What are the 3 Types of Strategy?

Businesses involve various strategies to fulfil their long-term and short-term goals. Corporate, Business and Functional are the three main types of business strategies. Corporate strategy is the overall plan that guides the other two strategies. Business strategy is related to a particular market, product, or resource, whereas functional strategy is specific to various departmental actions. Let's understand all these 3 types of strategies in detail. 

Strategies are like smart plans that guide businesses toward success. There are various types of strategies that work together. We have three major business strategies: corporate, business, and functional. Corporate strategy is the big plan for the whole company, deciding what industries to be in. Business strategy focuses on specific areas like products or markets. Functional strategy is about detailed actions of different departments, like marketing or production. Each strategy plays a role in achieving goals. Just like a puzzle, they fit together to make a company successful. Let’s understand the types of strategy involved in business with the help of interesting examples. 

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Table of Content

• Types of Strategy
  • Corporate Strategy
  • Business Strategy
  • Functional Strategy

• Examples of Three Types of Strategies
• Difference Between Corporate Strategy, Business Strategy and Functional Strategy

Types of Strategy

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Corporate Strategy

Corporate strategy refers to the overall plan and direction a company decides to follow to achieve its long-term goals and objectives. It’s like a roadmap that guides the company’s actions, decisions, and resource allocation to ensure it moves in the right direction to be successful.

In easy words, a corporate strategy is a big-picture plan that helps a company decide what it wants to achieve and how it will get there. Like how you might plan your steps to reach a destination, a company uses corporate strategy to prepare its steps to achieve its business goals. This strategy involves deciding which products or services to offer, the target market, how to compete with other companies, and how to use its resources wisely.

Corporate strategy is all about making smart choices to help a company succeed in the long run. It’s like a game plan that keeps the company focused and on track towards its ultimate goals.

Example of Corporate Strategy (Big Picture Plan)

Apple’s corporate strategy centres on creating innovative and high-quality technology products that seamlessly integrate hardware, software, and services. They aim to provide a unique user experience that sets them apart in the tech industry.

Business Strategy

Next, the type of strategy is business strategy. A company creates a well-thought-out plan to achieve its essential goals and succeed. It’s like a game plan that helps the company make smart choices about what products or services to offer, how to stand out from competitors, and how to use its resources wisely.

Business strategy is a roadmap that guides a company to make the right decisions. Also, to take the right actions to reach its desired destination. Like how you plan your steps to win a game, a company uses a business strategy to win the business world. This strategy involves figuring out the best way to attract customers, how to make products that people want, and how to grow over time.

So, business strategy is about making clever moves to help a company succeed and achieve its long-term goals. It’s like having a solid plan to ensure the company goes in the right direction and does well.

Example of Business Strategy (Specific Focus)

Apple might concentrate on the smartphone market as part of its business strategy. This strategy could involve producing premium iPhones with advanced features, stylish designs, and a strong ecosystem of apps and services.

Functional Strategy

Functional strategy refers to the specific plans and actions of a company’s different parts or functions, like departments or teams, that develop to support the business’s overall goals. It’s like a detailed game plan for each part of the company to do its best work and contribute to its success.

In simpler terms, think of a functional strategy as a set of instructions for each team or department within a company. Different parts of a company have strategies to ensure they do their jobs well. Just like players in a sports team have different roles and strategies on the field. Similarly, these strategies help each part of the company work efficiently and effectively to achieve its more significant goals.

Functional strategy is all about determining the best way for different company parts to work together and perform their tasks in a way that supports the business’s larger goals. It’s like having a well-organized playbook for each team within the company.

Example of Functional Strategy (Team-Level Plan)

Apple’s iPhone product development teams could use a functional strategy that involves rigorous quality control and regular software updates to ensure a smooth user experience. The design team might focus on aesthetics that align with Apple’s minimalist brand. The marketing team could create campaigns highlighting hardware and software integration for a seamless user experience.

Examples of Three Types of Strategies

Let’s use the example of ITC to understand the types of strategy. It’s a diversified conglomerate based in India. To explain the corporate strategy, business strategy, and functional strategy:

1. Corporate Strategy

Corporate strategy is like the big plan that ITC decides to follow as a whole company. It’s about making important decisions that affect the entire company. ITC’s corporate strategy might involve where to invest money. It includes industries to participate in and how to manage different parts of the business. For example, ITC’s corporate strategy could diversify its business. It can be done across sectors like tobacco, hotels, agri-business, and information technology to reduce risk and create a balanced portfolio.

2. Business Strategy

Business strategy is more specific. It’s about how ITC wants to succeed in its different industries. For instance, within its agri-business division, ITC might have a strategy focused on producing and selling high-quality agricultural products while supporting local farmers. The strategy might involve providing luxury experiences and expanding into new markets in its hotel division. Each of these strategies helps ITC compete effectively in its various businesses.

3. Functional Strategy

Functional strategies are like detailed plans for each part of ITC’s business. They involve specific actions and decisions made by different departments or functions within the company. For instance, in its agri-business, the functional strategy could involve sustainable farming methods. It is applied to ensure the quality of its products. The strategy might focus on developing innovative software solutions in its information technology division. It is done to meet the needs of its clients. Each functional strategy contributes to the success of the more significant business strategies.

Difference Between Corporate Strategy, Business Strategy and Functional Strategy

Corporate, business, and functional strategies are hierarchical levels of strategic planning that guide an organization’s goals. While corporate strategy focuses on the organisation's overall direction, business strategy addresses competitive positioning, and functional strategy deals with specific departmental goals to support higher-level strategies.

Conclusion

Corporate strategy sets the overarching direction for the organization, defining its mission and scope. Business strategy focuses on competing effectively in specific markets, while functional strategy ensures operational efficiency within departments. Together, these strategies align an organization’s efforts, optimize performance, and drive long-term growth by addressing different levels of strategic needs.