There are three levels of strategic planning: corporate, business, and functional. Strategy can be planned at each level, but plans for each level of an organization must be aligned to ensure maximum unity of effort. Without alignment, departments and functions will work cross-purposely and the overall corporate strategy will be less effective. This is how the strategist views each of the three levels of strategic planning:
Corporate level: Planning at this level must provide an overall strategic direction for an organization, sometimes referred to as the “grand strategy.” This is a concise statement of the overall direction that senior leadership intends to undertake to achieve its stated mission or vision. Strategy at the corporate level is generally decided by the CEO and the Board of Directors, although other senior leaders will often contribute to the formulation of the strategy. Strategic choices at the corporate level will likely require the commitment of a significant portion of the company’s resources over an extended period, and the results will have a significant impact on the future health of the organization. Strategic planning at this level will generally include sound analysis and identification of various strategic options based on the assumed future operating environment. In a multi-business enterprise, careful consideration will be given to the overall core competencies of the business and where the boundaries lie between corporate and business responsibilities.
Enterprise level: Each business within an organization will develop a strategy to support the overall business within its specific industry. The enterprise level strategy reflects the current position of the company within its industry and identifies how available resources can be applied to improve the position of the company relative to its competitors. There are a variety of ways that companies will compete, but most of the time it is based on the USP (Unique Selling Proposition) of the company that distinguishes the company and its products from other competitors. If there are no differences between the products or services of a company and those of other competitors, then the product or service becomes a commodity. Competition between companies offering commodities is usually rooted in price competition, with low-cost providers generally taking over. On the other hand, companies that distinguish themselves can compete on their unique selling proposition. If they can successfully demonstrate why they are different and how that difference can provide a better level of quality product or service, then the business can earn a higher margin for the premium product or service. This is the “value” added by the company, and the business strategy should focus on how the company adds value.
Functional level: The functional level describes the support functions of a company: finance, marketing, manufacturing, and human resources are some examples of the functional level. Strategies at this level should be defined to support overall business and corporate level strategies. If functional-level leaders can describe their activities and goals relative to the business or corporate levels, then everyone in the organization will be aligned and as such contribute to the overall goals and objectives of the organization. So, for example, IT or HR functional leaders must ask themselves whether the strategies for their functions match and support the overall strategic direction of the businesses they support or of the company itself as a whole.
The best strategic planners understand how important it is for a company to have alignment between the corporate, business, and functional levels of strategy. General strategies at the corporate level will not be effective if the support strategies at the enterprise and functional level are inconsistent with the general strategic intent of the senior leaders. Therefore, it is not only important to choose the right strategy for the corporate level, but it is also equally important to ensure that the enterprise and functional level strategies support the overall grand strategy of the organization.