You can slice and dice business strategies hundreds of different ways, but one recommended way puts corporate strategies at the top, business strategies in the middle and functional strategies at the base, where they support business and corporate strategies in specific ways, often resulting in improved bottom lines.
In a three-tier strategy model, corporate strategies come at the top and are chronologically the first to be organized and implemented. Generally, they serve to define the business by answering high-level questions. What kind of business are we? Which markets offer opportunities that fit our strengths? What is the strategic intent underlying our market decisions?
Business strategies address ways and means of succeeding in specific markets. Apple, for example, stresses R&D as essential to future growth along with the development of new products made possible by that R&D. Amazon's fundamental business strategy is to operate with thin profit margins, unprecedented economies of scale, and an unusually aggressive focus on customer satisfaction.
Functional business strategies seek to improve implementation of business and corporate strategies. Functional strategies include marketing strategies and human resources strategies. Often they concern specifics such as resource allocation, operating expense efficiencies and product improvement.
The functional strategy level is immediately concerned with fashioning and implementing strategies that improve function in specific departments.
● Functional purchasing and materials management strategies include improving quality of purchases at lower cost, negotiation practices with vendors, and analyzing the performance of purchasing staff.
● Functional production and operations strategies include marketing concepts, refining produce mix, and managing product life cycles
● Other functional strategies concern development of new products and services, distribution strategies, product positioning, packaging and advertising.
The underlying purpose of all functional strategies is to answer the question "How Can We Do Better?" It's at this level that businesses correct emerging or continuing problems and develop new ways of moving specific aspects of the business forward.
In 2017, for example, Google addressed two complaints, one primarily from advertisers and the other from customers. Advertisers complained that their ads were appearing on the same screen with content they felt put the company in a bad light (soft porn clickbait and on white supremacist videos on Google's YouTube). Customers complained that their search inquiries were exposing them to fake news sites, and they were growing increasingly discontent with the way in which their personal information was being used to develop sellable information to other companies.
In response, Google gave advertisers more control over where their ads appeared, purged objectionable political and sexual content from YouTube, and removed egregious sexual and political content from search results.
Problems that become apparent at the functional strategic level sometimes require new business and corporate strategies. In such cases, functional strategies drive larger strategy changes, although more often functional strategies implement business and corporate strategies.
When Marissa Meyer, a highly visible and successful Google executive was hired to turn around a struggling Yahoo, investors originally believed she would succeed, but she didn't. In the opinion of other CEOs and entrepreneurs, many of her problems had to do with not understanding how the company functioned operationally and in underestimating the resistance of lower level Yahoo employees to Meyer's proposals to change corporate and business strategies.
Eventually, in response to her lack of success in changing the company, she determined the best available solution was to sell it. In 2016, Meyers sold what was once a $135 billion company to Verizon for $5 billion. Meyer's vision for the company, incorporated in the corporate strategies she planned, failed because the company proved incapable or unwilling to carry out those strategies at the functional level. Eventually, this required Meyer's revised corporate strategy of selling off the company's assets to Verizon.