Introduction to business strategy

Startups Strategy

Posted by Enrico on Nov 24, 2016 1215

As a company grows, it evolves with its economic environment. Strategic decisions have to be taken constantly in order to guarantee profit in the long term. From a theoretical point of view, the strategy of a company can be formulated and implemented at three different levels: corporate, business unit or functional.

The corporate-level strategy is concerned with the selection of business areas in which your company should compete and with the development and coordination of that portfolio of business units. It should then answer the question: "In which business areas should we operate?" This is the level where the vision statements of the companies emerge. In practice, the corporate-level strategy should take into account the following elements:

  • Reach
    The issues that are considered to be corporate responsibilities should be defined. These might include identifying the overall vision, mission, and goals of the corporation, the type of business in which your corporation should be involved, and the way in which these businesses will be integrated and managed.
  • Competitive contact
    The localization of the corporate competition should be defined.
  • Managing activities and business interrelationships
    Corporate strategy tries to develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities.
  • Management practices definition
    Corporations have to decide how business units are to be governed. This can be through direct corporate intervention (centralization) or through autonomous government (decentralization)

A strategic business unit may be any profit center that can be managed independently from the other business units of your corporation. At the business unit level, the strategic issues are about both the practical coordination of operating units and developing and sustaining a competitive advantage for the products and services that are produced.

"Maturity begins to grow when you can sense your concern for others outweighing your concern for yourself." - John MacNaughton

Strategy formulation and implementation at the business unit level deals with:

  • Positioning and differentiating the business and/or products against those of rivals.
  • Anticipating changes in technology and customer perceptions and adjusting the strategy to accommodate them.
  • Influencing the nature of competition through strategic actions such as virtual integration and through political actions.
  • Building strategic partnerships and co-innovating with other business units, partners, and customers.

Managers at this level translate into operational plans the general statements and vision that are decided at the corporate level. The managers have to identify the most profitable market segment, where they can excel, keeping in focus the vision of the company as well as the corporate values and culture. Management style, beliefs, values and ethics at this level must be in accordance with the organization at the corporate level.

Functional-level strategy is related to functional units. Functional-level strategies in R&D, operations, manufacturing, marketing, finance, and human resources involve the development and coordination of resources through which business unit-level strategies can be executed effectively and efficiently.

The functional units of your organization are involved in higher-level strategies by providing input into the business unit level and corporate level, such as providing information on customer feedback or on resources and capabilities on which the higher-level strategies can be based. Once the higher-level strategy or strategic intent is developed, the functional units translate them into discrete action plans that each department or division must accomplish for the strategy to succeed.

Typical strategic decisions are about profit problems, classical business situations, mergers and acquisitions and supply/demand industry capacity. The main strategic frameworks to solve each of these issues are outlined in the another article.

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    Enrico Tam

    MBA, PhD, tech entrepreneur, maker

    Hi, I’m Enrico and I started hacking at 9 years old back when it was Visual Basic. After trying to become a professional tennis player I somehow got entangled in a PhD in engineering, an MBA programme and a big consulting fir... (continued)

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