Strategy is a broad term. It commonly describes any thinking that looks at the “big picture.” There are three levels of strategy to be considered:
- Functional Strategy – The value activities engaged in
- Business Strategy – How to fight the competition, tactics
- Corporate Strategy -What business space should we be in?
When putting on the strategy hat, you must ask yourself, “At what level do I wish to think? Functional, business, or corporate?”
FUNCTIONAL STRATEGY
Functional strategies are those operational methods and “value-Adding” activities that management chooses for its business. The functional strategy of Altria Group’s Philip Morris, for example, has been to lower costs by utilizing the most advanced processing technologies. If Philip Morris felt vulnerable to a single tobacco supplier, an excellent functional strategy would dictate that it use multiple suppliers.
BUSINESS STRATEGY
Business strategies are those battle plans used to fight the competition in the industry in which a company currently participates. They are on a higher level than functional strategies, but there is an overlap between how a company operates and competes.
Philip Morris’s business strategy has been to beat its competition by crowding store shelves with many different brands and spending heavily on advertising to promote its brands. Using these strategies, large tobacco companies preserve market share and prevent competitors from gaining a foothold in their industry.
CORPORATE STRATEGY
The corporate strategy looks at the whole gamut of business opportunity is Philip Morris’s corporate name change to Altria makes it clear Altria’s corporate strategy has led the company to diversify away from tobacco products and toward consumer goods. Altria’s executives reviewed the tobacco industry’s growth potential, the legal environment, and the increased health awareness among consumers and concluded that it was wise to be in more “healthful” businesses.
Is purchases of General Foods, Kraft, Nabisco, and Miller Brewing were made with that corporate strategy in mind. In 2002, Altria changed their “healthy opinion of Miller and sold it to SAB, which formed SAB Miller.
Source: The Ten-Day MBA