Generally speaking there levels of strategy for a well established MNC viz,, what , why and how about the business that it is in. What is answered by the Corporate level why is answered by the Business Unit level and how is answered by the Functional level strategies. Of late, some authors talk about a fourth level of strategy called operational level strategy.
Corporate Level Strategy
At the corporate level, strategy is formulated
for the organization as a whole. Corporate strategy deals with decisions
related to various business areas in which the firm operates and competes.
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.
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.
Business Unit Level Strategy
At the business unit level, strategy is formulated to convert the corporate vision into reality. 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.
Corporate Vs. Business Level Strategy
While business-level
strategy focused on how an organization generates value by positioning products
and services relative to the offerings of other firms in the same industry,
corporate-level strategy deals with a portfolio of distinct products and services.
When dealing at the business-level, managers ask, “How can we be successful in
this business?” When dealing with corporate-level strategy, executives ask, “In
what industry or industries should our firm compete?”
The executives in
charge of a firm such as The Walt Disney Company must decide whether to remain
within their present domains or venture into new ones. In Disney’s case, the
firm has expanded from its original business (films) and into television, theme
parks, and several others. In contrast, many firms never expand beyond their
initial choice of industry.
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 the business
unit strategy would be defined and evaluated by senior leadership, functional strategy is typically prepared 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.
The functional level
strategies have to reflect the business, and reaching corporate
goals requires the involvement of several functional areas. Therefore, to
increase market share, the functional level strategy might include marketing to
improve brand recognition, quality improvement for the end products and the
hiring of specialized personnel. When these strategies are met, departmental
management can create individual assignments geared to support sectoral
objectives. The functional level approach should have the following keyvariables:
·
Alignment. The functional strategies must align with business and
corporate strategies alike. If the corporate approach is to improve the level
of market share and the business strategy involves the improvement of brand
identification, the functional strategy should not include updating the
security systems because it is not in alignment with the other strategies.
·
Detail.
The functional strategy should have a high level of detail. There should be
specific goals for each department, and the respective managers should have
specific criteria through which the successes of the team are measured.
·
Existing Resources. Each functional strategy in place has to use current resources
present in each department, whether they are personnel, equipment or
opportunity. The business should not base the marketing department strategy on
inaccessible or imaginary resources.
·
Progress.
When trying to assess the level of progress being made, it is possible to get
caught up in the available data. The management should consider what the
corporate and business level strategies are and then provide frameworks to assist
in determining whether there is progress toward these objectives.
Functional level strategies are the goals and related actions linked to
specific departments in support of the corporate level strategy. They develop
the results the business owner wants to see, from the daily operations in the
different departments of the company.
Operational Level strategy
Operational level strategies cater to
the entire business's activities and are focused on resource application and
allocation. Operational level strategies usually are driven by the overall
business approach and are designed to maximize the overall effectiveness of the
production, all the while minimizing risk to the company goals.
Operating strategy is formulated at the operating units of an organization. A company may develop operating strategy, as an instance, for its factory, sates territory or small sections within a department. Operational level strategy refers to the means the companies use to accomplish overall objectives. Through the development of operational strategies, the firm can evaluate and implement efficient systems for the use of resources and personnel. Without a stable operations strategy, companies may not be able to keep up with the changing markets and could start to lose to trendier competitors.
Three
levels of strategies have different characteristics as given in the following
table:
|
Dimension |
Levels of Strategies |
|||
|
Corporate |
SBU |
Functional |
||
|
1 |
Impact |
Significant |
Major |
Insignificant |
|
2 |
Risk |
High |
Medium |
Low |
|
3 |
Involvement |
High |
Medium |
Low |
|
4 |
Profit
potential |
High |
Medium |
Low |
|
5 |
Type of
Decision |
Philosophical |
Mixed |
Operational |
|
6 |
Time
Horizon |
Long |
Medium |
Short |
|
7 |
Innovations |
Innovative |
Mixed |
Routine |
|
8 |
Flexibility |
High |
Medium |
Low |
|
9 |
Adaptability |
Insignificant |
Medium |
Significant |
|
10 |
Level of
Decision Making |
Highest |
Middle |
Lowest |
Usually, the operating managers/field-level managers develop an operating strategy to achieve immediate objectives. In large organizations, the operating managers normally take assistance from the mid-level managers while developing the operating strategy.
In some
companies; managers “develop an operating strategy for each set of annual
objectives in the departments or divisions.
One appropriate
operational level strategy example was when Amazon began to use drones for
delivery. It was a change from its traditional brick-and-mortar approach
coupled with physical deliveries. To be effective, all parts of the company
have to work together. Under the operations level strategy, each department has
to contribute to the mission statement and administer strategies which underlie
the overall business strategy.
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