Hierarchical Levels of Strategy | CAP CLASSES

Hierarchical Levels of Strategy

Hi Friends !!!!

Answer this question first.

Strategies are formulated at top level and are implemented in the business and the functional level. True or False???

Do you know, majority of the students answer the above question wrong. They say that the statement is True but the correct answer is that STRATEGIES ARE FORMULATED AT ALL THE LEVELS OF MANAGEMENT. That is what we call the hierarchical levels of Strategies.

Strategy can be formulated on three different levels:

1)     corporate level

2)     business unit level

3)     functional or departmental level.

While strategy may be about competing and surviving as a firm, one can argue that products, not corporations compete, and products are developed by business units. The role of the corporation then is to manage its business units and products so that each is competitive and so that each contributes to corporate purposes.

Corporate Level Strategy

Corporate level strategy fundamentally is concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses.Corporations are responsible for creating value through their businesses. They do so by managing their portfolio of businesses, ensuring that the businesses are successful over the long-term, developing business units, and sometimes ensuring that each business is compatible with others in the portfolio.

Business Unit Level Strategy

A strategic business unit may be a division, product line, or other profit center that can be planned independently from the other business units of the firm.
At the business unit level, the strategic issues are less about the coordination of operating units and more about developing and sustaining a competitive advantage for the goods and services that are produced. At the business level, the strategy formulation phase deals with:

•          positioning the business against rivals
  
•          anticipating changes in demand and technologies and adjusting the strategy to accommodate them
  
•          influencing the nature of competition through strategic actions such as vertical integration and through political actions such as lobbying.
  

Michael Porter identified three generic strategies (cost leadership, differentiation, and focus) that can be implemented at the business unit level to create a competitive advantage and defend against the adverse effects of the five forces.

Functional Level Strategy

The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Functional level strategies in marketing, finance, 1operations, human resources, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively.Functional units of an organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based. Once the higher-level strategy is developed, the functional units translate it into discrete action-plans that each department or division must accomplish for the strategy to succeed.

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