The word "strategy" can be used in different contexts that determining the kind of strategy that is

being referred to can get confusing. It is understandable because strategy can be formulated
across the many different tiers of an organization, and each tier's strategy will be of a different
nature versus that of other tiers.

Tiers of a Corporation

To fully understand the layers involved, the following is a generalized schematic of what a
corporate organization may look like:

***Figure 2 Generalized Corporate Structure***

The top layers consist of a Chief Executive Officer (CEO) along with a cohort of what are known as
C-level positions: Chief Operating Officer, Chief Finance Officer, and so on. This level of the
corporation usually resides at the headquarters of the company. They are responsible for the
corporate level strategies of the organization.

The Presidents, on the other hand, serve as the heads of their own respective business units and
are therefore responsible for the business level strategies or strategies pertaining to their
respective businesses. If a corporation has five businesses under its domain, it is expected to have
five Presidents as well, all of whom report to the CEO.

Under each President will serve the different Vice Presidents (VPs) who specialize In their own
respective fields of expertise. They are responsible for the functional level strategies of their
respective businesses. Their subordinates will then be responsible for operational or day-to-day,
strategies.

You may notice from the diagram that C-level positions do not have direct lines to the Presidents.
This is because C-level positions ideally should only serve as advisors to the CEO. They are not
supposed to have managerial or executive roles.

So if, for instance, the CEO does not have sufficient knowledge in legal matters, the CEO can
create a new advisory C-level position, the Chief Legal Officer, and this person will provide the
CEO with legal advice and strategy suggestions. If the CEO does not know much about marketing,
the CEO can hire a Chief Marketing Officer who can serve as a sounding board for top-level
marketing strategies.

In actual practice, however, many firms end up using C-level officers as executives, having the VPs
of each company under the domain of the headquarters report to their respective C-level
equivalents. So the VPs for Finance of each business, for instance, report to the Chief Financial
Officer. This leads to what is often referred to as a matrix form of management, where managers
end up reporting to more than one superior. The danger with such a matrix is that the lines of
authority become blurred, and incidents where orders from the C-level "executives" clash with the
orders from the Presidents commonly occur.

Corporate Level Strategies

This is the highest level where strategy formulation can take place. At the corporate level, the CEO
is primarily concerned with managing a portfolio of businesses, each of which is being run by
their own respective business heads (the Presidents). Such enterprises that are composed of
multiple businesses under a centralized managing unit are called conglomerates.

An example of such a conglomerate is the San Miguel Corporation. Its headquarters, situated in
Pasig City, manages a growing portfolio of different and diversified business interests. Originally
started as a beer-brewing enterprise, San Miguel has grown to also have businesses in packaging,
animal feeds, beverages, and eventually real estate and power and energy

Because corporate headquarters is involved in handling a variety of business enterprises, often of

a highly-diversified nature, the corporate strategy may involve either crafting of integrated
strategies that build synergies among the different enterprises or setting goals that the different
business heads strive to accomplish using their own respective strategies. Either way, a working
relationship needs to be established between the CEO and the various business heads, and it is
typically in terms of clear targets handed down by the CEO that the business heads then need to
achieve. Achievement of these targets often means rewarding of handsome incentives and
bonuses to successful business heads. As for the business heads that do not make their targets, at
the very least, they will not be rewarded with bonuses. At most, they may be relieved of their
duties.

usishould be noted that the CEO is not expected to be a master of each and every kind of
business that the conglomerate ventures into this will be nearly impossible. Instead, the CEO is
expected to be a generalist who understands how to communicate with the heads of each of the
different businesses.

****Figure 3 corporate strategies for a diversified firm****

Figure 3 shows the different strategies that are concerns of top management at the corporate
level of an organization. The CEO and C-level advisers are responsible for crafting strategies that
center on possible diversification strategies, establishing the corporate identity, generating
corporate-level competitive advantages and top-level initiatives for bolstering the competitiveness
of the different businesses, establishing new businesses and presence in growing industries,
divestment decisions, optimal resource allocation across the different business units, and the
scope of diversification that is to be allowed.

Who evaluates the CEO's performance? The CEO typically reports to a Board of Directors. It is the
Board that supposedly is responsible for assessing the CEO's performance, to the point of being
able to replace the CEO should the CEO not perform up to par.

Business Level Strategies

Business level strategies pertain to the strategies that are formulated at the level of the respective
business enterprises often under the helm of a company President.

"Business" here pertains to a particular product market area. A quick-service food chain, for
instance, may have its own brand and signature food preparations and target markets, essentially
making it a singular business unit (despite having several branches) Meanwhile, a manufacturer of
pens may produce different kinds of pens, but it should be clear that each pen is not a separate
business all of these pens may be produced by the same organization, using the same logistics
and distribution networks, and all of which are marketed as a portfolio of products under its
domain. A specific business can also be referred to as a strategic business unit (SBU).

It should be noted that for single-business firms, which actually applies to a great majority of
micro and small enterprises in the country, this is the topmost level of strategy that management
will be involved with, as they will not be diversified into different businesses and so will have no
need for a corporate level tier of management.

The President (or General Manager, as the business head may also be referred to) is responsible
for crafting strategies that will ensure the long-term sustainability of the business as it carves its
position of superiority in the marketplace.

**Figure 4 strategies at the business level***

Figure 4 shows the different strategies that a business level manager can pursue to accomplish
the goal of attaining long-term competitive advantages in the marketplace. These include
strategies that seek to weather changing industry conditions, strategies for building up the firm's
capacities in the industry through vertical integrations and other alliances, strategies for gaining
new competitive advantages, strategies for preserving existing advantages and improving on
these, strategies for bolstering specific functional capabilities, and strategies versus its
competitors.

The bottom line is that the President's responsibilities are to ensure that the business is profitable
and to ensure future profitability through the continuous pursuit of marketable competitive
advantages for the business.

Eventually, if the business is part of a conglomerate, the President's performance will be evaluated
by the CEO. At worst, a President who does not deliver on what is expected from the
headquarters may be asked to resign. On the other hand, a President who manages to deliver or
even exceed expectations may be generously rewarded in terms of bonuses or other incentives.
This is how the headquarters manages the businesses that it controls.

Functional Level Strategies

Functional level strategies pertain to strategies that are pursued by functional specialists within a
business unit.

A functional organization works by ensuring that it is staffed by competent personnel This

includes specialists in functional roles, such as marketing, finance, and operations. Specialists can
gain their competence and knowledge about their particular field through education (such as in
business schools) as well as through actual experience. Job interviewers, for instance, pay
particular attention to the amount and quality of work experience that applicants have in their
respective fields.

As specialists prove themselves, they rise up the ranks. Eventually, they may become the head of
their respective fields, typically in the position of Vice President (VP). As VP for a particular
business function, the specialist now takes on the role of strategy expert and functional executive
for the President. For instance, the VP for Marketing may be given the objective of developing a
certain number of new territories. The VP will therefore be responsible for formulating the
strategies that will lead to the optimal accomplishment of the objective given the resources that
the VP has at their disposal.

The lower left corner of Figure 4 presents the strategies that functional management seeks to
accomplish, depending on their function. These include manufacturing and operations strategies:
marketing, promotion, and distribution strategies; research and development and technology
strategies, human resource and labor strategies; and financial strategies

The VP's performance will eventually be evaluated by the President, who will assess the VP's
performance vis-à-vis the expected targets and outcomes. There will likely be rewards and
penalties that have been set up to ensure that the VPs will strive to do well in achieving their
objectives.

Will a VP eventually become President? It is possible. When this happens, it is said that the
President was promoted "from within the ranks." The upside here is that such a President will
already be familiar with how the business works. The downside, however, is the President may be
biased toward a problem-solving perspective that revolves around their core specialization. In
other words, a VP for Marketing who becomes President may see all of the firm's problems as
marketing problems, while a President who rose from the ranks of Finance may see all the firm's
problems as financial problems.

This is why the best Presidents are those who have well-rounded skills. They do not need to be
experts in any single management function, but they should know enough about all the functions
to be able to understand and more importantly, coordinate with all the specialists to develop a
unified strategy.

Operational Level Strategies

This may well be the lowest level where strategy formulation can take place. Operational level
strategy pertains to the actual operations that are undertaken in an organization by the people
down the line, typically by functional specialists at supervisory levels below the VPs. Usually, the
VP's objectives will be translated into more specific goals that are then passed down to the VP's
subordinates. These subordinates in turn establish on-the-ground strategies and action plans that
will help them achieve the goals as set by their VP.

Because supervisory level personnel have access to limited company resources (as compared to
the VPs), their strategy formulations are inherently limited in scope and likely localized in nature.