What is Business Strategy? Definition, Levels, and Elements

Why it matters: business strategy incorporates your company’s vision, its most important goals, and the plan of execution for achieving those goals.

• Importance: business strategy brings your mission to life
• Components: business strategy has three levels — corporate (company-wide, overarching), business (department-wide, contextual), functional (team-wide, tactical)
• Questions: is our business strategy feasible, desirable, viable, strategic, and sensitive to the market?

How do we cover business strategy? 

Every business has a strategy — whether it’s well executed and intentionally crafted is another story. Business strategy is an ever-evolving topic, with an overwhelming depth and complexity worth hundreds of articles.

But in this article, we’ll stick to the most important concepts, covering:

1. The definition and importance of business strategy
2. The three levels of strategy — corporate, business, functional
3. Key elements of a successful business strategy

Let’s get started by exploring the definition and importance of business strategy. 

So where does it all begin with business strategy?

In short, it's the foundation for every method and tactic your business takes to accomplish its goals and mission.

Business strategy is the guiding principle and action plan for your organization. It’s built through a vision and mission, objectives, and a dedicated decision-making process.

Learn more about mission and vision in the strategy process

The importance of business strategy

A business strategy isn’t just a plan for what you’re trying to achieve as a company — it reflects both your internal and external environment equally. It should position your goals and offerings against your competitors, market demand, and new opportunities.

Without a connected strategy at the corporate, business, and functional levels, your teams will:

• Operate in misalignment
• Lack engagement, motivation, and purpose
• Produce lackluster results, at best

A great business strategy is your market differentiator, your competitive advantage, and your edge in performance. 

Business strategy can be broken down into three distinct levels:

1. Corporate (company-wide, overarching)
2. Business (department-wide, contextual)
3. Functional (team-wide, tactical)

Corporate strategy

Corporate strategy is the “top-level” strategy that guides your organization. This is where strategy mapping, visualization, and vision-mission development occurs. This foundational step ultimately determines the trajectory of your business.

To establish a thriving corporate strategy, a few simple, but important questions must be answered:

• What type of business are we? (Niche)
• What distinguishes us as a company? (Vision)
• What are our company's competitive advantages? (Strength) 

These questions help you understand your company’s identity and pursuits. That is:

• How the business is being run
• The goals and objectives of the business
• Which markets the business enters
• How success is defined
• Who is hired and why
• How the budget is being created/spent 

Check out corporate strategy execution from a 30,000 ft. perspective

Business strategy

Business strategy is the middle ground between corporate and functional execution. It establishes and coordinates the positioning of your organization by applying the mission and vision to your competitive landscape.  

If corporate strategy focuses on the internal environment, business strategy focuses on the external. Business strategy explores the questions centered on value, like:

• Where is our primary area of focus?
• How will our customers benefit from this competitive focus?
• What about this focus ensures a unique value proposition?

With value creation at the core, investing in a sound business strategy is key to your team executing as effectively as possible. 

Improperly positioned firms encounter competitive difficulties and can fail to sustain competitive advantages. 

- Saylor.org

Functional strategy

With the second-tier business strategy created, functional strategy has a foundation. VPs and managers influence the key decisions in functional strategy. They have the responsibility of bridging functional strategy to the business and corporate strategy.

Functional strategy is then managed by the departments, teams, and initiatives in an organization where the work is done.  

Different functions require different strategies, each informed by the unique goals, aspirations, and needs of the department.

Without alignment between functional and business strategy, organizations experience an operational disconnect. While the functional strategy should meet the department's unique needs, it must also contribute to corporate and cross-departmental strategies. 

Functional strategy example

Let’s take this one step further by examining how marketing and sales teams may work together. At the strategic level, they may share and depend on information like:  

• The organization’s value proposition
• The ideal customer profile (ICP)  
• How the organization delivers value for the ICP

It makes sense for these departments to align their strategies, as they work with similar goals in mind. When functional units align, their impact compounds.  

The collective functional strategy funnels up to the corporate strategy, forming a collaborative organizational strategy across multiple levels within the organization.  

Learn more about alignment's importance in functional strategy

With so many moving parts, contributors, and focus areas, ensuring a clear understanding of business strategy can be complicated.

While different models reflect different outlines or structures, business strategy focuses on five elements:

1. Feasibility: what your business can offer  
2. Desirability: what the market desires, aka, the desired value  
3. Viability: ROI on value proposition
4. Strategic playground: your organization's identity, in support of the value proposition
5. External environment: ebbs and flows of what's interesting or in-demand 

Feasibility of business strategy

• Resources & strengths: Highlighting the resources available, plus the unique skills and strengths of the organization
• Collaborators: Specifying the organizations and individuals you collaborate with, and how they enhance the value of your products and services

Desirability of business strategy

• Value provided: Outlining the products and services offered, the approach taken in delivering them, and the added benefits they bring to the customer
• Target audience & desires: Identifying the target audience and organizations served, and the specific needs that are being fulfilled
• Alternatives: The other entities that customers consider as alternatives when deciding to purchase your products or services

Viability of business strategy

• Financials: Explaining how you receive compensation for your offerings, from whom, the method of payment, and the timing
• Risk management: Outlining the risks and costs associated with the organization and how they are managed

Strategic playground

• Outcomes & values: Stating the desired outcomes, long-term goals, and values that are important to the organization
• Culture & structure: Describing the culture and structure of the organization and what makes it unique

Environment external to the business strategy

• Analyzing the external factors and developments
• Potential uncertainties and out-of-control events 

A well-crafted business strategy is a market differentiator and competitive advantage, vital to achieving sustained growth and success. By using the breakdowns and elements in this article, your organization can begin developing a comprehensive and effective business strategy.

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