Business Level Strategy: The Middle Ground in Organisational Success

67% of employees feel lost during growth initiatives, not because of poor ideas, but because business level strategy is missing. It’s the bridge between corporate vision and real-world execution. 

According to a Gartner survey, 67% of key functions within organisations are not aligned with either their business units or corporate strategies. 

Furthermore, the same study reveals that 67% of employees do not fully understand their role when new growth initiatives are launched. These figures highlight a critical gap: while companies tend to focus heavily on high-level corporate strategy, they frequently overlook the business level strategy, the vital middle ground that translates broad objectives into actionable plans tailored for individual business units.

Positioned between corporate direction and functional operations, business level strategy concentrates on how specific units compete in their markets and create value for their customers. Despite its importance, this level often remains neglected or overshadowed by the bigger organisational picture, causing misalignment and execution challenges.

What is a business level strategy?

Business level strategy is the set of strategic planning and implementation activities that define and guide how an individual business unit competes within its particular market. These activities focus on gaining a competitive advantage and creating value specifically for the customers served by that unit.

For companies with multiple business units, business level strategy operates beneath the corporate level strategy, which sets overall organisational direction and decides which markets to compete in. Organisations with only one business unit often merge business and corporate strategies into a single level.

The following pyramid illustrates the three classical strategy levels:

• Corporate level strategy: Overall organisational direction and portfolio management.
• Business level strategy: Competitive positioning and value creation within specific markets.
• Functional level strategy: Operational tactics within departments supporting business strategy.

Why is business level strategy important?

Research from McKinsey indicates that nearly 70% of complex change programmes fail to achieve their intended outcomes, largely due to poor alignment between organisational strategy and day-to-day execution. Additionally, a study by Harvard Business Review found that only 23% of employees feel confident they understand their company’s strategic priorities. 

A well-defined business level strategy offers numerous benefits:

• Clarity and purpose: Provides a clear roadmap that guides decision-making and resource allocation within the business unit.
• Alignment and coordination: Ensures efforts across departments and teams support common objectives, fostering synergy.
• Competitive advantage: Identifies unique value propositions and differentiation opportunities tailored to specific markets.
• Opportunity and risk management: Helps in recognising and capitalising on market opportunities while mitigating risks.
• Operational efficiency and innovation: Promotes effective use of resources and encourages innovation.

Corporate level strategy vs business level strategy

The terms corporate strategy and business strategy are sometimes used interchangeably, but they represent different strategic perspectives.

• Corporate level strategy applies to the entire organisation, particularly when it operates multiple businesses in diverse markets. It determines broad decisions such as which industries to enter or exit, resource allocation across units, mergers and acquisitions, and overall corporate vision. The corporate strategy might decide to expand into wealth management, commercial lending, or digital banking.
• Business level strategy focuses on how an individual business unit competes in its market. It defines the competitive approach and value proposition tailored to customers served by that unit. Each division then formulates its own business level strategy, such as cost leadership in retail banking or differentiation in private wealth management.

Types of business level strategies

Organisations typically choose from several common business level strategies, each providing a different path to competitive advantage. The five most prevalent types are:

1. Cost leadership

This strategy seeks to become the lowest-cost producer in the industry or market segment. Achieving cost leadership often involves:

• Economies of scale through larger production volumes.
• Process improvements and operational efficiencies.
• Minimising costs in areas such as research and development, marketing, and overhead.

By maintaining the lowest costs, a business can offer products or services at prices lower than competitors, attracting price-sensitive customers.

Example: Supermarkets like Tesco and Aldi use cost leadership by offering affordable products through efficient supply chains.

2. Differentiation

Differentiation focuses on providing products or services with unique attributes valued by customers, allowing the business to charge a premium price. Differentiation may arise from:

• Superior quality or performance.
• Advanced technology or innovative features.
• Exceptional customer service or brand reputation.

Example: Apple Inc. exemplifies differentiation through its innovative product design, ecosystem integration, and strong brand, enabling it to command premium prices across its product lines.

3. Focused cost leadership

This approach targets a specific market niche or customer segment, aiming to be the lowest-cost producer within that focused area. By concentrating on a narrower audience, businesses can better tailor their offerings and optimise costs.

Example: Rolex focuses on the luxury watch segment, offering high-end, exclusive timepieces.

4. Focused differentiation

Focused differentiation aims to offer unique products or services to a well-defined niche, anticipating the precise needs of a smaller customer base. This strategy emphasises intimate customer knowledge and customised offerings.

Example: Luxury watchmakers produce highly specialised, bespoke timepieces aimed at affluent consumers who value exclusivity and craftsmanship.

5. Integrated low-cost/differentiation

Some companies blend cost leadership and differentiation, offering moderately priced products with distinctive features. This hybrid strategy aims to serve customers seeking both value and uniqueness.

Example: The emergence of “premium fast food” chains offering high-quality food at prices slightly above traditional fast food, combining convenience and differentiation.

How to develop a business level strategic plan

Once the strategic direction is chosen, it must be articulated into a clear, actionable business plan. The following steps outline an effective approach:

1. Analyse the current position: Gather and assess critical information about the business unit’s performance, market position, and external environment. Tools such as SWOT analysis, competitive landscape review, financial metrics, and customer feedback are valuable here.

2. Prioritise focus areas: Identify key strategic priorities derived from the analysis, which will guide the unit’s efforts. These should be specific enough to provide direction but broad enough to allow flexibility.

3. Define strategic objectives: Set clear objectives linked to the focus areas. These should be measurable, time-bound, and achievable, typically ranging between three to six per focus area.

4. Assign key performance indicators (KPIs): Determine KPIs that accurately track progress toward each objective. Selecting relevant KPIs ensures resources are concentrated on the right activities.

5. Develop projects and initiatives: Outline specific projects or programmes that will deliver the objectives. Each project must have defined actions, responsibilities, and deadlines.

Key elements of business level strategy

Two primary pillars underpin business level strategy:

Core competencies

These are the unique capabilities or advantages that set the business apart and enable value creation. Examples include proprietary technology, superior processes, skilled personnel, or brand reputation.

Identifying and leveraging core competencies provides a competitive edge. Tools such as the VRIO framework (Value, Rarity, Imitability, Organisation) help evaluate whether these competencies contribute to sustained advantage.

Customers

A deep understanding of customers is essential. This involves:

• Defining who the customers are (demographics, behaviours).
• Knowing what products or services customers need or value.
• Understanding how the business can satisfy these needs better than competitors.

Business level strategists typically have precise insights into customer segments, enabling tailored offerings and improved customer satisfaction.

Final thoughts 

Business level strategy occupies the crucial space between corporate direction and day-to-day operations. By focusing on specific markets, customers, and core competencies, it translates broad corporate aims into concrete initiatives that drive competitive advantage and value creation.

Neglecting this level can lead to misalignment, inefficiency, and missed opportunities. Conversely, a well-defined and well-executed business level strategy empowers business units to respond effectively to market demands, innovate, and grow sustainably.

Leaders should prioritise developing clear business level strategies, cascading them throughout the organisation, and employing tools to monitor and adapt strategies over time. This approach will enable organisations of all sizes to realise their strategic ambitions and achieve long-term success.