution.
• Short-Term Focus : Geared towards short-term goals and might encompass quarterly, monthly, or even daily activities.
• Resource Utilization : Deals with resource allocation at a detailed level, including workforce management, budget allocation, and technology deployment for specific projects and  initiatives .
• Project Management : Operational strategies often include  project management  to coordinate teams and meet time and budget constraints.
• Feedback and Adaptation : They incorporate feedback loops, allowing adjustments as circumstances change.
• Immediate Impact : Success at the operational level directly contributes to achieving broader business and corporate goals, serving as a linchpin in strategy execution.

Differences Across The Four Strategy Levels

Understanding the differences helps ensure that each strategy level is tailored to its unique role within the organization.

Decision-making timeframes

Corporate-level strategy involves decisions that span several years to decades, defining the organization's overall direction and long-term vision. In contrast, business-level strategy concentrates on 3-5 year plans, dealing with the competitive position in specific markets or industries. Functional-level strategy targets optimizing department functions like marketing, HR, or finance within annual cycles, while operational-level strategy addresses day-to-day decisions to implement higher-level strategies.

Scope of influence

The entire organization is influenced by corporate-level strategy, which sets broad strategic objectives affecting all business units and functions. On the other hand, business-level strategy focuses and zeroes in on individual units to create competitive advantage in the market. Aligning departmental activities with business and corporate goals is the main focus of functional-level strategy. Operational-level strategy, however, details steps for teams and individuals to achieve functional objectives and ensure smooth operations.

Focus areas

Growth, mergers and acquisitions, diversification, and portfolio management are central to corporate level strategies. Competitive strategy, market segmentation, and value proposition for a specific target market or product take precedence in each business unit strategy. Functional-level strategy aims to optimize department-specific activities and resources to support business unit goals. Finally, operational-level strategy emphasizes executing tasks, managing projects, and meeting immediate objectives to support functional goals.

Strategy Levels Aligned: The Key To Effective Execution

Understanding the levels of strategy is a big part of getting the creation right. However, with increased levels, there can be increased confusion.

Our dedicated  strategy execution platform ,  Cascade , allows you to centralize your strategy into one central hub. It empowers you to build your strategic plans and visualize how they work together. Easily see how your corporate strategy breaks down into business, functional, and operational plans , all in one cohesive platform.

Cascade simplifies the alignment of projects and encourages collaboration across plans and departments, making strategic execution a breeze.

Sign up to Cascade for FREE  or  book a demo  with one of our strategy experts to learn how you can plan, execute, and track your strategy in one easy-to-use platform.

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Your toolkit for strategy success.

• What is Strategy?
• Business Models
• Developing a Strategy
• Strategic Planning
• Competitive Advantage
• Growth Strategy
• Market Strategy
• Customer Strategy
• Geographic Strategy
• Product Strategy
• Service Strategy
• Pricing Strategy
• Distribution Strategy
• Sales Strategy
• Marketing Strategy
• Digital Marketing Strategy
• Organizational Strategy
• HR Strategy – Organizational Design
• HR Strategy – Employee Journey & Culture
• Process Strategy
• Procurement Strategy
• Cost and Capital Strategy
• Business Value
• Market Analysis
• Problem Solving Skills
• Strategic Options
• Business Analytics
• Strategic Decision Making
• Process Improvement
• Project Planning
• Team Leadership
• Personal Development
• Leadership Maturity Model
• Leadership Team Strategy
• The Leadership Team
• Leadership Mindset
• Communication & Collaboration
• Problem Solving
• Decision Making
• People Leadership
• Strategic Execution
• Executive Coaching
• Strategy Coaching
• Business Transformation
• Strategy Workshops
• Leadership Strategy Survey
• Leadership Training
• Who’s Joe?

STRATEGIC PLANNING

Strategic planning solves for 3 levels of strategy.

Strategic planning typically solves for three levels of strategy:

1. Business Model Strategy 2. Organizational & Financial Strategy 3. Functional Strategy

For larger companies with multiple business units there is a 4th higher level of strategy, Corporate Strategy, which is about the allocation of capital and resources across business units/models, and the harvesting of synergies through centralization of functions, shared sales, and marketing spend, M&A, customer synergies, etc.

Understanding which level of strategy you are solving for is beneficial when thinking through a strategic planning process. We'll go more in-depth in strategic planning for each level, but before that, let's go over some strategic planning fundamentals.

WHAT IS STRATEGIC PLANNING?

Strategy is simply the goals you choose and the actions (plans) you take to achieve those goals. Strategic Planning is the process by which you create goals and actions over a defined period.

A strategic planning process can take many forms. It can be in the form of a:

• Few hours with the team in a conference room
• Leadership offsite
• CEO thinking through the next year while backpacking for the weekend
• Very involved and coordinated multi-month process
• Strategy consulting project

Most strong CEOs and leaders spend a large portion of their mental capacity on strategic planning. They are constantly reframing their strategic context, thinking of new goals, initiatives, ways of organizing, etc.

At any level, formal strategic planning typically follows four high-level steps:

• Generate insights
• Develop opportunities

All of the strategy guides on Stratechi.com follow this 4-step process.

WHEN SHOULD WE DO STRATEGIC PLANNING?

Given the various levels of strategy (corporate, business model, org & financial, and functional) to solve for, your company's strategic planning process should be staggered with some overlap and feedback loops, since they should influence each other.

If your company has multiple business units, you typically need a planning cadence for your corporate strategy, which should take a few months and start sometime in Q2. Considering how deep you need to go into your business model strategy, you should kick off that planning process in Q2 or Q3. It typically takes a few months to finalize the headcount and budgets from org and financial strategic planning, so you should begin that process in Q3. Functional strategies should start in Q4; once business model, org & financial strategies are finished or almost finished.

If you are looking for a business coach to collaborate on your strategic planning, set up some on-demand one-on-one time with Joe Newsum , the creator of this content and a McKinsey alum

CORPORATE STRATEGIC PLANNING

Corporate strategic planning occurs in larger companies with multiple business units. The focus is two-fold. First, corporate strategic planning solves for the company's overall financial model/projections and the optimal allocation of capital and costs across the business models/units. Second, corporate strategic planning solves for any cross-business unit initiatives, such as shared services (finance, sales, HR, etc.) and major IT initiatives, which cascade down into the business unit strategies.

BUSINESS MODEL STRATEGIC PLANNING

Most companies struggle with business model strategic planning. They may not have a clear business model. They may revisit business model strategy too often, try to solve for too much, or at a level of specificity that is too low.

If your company doesn't have a well-documented and robust business model strategy, then your leadership team needs to take a step back and go through a systematic business model strategic planning process. The litmus test on this is, can you answer all of the questions below in our one-page business strategy template? Furthermore, do most managers and above understand the business model? If you need to develop a business model strategy I encourage you to read developing a strategy or set up some time with me to start figuring it out.

Business model strategy is defined at a high-level:

1. The Mission    2. Targets   3.  Customer Value  Proposition   4. Go-to-Market   5. The Organization

It serves as a true north for team members to understand the long-term strategy of the company and align their functional strategies too.

ORGANIZATIONAL & FINANCIAL STRATEGIC PLANNING

Strong companies typically rigorously revisit their business model strategy every 3-5 years. They may need to go deeper in a few areas every year or so, such as targeting a new market, customer, or geography and understanding the implications to the value proposition , go-to-market, and organization. Or, maybe the go-to-market strategy needs to evolve from a distribution focus to a direct model. Regardless, strong businesses have strong business model strategies that they stick with over time.

For struggling companies, business model strategic planning is critical. They need to quickly figure out what is working, and not working, where the market is going, how the targets are evolving, the strengths and weaknesses of the value proposition and go-to-market, and the organizational gaps. We recommend starting with the Leadership Strategy Survey and Strategy Workshop to deeply understand the leadership team's collective view on the company's strategy, while also aligning the team on what strategy is, and generating compelling potential strategies.

For all companies, it is prudent to revisit business model strategy, at some level, annually or every few years, to test major assumptions and think through competitive and market dynamics.  Lighter versions of business model strategic planning typically involve a series of leadership meetings or off-sites to systematically go through and discuss all of the major elements in the business model.  In between sessions, various analyses are done to prove or disprove important hypotheses about business model elements and dynamics.

Every 3-5 years, companies should embark on a rigorous business model strategic planning process to ensure their business model is competitive over the next 5-10 years. This process necessitates extensive project planning and management. We typically recommend bringing in a Strategy Coach to help with the planning, process, and workshops, while mentoring and coaching the internal teams driving the process.

Every year, every company does some flavor of organizational and financial strategic planning. Often, they term it "annual budgeting." Though, many companies fall short of infusing real strategic rigor into their budgeting, instead applying broad-based increases or decreases across the board to forecasts, headcount, and budgets. The process should involve a significant amount of analytical retrospection on the KPI performance and the ROI of spend and headcount.

Organizational and financial strategic planning solves for the financial forecast, functional headcount and budgets, and company-wide initiatives. Primarily driven by the finance and leadership team, the planning cycle typically begins in late Q2 into Q3 and is finalized a month or two before year-end. Of course, as the year plays out, there are quarterly or monthly tweaks to plan.

With the right KPIs , systems, and governance , the planning is typically straightforward with a series of meetings to systematically go through a structured process. We often advise bringing in a Strategy Coach to assess and improve the existing process, KPIs, systems and governance. In many cases, the Strategy Coach provides light support through the strategic planning process to push the thinking, analytics , rigor, and governance.

Often overlooked is the importance of properly communicating the business model strategy and the org & financial plan to the next few levels of management. This step is often more work than creating the plans, but if done correctly, ensures the functional strategies are aligned and impactful.

FUNCTIONAL STRATEGIC PLANNING

While strong leaders are always thinking and implementing new strategies, a systematic functional strategic planning process is important to get the broader team involved and aligned in creating winning strategies. The functions of a company are below; organized into value chain and support functions. In the end, all of these functions fuel the collective processes that produce and deliver the value proposition and go-to-market.

One of the most useful things to do for an organization is to drive consistency in functional strategic planning processes, governance, and outputs such as their strategic plans and KPIs. Consistency creates many benefits. It allows different leaders and team members to quickly understand a function's strategy allowing more time for collaborative problem solving . It ensures plans include all the major and necessary elements of a strategy and that they are at the right level of specificity. And, execution becomes simpler since everyone is talking the same language.

Stratechi.com goes in-depth into most of the functional strategies. If you are looking for strategic planning templates click here , otherwise visit:

Product Strategy Service Strategy Pricing Strategy Distribution Strategy Sales Strategy Marketing Strategy HR Strategy Partner Strategy

The key to creating strong functional strategies is to get managers and the next generation of leaders involved in the process. It not only produces great ideas, but also develops team members, ensures alignment, and drives a higher level of commitment and execution. I support many teams with a Strategy Coaching to help guide and mentor teams through a strategic planning process and project.

We hope this was helpful and if you need any support with your strategic planning, please set up some time with Joe Newsum .

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6.2 Planning

• What are the four types of planning?

Planning begins by anticipating potential problems or opportunities the organization may encounter. Managers then design strategies to solve current problems, prevent future problems, or take advantage of opportunities. These strategies serve as the foundation for goals, objectives, policies, and procedures. Put simply, planning is deciding what needs to be done to achieve organizational objectives, identifying when and how it will be done, and determining who should do it. Effective planning requires extensive information about the external business environment in which the firm competes, as well as its internal environment.

There are four basic types of planning: strategic, tactical, operational, and contingency. Most of us use these different types of planning in our own lives. Some plans are very broad and long term (more strategic in nature), such as planning to attend graduate school after earning a bachelor’s degree. Some plans are much more specific and short term (more operational in nature), such as planning to spend a few hours in the library this weekend. Your short-term plans support your long-term plans. If you study now, you have a better chance of achieving some future goal, such as getting a job interview or attending graduate school. Like you, organizations tailor their plans to meet the requirements of future situations or events. A summary of the four types of planning appears in Table 6.2 .

Strategic planning involves creating long-range (one to five years), broad goals for the organization and determining what resources will be needed to accomplish those goals. An evaluation of external environmental factors such as economic, technological, and social issues is critical to successful strategic planning. Strategic plans, such as the organization’s long-term mission, are formulated by top-level managers and put into action at lower levels in the organization. For example, when Mickey Drexler took over as CEO of J.Crew , the company was floundering and had been recently purchased by a private equity group. One of Drexler’s first moves was to change the strategic direction of the company by moving it out of the crowded trend-following retail segment, where it was competing with stores such as Gap , American Eagle , and Abercrombie and back into the preppie, luxury segment where it began. Rather than trying to sell abundant inventory to a mass market, J.Crew cultivated scarcity, making sure items sold out early rather than hit the sale rack later in the season. The company also limited the number of new stores it opened during a two-year span but planned to double the number of stores in the next five to six years. Drexler led the company through public offerings and back to private ownership before bringing on a new CEO in 2017. He remained chairman with ownership in the company. 4

Catching the Entrepreneurial Spirit

Changing strategy can change your opportunities.

Since 1949, Gordon Bernard, a printing company in Milford, Ohio, focused exclusively on printing fundraising calendars for a variety of clients, such as cities, schools, scout troops, and fire departments. The company’s approximately 4,000 clients nationwide, 10 percent of which have been with the company for over 50 years, generated $4 million in revenue in 2006. In order to better serve customers, company president Bob Sherman invested $650,000 in the purchase of a Xerox iGEN3 digital color press so that the company could produce in-house a part of its calendar product that had been outsourced. The high-tech press did more for the company than simply reduce costs, however.

The new press gave the company four-color printing capability for the first time in its history, and that led the management of Gordon Bernard to rethink the company’s strategy. The machine excels at short runs, which means that small batches of an item can be printed at a much lower cost than on a traditional press. The press also has the capability to customize every piece that rolls off the machine. For example, if a pet store wants to print 3,000 direct mail pieces, every single postcard can have a personalized greeting and text. Pieces targeted to bird owners can feature pictures of birds, whereas the dog owners’ brochure will contain dog pictures. Text and pictures can be personalized for owners of show dogs or overweight cats or iguanas.

Bob Sherman created a new division to oversee the implementation, training, marketing, and creative aspects of the new production process. The company even changed how it thinks of itself. No longer does Gordon Bernard consider itself a printing firm, but as a marketing services company with printing capabilities. That change in strategy prompted the company to seek more commercial work. For example, Gordon Bernard will help clients of its new services develop customer databases from their existing information and identify additional customer information they might want to collect. Even though calendar sales accounted for 97 percent of the firm’s revenues, that business is seasonal and leaves large amounts of unused capacity in the off-peak periods. Managers’ goals for the new division were to contribute 10 percent of total revenue within a couple years of purchase.

• What type of planning do you think Gordon Bernard is doing?
• Because Gordon Bernard’s strategy changed only after it purchased the iGEN3, does the shift constitute strategic planning? Why or why not?

Sources: GBC Fundraising Calendars, http://www.gordonbernard.com/, accessed September 15, 2017; Gordon Bernard Co Inc., https://www.manta.com, accessed September 15, 2017; Karen Bells, “Hot Off the Press; Milford Printer Spends Big to Fill New Niche,” Cincinnati Business Courier, July 15, 2005, pp. 17–18.

An organization’s mission is formalized in its mission statement , a document that states the purpose of the organization and its reason for existing. For example, Twitter ’s mission statement formalizes both concepts while staying within its self-imposed character limit; see Table 6.3 .

In all organizations, plans and goals at the tactical and operational levels should clearly support the organization’s mission statement.

Tactical planning begins the implementation of strategic plans. Tactical plans have a shorter (less than one year) time frame than strategic plans and more specific objectives designed to support the broader strategic goals. Tactical plans begin to address issues of coordinating and allocating resources to different parts of the organization.

Under Mickey Drexler, many new tactical plans were implemented to support J.Crew ’s new strategic direction. For example, he severely limited the number of stores opened each year, with only nine new openings in the first two years of his tenure (he closed seven). Instead, he invested the company’s resources in developing a product line that communicated J.Crew ’s new strategic direction. Drexler dumped trend-driven apparel because it did not meet the company’s new image. He even cut some million-dollar volume items. In their place, he created limited editions of a handful of garments that he thought would be popular, many of which fell into his new luxury strategy. For example, J.Crew now buys shoes directly from the same shoe manufacturers that produce footwear for designers such as Prada and Gucci . In general, J.Crew drastically tightened inventories, a move designed to keep reams of clothes from ending up on sale racks and to break its shoppers’ habit of waiting for discounts.

This part of the plan generated great results. Prior to Drexler’s change in strategy, half of J.Crew ’s clothing sold at a discount. After implementing tactical plans aimed to change that situation, only a small percentage does. The shift to limited editions and tighter inventory controls has not reduced the amount of new merchandise, however. On the contrary, Drexler created a J.Crew bridal collection, a jewelry line, and Crew Cuts, a line of kids’ clothing. The results of Drexler’s tactical plans were impressive. J.Crew saw same-store sales rise 17 percent in one year. 5

Operational planning creates specific standards, methods, policies, and procedures that are used in specific functional areas of the organization. Operational objectives are current, narrow, and resource focused. They are designed to help guide and control the implementation of tactical plans. In an industry where new versions of software have widely varying development cycles, Autodesk , maker of software tools for designers and engineers, implemented new operational plans that dramatically increased profits. Former CEO Carol Bartz shifted the company away from the erratic release schedule it had been keeping to regular, annual software releases. By releasing upgrades on a defined and predictable schedule, the company is able to use annual subscription pricing, which is more affordable for small and midsize companies. The new schedule keeps Autodesk customers on the most recent versions of popular software and has resulted in an overall increase in profitability. 6

The key to effective planning is anticipating future situations and events. Yet even the best-prepared organization must sometimes cope with unforeseen circumstances, such as a natural disaster, an act of terrorism, or a radical new technology. Therefore, many companies have developed contingency plans that identify alternative courses of action for very unusual or crisis situations. The contingency plan typically stipulates the chain of command, standard operating procedures, and communication channels the organization will use during an emergency.

An effective contingency plan can make or break a company. Consider the example of Marriott Hotels in Puerto Rico. Anticipating Hurricane Maria in 2017, workers at the San Juan Marriott had to shift from their regular duties to handling the needs of not only customers, but everyone who needed assistance in the wake of the hurricane that devastated the island. A contingency plan and training for events such as this were a key part of managing this crisis. 7 The company achieved its goal of being able to cater to guest and general needs due to planning and training while having a contingency plan in place. One guest commented on TripAdvisor , “Could not believe how friendly, helpful & responsive staff were even during height of hurricane. Special thanks to Eydie, Juan, Jock, Ashley and security Luis. They kept us safe & were exemplary. Will always stay at Marriott from now on.” 8 Within one month after Hurricane Maria hit, operations were back to normal at the San Juan Marriott . 9

Managing Change

Boeing takes off in new direction.

Boeing and Airbus have been locked in fierce competition for the world’s airplane business for decades. What characterized most of that time period was a focus on designing larger and larger airplanes. Since its development in the 1970s, Boeing revamped its pioneering B747 numerous times and at one time boasted over 1,300 of the jumbo jets in operation around the world. As part of this head-to-head competition for bragging rights to the largest jet in the air, Boeing was working on a 747X, a super-jumbo jet designed to hold 525 passengers. In what seemed to be an abrupt change of strategy, Boeing conceded the super-jumbo segment of the market to its rival and killed plans for the 747X. Instead of trying to create a plane with more seats, Boeing engineers began developing planes to fly fewer people at higher speeds. Then, as the rising price of jet fuel surpassed the airlines’ ability to easily absorb its increasing cost, Boeing again changed its strategy, this time focusing on developing jets that use less fuel. In the end, Boeing ’s strategy changed from plane capacity to jet efficiency.

The new strategy required new plans. Boeing managers identified gaps in Airbus ’s product line and immediately set out to develop planes to fill them. Boeing announced a new 787 “Dreamliner,” which boasted better fuel efficiency thanks to lightweight composite materials and next-generation engine design. Even though the 787 has less than half the seating of the Airbus A380, Boeing ’s Dreamliner is a hit in the market. Orders for the new plane have been stronger than anticipated, forcing Boeing to change its production plans to meet demand. The company decided to accelerate its planned 787 production rate buildup, rolling out a new jet every two days or so.

Airbus was not so lucky. The company spent so much time and energy on its super-jumbo that its A350 (the plane designed to compete with Boeing’s 787) suffered. The 787 uses 15 percent less fuel than the A350, can fly nonstop from Beijing to New York, and is one of the fastest-selling commercial planes ever.

The battle for airline supremacy continues to switch between the two global giants. In 2017, Boeing beat Airbus on commercial jet orders at the Paris Air Show and continues to push forward. A spokesperson has hinted at a hybrid fuselage for midrange planes, which could carry passengers farther at lower costs. If successful, Boeing will regain market share lost to the Airbus A321.

• What seems to be the difference in how Boeing and Airbus have approached planning?
• Do you think Airbus should change its strategic plans to meet Boeing’s or stick with its current plans? Explain.

Sources: Gillian Rich, “Why Boeing's Paris Air Show Orders Are ‘Staggering’,” http://www.investors.com, June 22, 2017; Jon Ostrower, “Boeing vs. Airbus: A New Winner Emerges at the Paris Air Show,” CNN, http://money.cnn.com, June 22, 2017; Gillian Rich, “’Hybrid’ Design for New Boeing Midrange Jet Could Hit This Sweet Spot,” http://www.investors.com, June 20, 2017; Alex Taylor, III, “Boeing Finally Has a Flight Plan,” Fortune , June 13, 2005, pp. 27–28; J. Lynn Lunsford and Rod Stone, “Boeing Net Falls, but Outlook Is Rosy,” The Wall Street Journal , July 28, 2005, p. A3; Carol Matlack and Stanley Holmes, “Why Airbus Is Losing Altitude,” Business Week , June 20, 2005, p. 20; J. Lynn Lunsford, “UPS to Buy 8 Boeing 747s, Lifting Jet’s Prospects,” The Wall Street Journal , September 18, 2005, p. A2; “Airbus to Launch A350 Jet in October,” Xinhua News Agency , September 14, 2005, online; “Boeing Plans Major Change,” Performance Materials , April 30, 2001, p. 5.

Concept Check

• What is the purpose of planning, and what is needed to do it effectively?
• Identify the unique characteristics of each type of planning.

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• Authors: Lawrence J. Gitman, Carl McDaniel, Amit Shah, Monique Reece, Linda Koffel, Bethann Talsma, James C. Hyatt
• Publisher/website: OpenStax
• Book title: Introduction to Business
• Publication date: Sep 19, 2018
• Location: Houston, Texas
• Book URL: https://openstax.org/books/introduction-business/pages/1-introduction
• Section URL: https://openstax.org/books/introduction-business/pages/6-2-planning

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Britain’s Violent Riots: What We Know

Officials had braced for more unrest on Wednesday, but the night’s anti-immigration protests were smaller, with counterprotesters dominating the streets instead.

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By Lynsey Chutel

After days of violent rioting set off by disinformation around a deadly stabbing rampage, the authorities in Britain had been bracing for more unrest on Wednesday. But by nightfall, large-scale anti-immigration demonstrations had not materialized, and only a few arrests had been made nationwide.

Instead, streets in cities across the country were filled with thousands of antiracism protesters, including in Liverpool, where by late evening, the counterdemonstration had taken on an almost celebratory tone.

Over the weekend, the anti-immigration protests, organized by far-right groups, had devolved into violence in more than a dozen towns and cities. And with messages on social media calling for wider protests and counterprotests on Wednesday, the British authorities were on high alert.

With tensions running high, Prime Minister Keir Starmer’s cabinet held emergency meetings to discuss what has become the first crisis of his recently elected government. Some 6,000 specialist public-order police officers were mobilized nationwide to respond to any disorder, and the authorities in several cities and towns stepped up patrols.

Wednesday was not trouble-free, however.

In Bristol, the police said there was one arrest after a brick was thrown at a police vehicle and a bottle was thrown. In the southern city of Portsmouth, police officers dispersed a small group of anti-immigration protesters who had blocked a roadway. And in Belfast, Northern Ireland, where there have been at least four nights of unrest, disorder continued, and the police service said it would bring in additional officers.

But overall, many expressed relief that the fears of wide-scale violence had not been realized.

Here’s what we know about the turmoil in Britain.

Where arrests have been reported

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