The three levels of planning

There are three levels of strategic planning: Corporate, Commercial and Functional. Strategy can be planned at each level, but plans for each level of an organization must be aligned to ensure maximum unity of effort. Without alignment, departments and functions will work at cross purposes and the overall corporate strategy will be less effective. This is how strategists view each of the three levels of strategic planning:

Corporate level: Planning at this level should provide an overall strategic direction for an organization, sometimes referred to as “grand strategy.” This is a concise statement of the overall direction that senior leadership intends to undertake to achieve their stated mission or vision. Corporate-level strategy is typically decided by the CEO and Board of Directors, although other senior leaders will often contribute to strategy formulation. Strategic choices at the corporate level will likely require the commitment of a significant portion of the company’s resources over an extended period, and the results will have a significant impact on the future health of the organization. Strategic planning at this level will typically include sound analysis and the identification of various strategic options based on the assumed future operating environment. In a multi-business company, particular attention will be paid to the overall core competencies of the business and where the lines lie between corporate and business responsibilities.

Enterprise level: Each business within an organization will develop a strategy to support the overall business within their specific industry. The company-level strategy reflects the company’s current position within its industry and identifies how available resources can be applied to improve the company’s position relative to its competitors. There are a variety of ways that companies will compete, but most of the time it is based on the USP (Unique Selling Proposition) of the company that distinguishes the company and its products from other competitors. If there are no differences between a company’s products or services and those of other competitors, then the product or service becomes a commodity. Competition among companies offering basic products is often based on price competition, with low-cost providers often taking over. On the other hand, companies that distinguish themselves can compete with their unique selling proposition. If they can successfully demonstrate why they are different and how that difference can provide a better level of quality service or product, then the company can earn a higher margin for the premium service or product. This is the “value” added by the company, and the business strategy should focus on how the company adds value.

functional level: The functional level describes the support functions of a company: finance, marketing, manufacturing and human resources are some examples of the functional level. Strategies should be defined at this level to support overall business and corporate level strategies. If functional level leaders can describe their activities and goals in relation to business or corporate levels, then everyone in the organization will be aligned and as such will contribute to the overall goals and objectives of the organization. So, for example, IT or HR functional leaders need to ask themselves if the strategies for their functions align with and support the overall strategic direction of the businesses they support or the company as a whole.

The best strategic planners understand how important it is for a business to have alignment between the corporate, business, and functional levels of strategy. Overall strategies at the corporate level will not be effective if strategies at the functional and supporting business levels are inconsistent with the overall strategic intent of senior leaders. Therefore, it is not only important to choose the right strategy for the corporate level, but it is also equally important to ensure that the strategies at the functional and business levels support the overall grand strategy of the organization.

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