1. Corporate Strategy
The “Where” Decision: This level defines the scope of the entire organization. It answers the question: “Which industries and markets should we compete in?”
Example: Amazon’s acquisition of iRobot was a corporate move to dominate the “Smart Home” industry, expanding their scope beyond traditional e-commerce.
2. Competitive Strategy
The “How” Decision: This level focuses on business units. It answers the question: “How do we win against rivals in this specific market?”
Example: Tesla competes through differentiation. They win by being the most innovative in battery technology and autonomous driving, rather than being the cheapest.
3. Functional Strategy
The “Execution” Decision: This level focuses on departments (Marketing, HR, Ops). It answers the question: “How do we support the business unit’s strategy?”
Example: To support Tesla’s innovation, the Operations department focuses on ultra-efficient Gigafactories, while Marketing highlights high-tech performance features.
Vertical Alignment
For a strategy to work, these three levels must be perfectly aligned. If the Corporate level chooses a high-end industry, but the Functional level focuses on low-cost budget operations, the strategy will fail.
The CEO sets the direction (Corporate), the Manager chooses the playbook (Competitive), and the Teams execute the action plan (Functional).
Strategy is a cohesive chain. The strength of your competitive advantage is only as strong as the alignment between these three levels.