Strategy making and development is not just the task of top management, instead middle and lower-level managers need to take an active part in the entire strategic process. The levels of strategic planning are different in large organizations and small organizations. In large organizations there are actually four levels of strategic planning: corporate, divisional, functional and operational. On the other hand, in smaller organizations there are three levels of strategic planning: company, functional and operational. A successful strategic plan needs participation from all the core accountable groups, and this ensures facilitation, coordination, and commitment during the entire process.
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What are the Different Levels of Strategies Within an Organization?
Integration Strategies
Forward integration and backward integration together help in creating integration strategies, which are collectively also known as vertical integration strategy.
Vertical integration strategy helps an organization to gain control over its suppliers and distributors and Horizontal integration allows an organization to gain ownership or control over competitors. Vertical and Horizontal integration collectively form the Integration Strategies.
In Large firms the levels of strategies according to the person most responsible are:
1st Level- It is the corporate level and the person responsible is the CEO or the Chief Executive Officer of the company.
2nd Level- This is the Divisional level within an organization, and the person responsible within this level is Division President or Executive Vice President.
3rd Level- This is the functional level within an organization, and the people responsible are finance, marketing, R&D, manufacturing, Information Systems, and Human Resource Managers.
4th Level- This is the operational level within the organization, and the people responsible are plant managers, sales managers, production managers, and department managers.
In smaller firms the levels of strategies according to the person most responsible
1st Level- This is the company level within a company, and the person responsible is the Owner or the President of the company.
2nd Level- This is the functional level within the organization, and the people responsible are finance, marketing, R&D, manufacturing, Information Systems, and Human resource managers.
3rd Level- This is the Operational level within an organization, and the people responsible are plant managers, sales managers, production, and department managers.
This clearly shows that strategic planning as a process needs support from all the required levels within an organization to achieve the required success.
Let’s Discuss the Strategies in Detail
Forward Integration
Forward integration refers to gaining more control over retailers and suppliers. Getting into online mode like creating a website for online selling is one form of forward integration strategy. This strategy allows the organizations to acquire more control over their sales process as they get an access to direct contact with their customers. This strategy is used by the company as and when it moves up the supply chain and it allows the customer to get more control over the product flow. One excellent example of this strategy is a famer that sells his produce directly in the market and avoids making use of any kind of intermediary.
Backward Integration
Backward integration strategy is used by an organization to gain increased control or ownership over an organization’s suppliers. This strategy is usually used by an organization when an organization’s suppliers are unreliable or are not capable of meeting the needs of an organization. One such brilliant example in this case is Starbucks purchasing its first 600-acre coffee farm in Costa Rica. This gives Starbucks complete control over the quality of coffee beans which is definitely the USP (Unique Selling Proposition) of the company. Some of the large companies that have access to global sources of supply use De-integration as a strategy. These companies are smart enough to shop around and make the suppliers compete against each other and then go for the best deal they get.
Horizontal Integration
When an organization is looking at gaining control over its competitors it makes use of Horizontal integration as its Growth Strategy. Mergers, acquisitions, and take overs are a part of Horizontal Strategy. Horizontal Strategy aims at creating economies of scale, and increased transfer of resources and competencies. It has been observed that mergers between direct competitors yield better results as compared to mergers between unrelated businesses. Google purchasing YouTube to enhance its search portfolio is an example of Horizontal Integration.
The success of any strategy depends on a successful participation from all the levels within the organization. Coordination between the responsible members leads to the success of a strategy and also helps in achieving the desired results.
