At first, the notion of three different strategy levels for a company may seem confusing. After all, doesn’t an organization have one overriding goal: to grow and to make money? That’s true, of course, but a company is a complex operation with a clear hierarchy. Yet corporate, business and functional strategies enable you to focus on individual aspects of your company. What's more, these strategies help you take a top-down view when setting goals. The end result is synergy throughout your organization. This synergy can in turn enable you to grow. Read on to find out how.
As a leader, your first task is to ask yourself how will you ensure that your company thrives. How can you make sure that your business flourishes? This question will orient you as you consider the levels of strategy. A strategy is a plan of action you take to achieve a specific goal. How will you meet your sales goal? How will you improve customer service? How will you better track inventory?
You must answer these questions:
● Why does my company exist?
● How will I conduct myself as a representative of my company? How will my company behave?
● Where are we going? Where will be in five, 10 or 20 years?
● How will we meet our goals?
● What does my company need right now to grow?
With sound strategy, you can.
By answering these questions, you can ensure that you stay laser focused on your goals. The power of strategy is that it can help you stand out from the crowd. As a business owner, you must discover and hone your competitive edge. What is it that sets you apart from your competition? What are your strengths? The strategies you come up with should always play to those strengths.
The three levels of service that are:
● The corporate level
● The business level
● The functional level
At the corporate strategy level, you’re answering a fundamental question: what do you want to achieve? At the business unit level, you’re deciding which industries you will operate in and how you will compete with competitors. At the functional level, you’re deciding how to organize your company and how much delegation you want to do.
The corporate level is the highest level of business strategy, and it is the broadest. You should craft your corporate-level strategy with your main purpose in mind. This is the place to set lofty, long-term goals. These goals impact the other two levels. Put another way, your business and functional goals should relate to your corporate goals and vice versa.
It’s at this level that you craft your mission and vision statements. To craft the best corporate strategy you can, clarify your mission. With your mission statement, you describe what your company does and how it differs from the competition. With your vision statement, you state how you want your company to be operating at a specific time in the future. It’s not uncommon for business owners to craft vision statements for the next five, 10, 15 or even 20 years.
You will also want to create your corporate objectives at this level. Here, you should state targeted, high-level goals. Focus on specific financial, internal, customer and growth goals. If you were starting a dog grooming company, you might create a specific per hour earnings goal. Because customer service and word of mouth are so crucial in that industry, you might also might set a measurable customer satisfaction goal. On the internal side of things, you might decide that you want to be able to hire five employees within two years.
Here you would define separate strategies for the various industries you operate in. Business owners who operate in many different niches must decide which to focus on most, and that may change over time. At the business unit level, you may decide to make a graceful exit from an under-performing market. Or, you may even decide to sell off individual business units.
If you operate only in one industry or niche, you might not find much to do here. That said, there is work you can do. For one thing, it’s at this level that you decide how you will differentiate yourself from the competition. What is it that makes your business special? How is your product or service superior? Now is the time to poke your head up and perform SWOT analysis: strengths, weaknesses, opportunities and threats.
The strategies you define here should specify objectives that both support each business unit and the company as a whole. For instance, the dog groomer may create a growth strategy that would allow him to branch out into grooming other animals or performing similar services. It's important to note that in this scenario, the new business unit would be compatible with the original service. This keeps costs low and also ensures that the original business unit continues to perform well.
When you craft functional level strategy, you're concerned with smooth internal operation. This involves how departments operate and interact, and how they support your corporate level strategy day in and day out. Typically, your department heads would craft and carry out your functional level strategy. But if you’re a startup, you may need to take the reigns here, too. If you do have department heads, your functional-level strategy will help them keep things running smoothly. Whether you have departments or not, it’s never too early to start working on your functional strategy.
It’s at this level that the rubber meets the road. If projects aren’t created and efficiently executed, your entire business will suffer. So, your functional level strategy should provide ways of measuring progress. You, or your department heads, should be able to answer these questions at all times:
1. How close are we to meeting our current objectives?
2. What are the most important steps we can take right now to meet these objectives?
In other words, while you will have objectives, projects and goals at every level of your organization, they should be particularly granular at the functional level.
You want to ensure that the goals at the functional level align with your goals at the corporate level. For instance, all departments in your organization should focus on creating a quality product, and all departments should be concerned with delivering stellar customer service. The difference is that at the functional level, your teams should be creating specific plans to achieve these goals.
Our dog groomer may have a department head, who focuses on booking new customers and another, who focuses on the day-to-day operations. Both teams utilize specific strategies that enable them to excel, but both are also focused on growing the company as a whole.
Perhaps the most important takeaway is that your strategy at all three levels should align. If it does not, you will be trying to move in three directions at once. As the saying goes, a house divided against itself cannot stand. Build a sturdy foundation today by working on all three levels of business strategy.