There are generally 3 (sometimes broken into 4) Types of Business Strategies:
- Organizational (Corporate) Strategy
- Business (Competitive) Strategy
- Functional Strategy
- Operating Strategy
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A corporate-level strategy, often referred to an an organizational-level strategy, focuses on vision, mission, values, or purpose of the organization.
It often relates to the company’s core value proposition and objectives that it hopes to achieve in doing so.
It may also regard what the company stands for and how it will be perceived by stakeholders and third parties.
Organizational Strategies are generally broken down into:
- Growth-Based Strategies,
- Stability Strategies,
- Retrenchment Strategies, or
- Mix of these Strategies
A competitive strategy, often referred to as a business-level strategy, focuses on how a business unit will compete against competitors within the market.
Implementing a business unit’s competitive strategy should further the organization-level strategy.
The primary understanding of competitive strategies comes from Michael Porter’s Generic Strategies, which include:
- Cost-Based Strategy,
- Differentiation Strategy, and
- Focus (Niche) Strategy.
The objective of competitive strategy is to create a sustainable competitive advantage.
Another influential source on competitive advantage is the Resource-Base View (RBV) of the firm, which focuses on the effective use of firm resources to create competitive advantage.
Porter’s Value Chain, and the concept of a value chain in general, which quantifies activities along the value delivery process. This provides and understanding or where competitive strategies can be effectuated.
A functional strategy concerns how a functional division of a company will achieve its objectives. Carrying out a functional strategy is in support of a business unit’s competitive strategy through maximizing resource productivity. It focuses on developing competence in pursuit of a competitive advantage. Major functional areas include marketing, accounting, finance, operations), Research and Development, and Human Resources.
Three factors characterize the formulation of functional-level strategies:
- Short-term nature of the objectives,
- How specific are the objectives, and
- Extent of involvement of managers.
The functional strategy will revolve around key individuals in the functional area and focus on key operational aspects in the value chain, such as productivity, pricing, logistics, cost-effectiveness, efficiency, product design, product branding and image, product-life cycle, etc.
While often included within a functional strategy, an operating strategy is concerned with how the component parts (operating divisions) of an organization deliver effectively the corporate, business and functional -level strategies in terms of resources, processes and people. They are at departmental level and set periodic short-term targets for accomplishment.
Related Topics
- 3 Dimensional Business Model
- What is Strategy?
- What is Business Strategy?
- What is Management Strategy (Strategic Management)?
- Types of Business Strategy?
- Competitive Advantage
- First Mover Advantage Definition
- Organizational Dynamics
- Synergy - Definition
- Business Model Overview
- Business Model Canvas - Explained
- Razor Blade Business Model
- Click and Mortar Model
- Transformative Business Model
- How Management Develops a Strategic Plan
- Mintzberg's 5 Ps of Strategy
As a seasoned expert in business strategy, I've delved deep into the intricate realms of organizational dynamics, competitive advantage, and strategic management. My extensive experience and knowledge in this field are underscored by a comprehensive understanding of key frameworks and theories that shape the strategic landscape. Let's dissect the concepts presented in the provided article:
1. Organizational (Corporate) Strategy:
- Definition: This type of strategy focuses on the overall vision, mission, values, and purpose of the organization.
- Components:
- Core Value Proposition: Central to the organizational strategy, it defines what the company stands for.
- Objectives: Goals that the organization aims to achieve.
- Subtypes: Often categorized into Growth-Based, Stability, Retrenchment, or a Mix of these Strategies.
2. Business (Competitive) Strategy:
- Definition: Concentrates on how a business unit competes against competitors in the market.
- Influential Models:
- Michael Porter’s Generic Strategies: Includes Cost-Based, Differentiation, and Focus (Niche) Strategies.
- Resource-Based View (RBV): Emphasizes effective use of firm resources for a competitive advantage.
- Porter’s Value Chain: Quantifies activities in the value delivery process, guiding strategic implementation.
3. Functional Strategy:
- Definition: Concerns how a functional division of a company achieves its objectives, supporting the business unit’s competitive strategy.
- Major Functional Areas:
- Marketing, Accounting, Finance, Operations, Research and Development, Human Resources.
- Formulation Factors: Short-term nature, specificity, and managerial involvement.
4. Operating Strategy:
- Definition: Focuses on how operating divisions of an organization effectively deliver corporate, business, and functional-level strategies in terms of resources, processes, and people.
- Scope: Departmental level, setting short-term targets for accomplishment.
These concepts collectively form a robust framework for strategic planning and execution within an organization. It's crucial to note the interconnectedness between these strategies, emphasizing alignment to achieve overarching goals. Additionally, the article touches upon related topics such as competitive advantage, first-mover advantage, organizational dynamics, and Mintzberg's 5 Ps of Strategy, providing a holistic view of the strategic management landscape.
