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. Subscribe to our free newsletter, or join the Mind Tools Club and really supercharge your career!

Add this article to My Learning Plan

Comments (22)
  • Midgie wrote Over an hour ago
    Hi Irene,
    Thanks for the feedback and pleased to hear that you use this site to help you learn and develop.

    Midgie
    Mind Tools Team
  • Irene wrote This week
    I have gained immensely from the write up on strategy and appreciate the learning opportunity on mind tools.
  • Midgie wrote This week
    Hi Hanno2 and Frog_Pond,
    Thanks for both your comments.

    I like the simply way of describing strategy as simply 'how to achieve' a particular target.

    Frog_Pond, I'll pass your suggestion onto the editorial team for their consideration.

    Midgie
    Mind Tools Team
  • Frog_Pond wrote This week
    Thanks for the article. I would love to see a post about strategy in contexts other than business, for example in government (e.g. implementing policy, improving environmental/ social outcomes like air quality/ health, or in government-run utilities).

    I've always found Porter's definition useful in a business setting, but often the USP approach and getting ahead of competitors is not the focus in a government or utility setting. The Johnson and Scholes definition seems a little more adaptable to this setting, so I'll see what more I can find out about them.

    My observation in implementing government strategies is that a holistic view is needed to make sure all necessary, interrelated aspects are covered and dealt with. It must be much more than just an action plan to reach a single goal. The challenge is very often lack of alignment between or within agencies - probably not a problem unique to government organisations!
  • Hanno2 wrote This week
    The term "strategy" etmyolgically comes from "strategos"(GR), the highest military commander.
    He sets the "TARGET" and (only) then everyone below him tries to figure out "HOW TO ACHIEVE THE TARGET".
    Assumedly any answer to the question
    "How to achieve = strategy
  • Yolande wrote This month
    Hi Evi

    If you want to learn more about strategy, I would strongly recommend joining as a member. You will then have access to all our articles, worksheets and tools related to strategy.

    Yolandé
    Mind Tools Team
  • evi wrote This month
    i need strategy management for corporate especially, business & planning strategy.
    i'm interest to attended this training
  • Midgie wrote This month
    Hi Evi,
    Thanks for your question.

    We have several modules related to strategy in our Bite-Sized Training section - http://www.mindtools.com/community/LearningStreams/ThinkStrategically.php - available to members.

    We also have many articles in the business strategy toolkit area - http://www.mindtools.com/pages/main/newMN_STR.htm - that might also help.

    For what purposes are you looking for training? What needs are you looking to fulfill? We can perhaps suggest more pertinent articles that can help.

    Midgie
    Mind Tools Team
  • evi wrote This month
    is there any training for this topic, need inform as soon as possible
  • StrategyBG wrote This month
    Great comments! All good stuff and helpful for those trying to understand Business Strategy... Without a Vision you can't have a Mission.
Show all comments

Where to go from here:

Join the Mind Tools Club

Click to join Mind Tools
Printer-friendly version
Return to the top of the page

Your Score
Create a Login to Save Your Learning Plan

This ensures that you don’t lose your plan.


Connect with…

Or create a Mind Tools login. Existing user? Log in here.
Log in with your existing Mind Tools details
Lost Username or Password
You are now logged in…

Lost username or password?

Please enter your username or email address and we'll send you a reminder.

Thank You!

Your log in details have been sent to the email account you registered with. Please check your email to reset your login details.

Create a Mind Tools Login
Your plan has been created.

While you're here, subscribe to our FREE newsletter?

Learn a new career skill every week, and get our Personal Development Plan workbook (worth $19.99) when you subscribe.


Thank You!

Please check your Inbox, and click on the link in the email from us. We can then send you the newsletter.