What is Strategy?

The Three Levels of Strategy

Learn about the three levels of strategy,
in this video.

You've probably heard the term "business strategy" used in the workplace.

But what is strategy, exactly? And are you aware that you need different types of strategy at different levels within your organization?

In this article, we're looking at some common definitions of strategy. We'll focus on three strategic levels – corporate strategy, business unit strategy, and team strategy – and we'll look at some of the core tools and models associated with each area.

Defining Strategy

Strategy has been studied for years by business leaders and by business theorists. Yet, there is no definitive answer about what strategy really is.

One reason for this is that people think about strategy in different ways.

For instance, some people believe that you must analyze the present carefully, anticipate changes in your market or industry, and, from this, plan how you'll succeed in the future. Meanwhile, others think that the future is just too difficult to predict, and they prefer to evolve their strategies organically.

Gerry Johnson and Kevan Scholes, authors of "Exploring Corporate Strategy," say that strategy determines the direction and scope of an organization over the long term, and they say that it should determine how resources should be configured to meet the needs of markets and stakeholders.

Michael Porter, a strategy expert and professor at Harvard Business School, emphasizes the need for strategy to define and communicate an organization's unique position, and says that it should determine how organizational resources, skills, and competencies should be combined to create competitive advantage.

While there will always be some evolved element of strategy, at Mind Tools, we believe that planning for success in the marketplace is important; and that, to take full advantage of the opportunities open to them, organizations need to anticipate and prepare for the future at all levels.

For instance, many successful and productive organizations have a corporate strategy to guide the big picture. Each business unit within the organization then has a business unit strategy, which its leaders use to determine how they will compete in their individual markets.

In turn, each team should have its own strategy to ensure that its day-to-day activities help move the organization in the right direction.

At each level, though, a simple definition of strategy can be: "Determining how we are going to win in the period ahead."

We'll now look more deeply at each level of strategy – corporate, business unit, and team.

Corporate Strategy

In business, corporate strategy refers to the overall strategy of an organization that is made up of multiple business units, operating in multiple markets. It determines how the corporation as a whole supports and enhances the value of the business units within it; and it answers the question, "How do we structure the overall business, so that all of its parts create more value together than they would individually?"

Corporations can do this by building strong internal competences, by sharing technologies and resources between business units, by raising capital cost-effectively, by developing and nurturing a strong corporate brand, and so on.

So, at this level of strategy, we're concerned with thinking about how the business units within the corporation should fit together, and understanding how resources should be deployed to create the greatest possible value. Tools like Porter's Generic Strategies  , the Boston Matrix  , the ADL Matrix   and VRIO Analysis   will help with this type of high-level analysis and planning.

The organization's design   is another important strategic factor that needs to be considered at this level. How you structure your business, your people, and other resources – all of these affect competitive advantage and can support your strategic goals.

Business Unit Strategy

Strategy at the business unit level is concerned with competing successfully in individual markets, and it addresses the question, "How do we win in this market?" However, this strategy needs to be linked to the objectives identified in the corporate level strategy.

Competitive analysis, including gathering competitive intelligence  , is a great starting point for developing a business unit strategy. As part of this, it's important to think about your core competencies  , and how you can use these to meet your customers' needs in the best possible way. From there you can use USP Analysis   to understand how to strengthen your competitive position.

You will also want to explore your options for creating and exploiting new opportunities. Porter's Five Forces   is a must-have tool for this process, while a SWOT Analysis   will help you understand and address the opportunities and threats in your market.

Note:

For smaller businesses, corporate and business unit strategy may overlap or be the same thing. However, if an organization is competing in different markets, then each business unit needs to think about its own strategic direction.


It's important, though, that each business unit's strategy is aligned with the overall strategy of the corporation, particularly where the corporation's brand is important.

Your business unit strategy will likely be the most visible level of strategy within each business area. People working within each unit should be able to draw direct links between this strategy and the work that they're doing. When people understand how they can help their business unit "win," you have the basis for a highly productive and motivated workforce. As such, it's important to have a clear definition of the business unit's mission, vision and values  .

Team Strategy

To execute your corporate and business unit strategies successfully, you need teams throughout your organization to work together. Each of these teams has a different contribution to make, meaning that each team needs to have its own team-level strategy, however simple.

This team strategy must lead directly to the achievement of business unit and corporate strategies, meaning that all levels of strategy support and enhance each other to ensure that the organization is successful.

This is where it's useful to define the team's purpose and boundaries using, for example, a team charter  ; and to manage it using techniques such as Management by Objectives   and use of key performance indicators  .

You need to be working efficiently to achieve the strategic objectives that have been set at higher levels of the organization; so, an important element of your team strategy is to implement best practices to help your team to meet its objectives. Activities that optimize supplier management, quality, and operational excellence are also important factors in creating and executing an effective team strategy.

Key Points

Strategy can be difficult to define, but a good definition is: "Determining how we will win in the period ahead."

In business there are different levels of strategy. Each of these has a different focus, and needs different tools and skills.

Corporate strategy focuses on the organization as a whole, while business unit strategy focuses on an individual business unit or market.

Finally, team strategy identifies how a team will help the organization meet its overall goals and objectives.

Tip:

Our Developing Your Strategy   article presents a common-sense step-by-step approach to strategy development, which you can apply to developing a corporate, business unit, or team strategy. You can also find out more about strategy development by taking our Essential Strategy Bite-Sized Training™ session.

This site teaches you the skills you need for a happy and successful career; and this is just one of many tools and resources that you'll find here at Mind Tools. Click here for more, subscribe to our free newsletter, or become a member for just $1.

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Comments (10)
  • Midgie wrote Over a month ago
    Hi Divyamangal,
    Welcome to the Club.

    I see the vision statement coming first, and then the mission statement. As I said in a previous post - viewtopic.php?t=3130&p=25938#p25938 - the vision statement is like the goal of what you want to achieve and the mission statement is how you are going to get there.

    In what situation are you exploring vision and mission statements?

    Hope to see you around the Club and remember that we are always happy to help out, offering thoughts, ideas and suggestions.

    Midgie
  • Divyamangal wrote Over a month ago
    It is Vision and Mission which come first. Only thereafter you can analysis various aspects in view of Vision and Mission.
  • Dianna wrote Over a month ago
    Interesting comments Ricardo_RM,
    I agree that knowing your people and what they can accomplish will help you execute your strategy. What do you think drives the strategy though? For me the question is which comes first; Your employee's aptitude or your vision and mission?

    Dianna
  • Ricardo_RM wrote Over a month ago
    The strategy depend on what have to thing your employes and what kind of aptitud is necesary, people you know to work, and firts know your people, the company model in your compite could be the diference betwen grow like company
  • Dianna wrote Over a month ago
    Hi parthibanv,
    Are you familiar with VMOST Analysis: http://www.mindtools.com/community/pages/article/newSTR_72.php I think it's a tool that fits well with your concept of strategy. Basically it follows this hierarchy:

    Vision
    Mission
    Objectives
    Strategy
    Tactics

    Take a look and see what you think. I'm interested to get your feedback on it as well.

    Dianna
  • parthibanv wrote Over a month ago
    I believe Vision, Mission and Values should be part of Corporate Strategy as compared to Business Unit Strategy, BU should have its own Vision, Mission but should be guided by Corporate Vision/Mission and Values
  • Dianna wrote Over a month ago
    Hi Cyrus - great definition! I like the idea of looking sideways - we can very often get too focused on looking forward and risk missing opportunities that are to the left or the right!!

    Your post clearly indicates one of the conundrums of trying to define strategy - there are so many different opinions and concepts that are all viable and relevant and helpful. In an upcoming strategy article we explore Mintzberg's 5Ps of Strategy, which is a response to the difficulty of trying to define strategy from one perspective or position. I think that by discussing strategy and considering how other people approach the concept and process of strategic development the better our overall understanding will be.

    Sharing your thoughts brings more depth to the whole conversation! I look forward to hearing more from you on this subject and all the others that we discuss!

    Talk soon!
    Dianna
  • jostai wrote Over a month ago
    James,

    There three levels of strategy is great but in my view, strategy is ' being a few steps ahead of others in business competitiveness and ever looking forward and occasionally, sideways'

    Cyrus
  • James wrote Over a month ago
    Hi Uncletom

    Our pleasure!

    FYI, Rachel Salaman has just recorded an Expert Interview with Cesare Mainardi, which addresses this whole point of making sure that strategy is actionable. It'll publish on 18 July - I know that's quite far ahead, but it'll be worth waiting for!

    Best wishes!

    James
  • uncletom wrote Over a month ago
    James, I enjoyed reading this article and liked how it looked at strategy from the 3 different perspectives ,team, business unit and corporation and the need for them to align in order to win.

    In my experience I see strategy as 'an action plan' since unless the theories determined are actionable the strategy is closer to a dream than a plan!

    great food for thought tks.

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