Types of Strategies and Levels: Part 2

In one line: Types of Strategies and Levels — exam-ready notes in one glance.

In one line: Strategy operates at three levels – corporate (direction), business (competition), functional (daily execution) – and the corporate level deploys four strategy families: concentration, integration, diversification, and retrenchment.

In today’s dynamic business landscape, success hinges on more than great products or innovative technologies. Instead, it requires a well-crafted strategy at every tier of management. Effective strategy acts as a compass, guiding the organization from abstract vision to concrete results. This guide explores the layers of strategy – corporate, business, and functional – then unpacks the four major strategy types organizations deploy.

Table of Contents

1. Understanding Strategic Management Levels
2. Corporate Strategy: Steering the Organization’s Direction
3. Business Strategy: Competing at the Market Level
4. Functional Strategy: The Power of Everyday Decisions
5. Types of Major Strategies (Corporate, Concentration, Integration, Diversification, Retrenchment)
6. Conclusion: Integrating Strategy for Sustainable Success

1. Understanding Strategic Management Levels

Strategy is not a one-size-fits-all concept. Instead, it cascades down the organization, adapting to each level’s scope:

• Corporate strategy sets the overarching vision and direction.
• Business strategy focuses on how each business unit will compete and succeed.
• Functional strategy directs daily operations and functional excellence at ground level.

Now let us examine what each means for a modern enterprise.

2. Corporate Strategy: Steering the Organization’s Direction

Corporate strategy is the guiding star for the whole organization. The CEO and top leaders craft it, bringing vision, purpose, and ambition together. Furthermore, these strategies set a broad, future-oriented framework – typically three to five years – for the organization’s long-term objectives.

Core Elements of Corporate Strategy

• Vision: where the company aspires to be.
• Values: principles shaping culture and behavior.
• Strategic focus areas: the main pillars for resource allocation and executive attention.
• Objectives: measurable targets and milestones.
• KPIs: key performance indicators tracking progress.

Corporate strategies are big-picture, conceptual, and forward-thinking, guiding all subsequent strategies within the company.

Examples: First, Apple Inc. focuses on innovation, user experience, and technology market leadership. Then, Google champions its motto while investing in search and advertising technologies.

3. Business Strategy: Competing at the Market Level

Business strategy zooms into individual business units. Heads of business units and middle managers own it, focusing on winning in specific markets. Moreover, involvement at this level boosts buy-in and ownership, increasing success likelihood.

Examples: Starbucks diversifies offerings beyond coffee – food, merchandise, digital services – tailoring experiences to customer preferences. Similarly, Amazon expands into distinct segments: e-commerce, AWS cloud computing, and Prime Video, each with tailored strategies.

4. Functional Strategy: The Power of Everyday Decisions

Functional strategy operates at ground level. It directs daily operations within departments – marketing, finance, HR, operations. In contrast to the levels above, functional strategies stem from overarching business and corporate strategies, translating them into departmental action.

Example: Toyota embraces lean manufacturing, continuous improvement (kaizen), and quality control to maximize efficiency and minimize waste.

5. Types of Major Strategies

Concentration Strategies

Concentration means growing through the existing business. When used: the company is satisfied with its position and aims for steady revenue and efficiency improvement.

Examples: SAIL (Steel Authority of India) focuses on operational efficiency over expanding capacity. Meanwhile, McDonald’s maintains a core menu with limited-time promotions to retain customer interest.

Three growth paths sit under concentration. First, market penetration: growing share for current products via marketing – Samsung’s smartphone campaigns. Then, market development: selling existing products in new markets – Amazon expanding into new countries. Finally, product development: launching new products for current customers – Apple’s regular iPhone updates.

Integration Strategies

Integration means owning more of the value chain. Three forms exist. First, backward integration: owning suppliers – Apple designing its own chips. Then, forward integration: controlling distribution and retail – Apple Stores. Finally, balanced integration: performing both.

Example: ExxonMobil manages everything from oil exploration to refining and retail.

Diversification Strategies

Diversification means entering new businesses. Three types apply. First, concentric diversification: a new line closely related to the existing core – Coca-Cola launching bottled water. Then, horizontal diversification: new, related products for existing customers – Tata Group venturing into hotels. Finally, conglomerate diversification: adding unrelated businesses – Berkshire Hathaway’s portfolio.

Examples: General Electric moved from electronics to aviation, energy, and finance. Furthermore, Alphabet invests broadly beyond Google: AI, autonomous vehicles, biosciences.

Retrenchment Strategies

Retrenchment means cutting back to recover. When used: the company needs to cut costs, focus efforts, or withdraw from unprofitable sectors – often during economic downturns.

Three forms exist. First, liquidation: complete closure and asset sale – Borders bookstore chain’s shutdown. Then, turnaround: reviving underperforming units with new leadership or strategy – Ford’s restructuring. Finally, divestment: selling non-strategic businesses to focus on core strengths – GM selling Opel.

Examples: Mahindra & Mahindra sold the M-Seal brand to consolidate operations. Similarly, GE divested non-core divisions like appliances to focus on aviation and healthcare.

Mixed Strategies

Real companies blend families. When used: the company deploys stability, expansion, and retrenchment tailored to each product line.

Examples: Reliance Industries started in textiles, then shifted into retail and petrochemicals. Meanwhile, Procter & Gamble maintains stable brands while expanding into new categories.

6. Conclusion: Integrating Strategy for Sustainable Success

Strategy must align from the corporate level down to daily operations. Furthermore, the right mix – stability, expansion, retrenchment – depends on context and objectives. In addition, involvement at all management levels increases buy-in and execution success. Therefore, the examples from leading companies showcase how strategies operate in real life: McDonald’s, Starbucks, and Subway dominate focused markets; Nike leads athletic wear by narrowing focus. Master the three levels and four families, and any strategy question – MCQ, short, or case – resolves from this note.

Read next: Strategic Analysis: Unlocking Success in the Business World, Part 3

Frequently Asked Questions

What are the three levels of strategy?

Corporate (direction and vision), business (how each unit competes), and functional (daily departmental execution). Together they cascade strategy from vision to action.

What are the four major strategy families?

Concentration (grow the core), integration (own the value chain), diversification (enter new businesses), and retrenchment (cut back to recover).

What is the difference between concentric and conglomerate diversification?

Concentric adds related businesses – Coca-Cola launching water. In contrast, conglomerate adds unrelated ones – Berkshire Hathaway’s portfolio across insurance, rail, and energy.

When should a company choose retrenchment?

When costs must be cut, focus narrowed, or unprofitable sectors exited – typically during downturns or after over-expansion.

What is backward integration with an example?

Owning your suppliers. For example, Apple designing its own chips instead of buying from Qualcomm.

Which strategy family does market penetration belong to?

Concentration – growing share for existing products in existing markets, alongside market development and product development.

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