Understanding Levels of Strategic Managements in Organization: Unveiling Scopes and Differences

Businesses are created to thrive and make profits. However, these are general words that usually imply grandiose and quite specific plans for the future.

Entrepreneurs just have to decide which goals are of their greatest interest and how they can achieve them. This is where strategic management comes to the rescue.

Yes, the strategy for a multinational corporation and a small company are two different strategies, but both require careful planning and seamless implementation. Various tools and solutions are applied to them, but their selection usually depends on the level of strategic management.

So, let’s delve deeper into the concept of strategic management and explore its levels to see how an organization can set goals and reach them for profit and prosperity.

From a Plan to an Action: What Is Strategic Management?

In short, strategic management is a continuous process of setting long-term and short-term goals for a company or an organization, developing plans of action, applying current resources to achieve them, and finally evaluating the efforts made.

It is a network of multi-level activities that never stop but lead to mid-term and ultimate results planned from the very beginning.

Today, strategic management involves developing a full-scale company strategy and selecting an approach that could be more effective for an organization in given circumstances. The path typically includes the following steps:

• Setting clear and realistic long-term and short-term goals to outline the direction for a company to follow.
• Conducting strategic analysis using specific tools, such as the SWOT method, to explore and identify factors that affect the business in both positive and negative ways.
• Figuring out a detailed strategy for a company and defining resources, teams, and technologies needed to meet all the objectives set.
• Implementing all plans and approaches based on the proper use of technological and human resources.
• Estimating results and evaluating the effectiveness of the approaches and strategies applied.
• Eliminating lackluster approaches and strategies while maintaining more powerful ones.

Dedicating enough time and effort to strategic management results in numerous benefits for a company. These include higher profitability, improved cash flow, lower risks, increased market share, and a more objective assessment and vision of future perspectives.

Strategic managers are in high demand in many spheres and industries, including finance, business, education, healthcare, technology, corporate planning, government, and others. Reasonable and cost-effective strategies are needed in various areas, and this type of management helps to identify and arrange solutions according to the goals and vision of a specific organization.

What Levels Does Strategic Management Imply, and What Is the Difference Between Them?

Now, that we know what strategic management is, it is time to explore its levels. Experts define four of them: strategic, business, functional, and operational. Each of them plays its own unique role for a company, but the scope of actions within them varies according to the following criteria:

1. Timeframes. Corporate management is the level where decisions for the following years and even decades are made; long-term vision is crucial here. At the business level, experts develop actionable plans for the coming 3–5 years, while functional-level strategy operates within annual cycles. As for the operational level, day-to-day decisions form its basis.
2. Responsibilities. Objectives for the entire organization are set at the corporate level; they spread across all units and functions. At the business level, experts focus on separate units and functions, mostly to achieve a considerable competitive edge in the markets. Workflow within departments is usually arranged at the operational level of strategic management. Finally, teams and individuals are guided by tasks set according to operational-level strategy.
3. Focal Points. Corporate-level strategies usually relate to mergers and acquisitions, business growth, and diversification. Business strategy focuses on finding competitive advantages, value propositions, and market segmentation. Activities of departments and allocation of resources are optimized at the functional level of management. Lastly, immediate tasks and current workflow maintenance are delegated to operational-level strategy experts.

Also, metrics and KPIs differ from level to level. The efficiency of corporate strategy is evaluated based on ROI, revenue, and market share. Competitive position and market penetration rates are indicators of business strategy. The use of resources shows how successful the functional strategy is, while turnaround time and quality of task completion display whether the operational strategy is effective.

Now that the difference between the levels of strategic management is more or less clear, let’s examine each type of strategy in detail.

Corporate Level of Management

The corporate level is the highest in the strategic management hierarchy. It sets general guidelines for organizational development and outlines global strategies for achieving it. In simple terms, it provides a clear understanding of what the business was launched for and what its owners want to gain from it.

As a rule, top management, the CEO, and company authorities develop these plans and concepts. This is quite reasonable; they know their business better and understand which directions are preferred for its further operation and growth. Strategies at the corporate level usually span 5–6 years or even longer periods.

In general, a corporate strategic plan encompasses the following aspects:

• Corporate goals and objectives
• General focus areas
• Key business metrics
• Fundamental KPIs

Additionally, the mission of the company, its message, and corporate values are outlined and stated at the corporate level.

This kind of strategy is valuable for any organization, whether it is an influential company or a small startup. Here, stages for overall business development are set and then become the basis for setting goals and tasks for employees at all levels. Besides providing strategic direction, it also helps business owners stay flexible and adapt to changing conditions, as the frameworks are already reliable, clear, and steady.

Business Level of Management

After the corporate strategy is established, the business-level strategy comes next. It is developed to establish goals for specific business units along with the means and methods of achieving them. Gaining a competitive edge in the exact market where a given unit operates is usually a priority.

There are a few types of approaches within business-level strategy, and their choice usually depends on the competitive advantage that the company regards as the most powerful. Experts can differentiate strategies and adopt methods for development. The approach that allows an organization to get closer to the set goals in a shorter time is the most effective.

Business-level strategy development is usually the responsibility of vice presidents and business unit heads, both global and regional. However, the involvement of middle managers may be helpful; they gain a clearer understanding of the plans they help create and feel more responsible and enthusiastic about their completion.

As a rule, building strategies at the business level is crucial for organizations that sell multiple categories of goods, offer various types of services, or operate in several spheres. For example, a bank can offer investment management, retail banking, credit services, and insurance, all of which require a specific approach. In this case, each business unit has its own goals, so it needs a unique strategy to reach them. If your organization is small and includes just one business unit, you may skip directly from the corporate to the functional level.

Functional Level of Management

This level involves the search for and creation of methods, solutions, and approaches for specific or all functional areas of a business, such as finance, manufacturing, marketing, HR, supply chain, and others. The task for a strategy manager is to list and arrange efforts and activities for these departments so that they work properly and contribute to achieving broader goals set within corporate and business strategy.

Functional strategies are usually narrow-focused and outline short-term goals, current tasks, and responsibilities of each department. All of them must align with business and corporate goals while simultaneously addressing specific challenges within each area.

Still, there may be a pitfall in the development of functional strategies. When departments receive their detailed and actionable plans, they may become overly focused on their tasks and begin to ignore communication between teams. This can lead to staff disconnection and reduced development efficiency. The way out is cross-functional collaboration, achieved through joint tasks and coordinated efforts.

Operational Level of Management

This is the level where it’s time to move from words and plans to action. Operational strategy always deals with the execution and arrangement of the workflow to move the company in the right direction. Day-to-day actions and short-term tasks become the focus, and their results are usually tangible. 

In short, the strategy gives employees a clear understanding of what they have to do and what actions they need to take within their routine; however, all of them serve to achieve higher-level goals.

The operational strategy provides responses to the following questions:

1. How will the proposed steps be executed?
2. What should be done within a given quarter, month, week, or even day?
3. How will resources and the budget be allocated in detail?
4. How can teams be coordinated and operate efficiently within budget and time frames?
5. What else should be adjusted or improved under changing circumstances?
6. Do the proposed operations contribute enough to achieving bigger business and corporate objectives?

Operations are usually listed and distributed by project managers, as well as team leaders and members.

Though some business owners still don’t include this strategy in the levels of strategic management, it deserves its place. Bigger goals are reached through smaller actions, so the future of the company depends on the way these actions are arranged and executed.

Final Thoughts: The Power of Strategic Management

Strategic management is crucial for any organization where leadership wants to build its activities on realistic goals and values, see clear guidelines, and apply proper methods for achieving the desired results.

Companies that dedicate enough time and effort to developing their strategy at each of the four levels gain a steady foundation for effective management, quick adaptation to changing circumstances, and employee awareness and engagement across all units and departments.