25 May What Are the Types of Organizational Strategies?
In our increasingly complex and competitive business landscape, many businesses recognize the importance of organizational strategy.
From Amazon to IKEA, organizational strategy has guided countless industry-leading businesses to success by helping them align their efforts, maximize the impact of their resources, capitalize on their strengths, and safeguard their weaknesses.
To help demystify the concept of organizational strategy, we’ll be breaking down the four main types of organizational strategies, examining four of the most popular organizational strategies, and discussing the role these strategies play in the growth, profitability, and longevity of an organization.
Whether you’re a seasoned business veteran or a fresh-faced entrepreneur, understanding these strategies is key to creating a resilient, adaptable, and thriving organization. So let’s dive in!
What Are the Types of Organizational Strategies?
You probably know there are a number of organizational strategies to choose to enhance your business’ success. But did you know there are also different types of organizational strategies?
Understanding the fundamentals of these types of organizational strategies will make it easier for you to identify organizational strategies that align with your company’s unique advantages, mission, values, and long-term vision.
The four types of organizational strategies are corporate level, business level, functional level, and operating level. Let’s take a bird’s eye look at what each type of organizational strategy aims to achieve and how they differ from one another.
Corporate-level organizational strategy is concerned with one thing and one thing only – the “big picture.”
Corporate-level strategy codifies a company’s approach to high-level decision-making and outlines how the company, as an entity, will leverage its assets, brand, and talent into five, seven, and even ten-year goals and milestones.
Common business matters that can be streamlined with an effective organizational strategy include mergers and acquisitions, portfolio management, and high-level resource allocation. Corporate-level organizational strategy can also outline internal hierarchies, define roles and responsibilities, and set hiring goals.
Business-level strategy takes a small step down from corporate strategy’s lofty view while maintaining company-wide impact.
Business-level strategy exists to create a systemic approach to pursuing opportunities and maximizing competitive advantages in your industry, market, and niche. For example, a business-level strategy could be leveraged to structure and streamline decision-making regarding matters like product differentiation, pricing tactics, branding decisions, and sales targets.
Functional level strategy exists to provide guidance, allocate resources, and outline the project and reporting structures to the various departments involved in transforming corporate and business level strategies into reality.
Much like the relationship between corporate and business-level organizational strategies, functional-level organizational strategy deploys a more narrow and action-based approach to company management than the previous level.
This means rather than determining large-scale strategies and launching company-wide initiatives, the functional-level organizational strategy focuses on determining how functional units – or departments – will transform the vision and strategy handed down from the corporate and business level into day-to-day realities.
Functional-level organizational strategy could take the form of new recruiting goals for Human Resources, updated reporting tools or techniques for Accounting, the introduction of new technologies in the supply chain, and new sales quotas, KPIs, and activity metrics.
Operating level strategies are the most practical and actionable of all types of organizational strategies. Operating-level strategy aims to create smooth, replicable implementation systems for new strategies, initiatives, and processes.
Operating-level organizational strategies ditch abstract strategizing to develop practical, actionable, hands-on processes, systems, and initiatives that ensure every aspect of your company’s operations is aligned with higher-level strategies and optimized for maximum efficiency, profitability, and performance.
What Are the 4 Organizational Strategies?
Now that we’ve examined the four types of organizational strategies let’s move on to something more advanced.
We will take a bird’s eye overview of four of the most popular, successful, and widely applicable organizational strategies you could begin implementing today. These strategies include cost leadership, product differentiation, focus strategy, and diversification. Let’s dive in!
- Cost Leadership: Cost leadership has accelerated the success of wildly successful companies like Walmart, Amazon, and IKEA.
This organizational strategy helps companies grow their market share, capture cost-sensitive shoppers, build a strong brand perception, and generate healthy profit margins by becoming the lowest cost-producer in their industry or market.
Cost leadership strategy encourages companies to aggressively cut expenses and minimize overhead to allow them to generate profits at product price points far below their competitors’ offerings.
- Product Differentiation: Product differentiation is another popular organizational strategy that has fueled the success of companies like Rolex, BMW, and Nike.
Product differentiation generates growth and captures customers by promoting a unique, innovative, and eye-catching perception of a company’s brand, products, and services.
The most popular ways of achieving product differentiation include marketing and branding campaigns, prioritizing perceived quality, and earning a reputation for consistently pushing the state of your industry forward through innovative and exciting developments.
- Focus Strategy: Focus organizational strategy revolves around narrowing the scope of a business to target, capture, and serve a segment or niche in its larger industry.
Focus strategy accomplishes this by identifying gaps in a market, then developing unique product and service lines that provide a solution that draws in the targeted customer segment.
- Diversification: Diversification is one of the most straightforward – and, as a result, popular – organizational strategies.
Diversification encourages companies to invest in a range of industries and markets to mitigate the risks associated with unexpected economic changes. Put simply; diversification helps companies avoid “putting too many eggs in one basket” and maximize the ROI of their resources.
What Is the Purpose of Strategy in an Organization?
Strategy, as you know from your experience as an executive or business leader, is often the primary differentiator between companies that generate steady, sustainable, and long-lasting success from those that struggle to gain traction, get dragged down by avoidable issues and inefficiencies, and eventually close their doors without fulfilling their mission and vision.
Strong organizational and business strategies accomplish this by creating data-driven guidelines, frameworks, and best practices that position companies to maximize competitive advantages, mitigate setbacks, attack emerging opportunities, and sidestep unexpected threats.
These systems make it easier to navigate common business questions like:
- What’s the most effective way to allocate our resources?
- What Key Performance Indicators (KPIs) are best suited for tracking progress?
- How should we assign internal roles and responsibilities as we grow?
- What is our approach as a company to project management?
- How can we minimize expenses without impacting brand perception?
Instead of scrambling to respond to any given circumstance (and potentially making a poor call), businesses can turn to their organizational strategy models to gain direction, insight, and clarity when confronting unexpected challenges like market volatility, shifts in consumer behaviors and preferences, the emergence of new competitors, or flagging sales numbers.
Strategy also provides a laundry list of “soft benefits” that lead to improved performance, stronger productivity, and enhanced employee engagement.
For example, by providing your company with a shared sense of direction that ranges from your
C-suite to your new hires, you can cultivate a more collaborative and engaging culture and work environment. As a result, your employees are more likely to engage in creative and innovative exploration, often leading to valuable improvements in your product offerings, business operations, sales processes, and more.
Now that we’ve covered the purpose of organizational strategy let’s look at how organizational strategy and services and organizational strategy and customers connect.
What Is the Connection Between Organizational Strategy, Product Services, and Customers?
Organizational strategy is no one-trick pony.
In fact, the right organizational strategy will make a multi-faceted impact on your business that extends beyond operations to enhance your products, improve your services, and engage your customers. Wondering how?
Let’s take a look together!
Organizational Strategy and Products, Services, and Customers
Since your organizational strategy outlines your goals, you might’ve guessed your means of achieving these goals – your products – are fundamentally linked to your organizational strategy.
For example, if you’re an electronics manufacturer pursuing an innovative organizational strategy, you’ll be best served by focusing your efforts on intensive research and development.
This style of strategy would allow you to create a new or unique product that would engage your customer base and boost your brand perception as an industry leader.
The connection between organizational strategy and services is very similar to the connection organizational strategy shares with products. Your overarching organizational strategy will determine the types of services that will be advantageous for your company to pursue.
A business staking its growth on a service-based organizational strategy would be better served by investing in customer experiences. Conversely, a cost-leadership-based service company would reach its goals faster by investing in self-service or automated-service solutions.
Much like products and services, your organizational strategy will determine how you identify target markets, segment your customer base, and develop and refine your UVP.
Organizational strategy can also shape how a company engages, communicates, and interacts with its customer base.
Discover Your Ideal Strategy
Are you ready to unlock your company’s full potential? Then you need a custom organizational strategy that aligns with your values, capitalizes on your strengths, and sets the stage for long-term success.
Medallion Partners has over 15 years of experience helping businesses across industries identify, customize, and implement the ideal organizational strategy.
Our industry-leading consultants bring decades of experience to every partnership, allowing our firm to consistently craft organizational strategies that exceed all expectations. Let us help you uncover the strategy you need to propel your company to the next level. Contact us today.