A company that repairs computers and sells computer parts has a service line of business and a retail line of business. Both lines of business require support from marketing, finance and human resources.
The management team typically develops a corporate strategy that consists of the individual line of business strategies and an overall company-wide strategy.
Each function also creates a strategy that specifically describes how it will help each line of business and the company as a whole achieve collective business objectives.
The corporate strategy outlines the business strategy for the company. It's often accompanied by a vision statement that describes the desired future state of the company.
The business strategy describes how the company will achieve certain financial objectives, such as revenue, expense and profit; how it will acquire and keep customers; how it will attract and retain employees; and how it will create systems and processes that support the financial, customer and human resources objectives.
Once the corporate strategies have been defined, each support (functional) group, such as marketing, finance and human resources, develops a functional strategy.
Functional strategies describe the specific ways in which a function will help the business execute its strategy. Every element in a functional strategy should link directly to an element in the business strategy.
For example, if a strategy is to expand the business by opening new locations, a human resource strategy might discuss how HR will help recruit and hire the right number and right kind of people to staff the new locations.
A corporate strategy should highlight the ways in which the lines of business can help one another grow and prosper.
For example, the computer repair business would be an important customer of the parts business, which might make sure it always has certain parts in stock for repair work. The parts business would be an important source of customer referrals to the repair business.
By marketing themselves as a single parts and repair business, they may be able to better attract customers who aren't sure whether they need parts or service.
It's critical that employees understand the organization's business and functional strategies and identify how their actions can affect those strategies. Company leaders must communicate strategies so employees at every level of the organization comprehend them and think about them as they perform their daily activities.
A good strategy that is understood and well executed is much more valuable than a great strategy that never gets implemented because few people understand it.