LEVELS OF STRATEGY

1. Corporate Level – composed principally of a board of directors and the chief executive and
administrative officers. They are responsible for the firm’s financial performance and for the
achievement of non-financial goals such as enhancing the firm’s image and fulfilling its
social responsibilities.
2. Business Level – composed principally of business and corporate managers. These managers
must translate the statements of direction and intent generated at the corporate level into
concrete objectives and strategies for individual business divisions. Managers determine
how the firm will compete in the selected product market arena.
3. Functional Level – composed principally of managers of product, geographic , and
functional areas. They develop annual objectives and short-term strategies in such areas as
production, operations, research and development, finance and accounting, marketing
and human relations. Their principal responsibility is to implement or execute the firm’s
strategic plans.
While corporate and business level managers center their attention on “doing the right
things”, managers at the functional level center their attentions on “doing things right”.

Formality in Strategic Management

Formality refers to the degree which participants, responsibilities, authority and discretion in
decision making are specified. It is an important consideration in the study of strategic
management, because greater formality is usually positively correlated with the cost,
comprehensiveness, accuracy, and success of planning.
Forces that determine how much formality is needed:
 The size of the organization
 Its predominant management styles
 The complexity of its environment
 The firm’s production process
 The firm’s problems
 The purpose of its planning system

Entrepreneurial Mode – The informal, intuitive, and limited approach to strategic management
associated with owner-managers of smaller firms.
Planning Mode – The strategic formality associated with large firms that operate under a
comprehensive, formal planning system.
Adaptive Mode – The strategic formality associated with medium sized firms that emphasize the
incremental modification of existing competitive approaches.
The Strategy Makers
The ideal strategic management team includes decision makers from all three company levels
(the Corporate, Business and Functional). For examples are the Chief Executive Officers, the
product managers, and the heads of functional areas.

Benefits of Strategic Management

1. It enhances the firm’s ability to prevent problems.
2. Strategic decisions are likely to be drawn from the best available alternatives
3. The involvement of employees in strategy formulation improves their understanding of the
productivity-reward relationship in every strategic plan and, thus, heightens their motivation.
4. Gaps and overlaps in activities are reduced
5. Resistance to change is reduced.

Risks of Strategic Management

1. The time that managers spend on strategic management process may have a negative
impact on the operational responsibilities.
2. The formulators of strategy are not intimately involved in its implementation
3. Strategic managers must be trained to anticipate and respond to the disappointment of
participating subordinates over unattained expectations