Organizational Strategy

What Organizational Strategy Is And Why Your Business Needs It

Organizational strategy isn’t just for big business anymore. Even a startup coffee shop or catering business needs to plan strategically if it wants to grow and thrive.

But what exactly is organizational strategy, and why does your business need it? We’ll answer those questions in this article, give you four key features of a good organizational strategy, and show you the best way to get started.

Table Of Contents

What is organizational strategy?

Business owner working on his organizational strategy

At its most basic, an organizational strategy (or OS for short) is a plan that specifies how your business will allocate resources (e.g., money, labor, and inventory) to support infrastructure, production, marketing, inventory, and other business activities.

When you sit down to create your organizational strategy, you should first divide it into three distinct categories:

  1. Corporate level strategy
  2. Business level strategy
  3. Functional level strategy

Think of each category as a building block in the larger organizational strategy that guides your business. Here’s a brief description of each.

Corporate level strategy

Corporate level strategy is the main purpose of your business — it’s the destination toward which your business is moving.

Common corporate level strategies include:

  • Concentration
  • Diversification
  • No Change
  • Profit
  • Investigation
  • Turnaround
  • Liquidation

Most corporate level strategies will be broad in scope, complex, and geared toward the overarching goals of your business.

Business level strategy

Business level strategy is the bridge between corporate level strategy and much of the “boots-on-the-ground” activity that occurs in functional level strategy. Because of that, business level strategy is more focused than the corporate level strategy that drives it.

So, for example, if your corporate level strategy is diversification, your business level strategies might look something like this:

  • Increase marketing budget
  • Rebrand
  • Investigate new markets
  • Broaden exposure

Those more specific goals will then guide you in setting your functional level strategies.


Functional level strategy

Functional level strategies are the specific actions and benchmarks you assign to departments and individuals that move your business toward the goals created by your corporate level strategy. They are a direct offshoot of your business level strategies.

Functional level strategies, by nature, will be very detailed. So if one of your business level strategies is to rebrand your product, a functional level strategy might be for the marketing department to investigate which color your product should be so that it appeals to your target audience.

Those three strategies together — functional, business, and corporate — make up the very broad, very general organizational strategy that every company needs to be successful.

Why does your business need an organizational strategy?

Example of a business professional's desk

1) Sets direction and priorities

We’ve said it already, but it’s worth saying again: an organizational strategy gives your business direction. Without that direction, your business may be flailing in the wind, so to speak.

One week you’re working toward diversification, and the next week you’re working toward no change (opposite organizational strategies). That’s a recipe for disaster. At the very least, an organizational strategy gives you consistency.

An organizational strategy also gives your business priorities. It defines success and shows you what activities you should put first (and second, and third) in order to move your business toward that goal.

2) Aligns teams and departments in a common goal

Getting all your departments and teams pulling in the same direction is hard enough. Without an organizational strategy, it’s nearly impossible.

When you set your overarching strategy — even if it’s something fairly vague, like increase profits — you give all your employees a common goal to get behind. That creates alignment within departments (horizontally) and throughout your organization (vertically).

3) Clarifies and simplifies decision making

Decisions about your business can be some of the most difficult you’ll ever have to make. But with an organizational strategy in place, you can reduce the number of decisions you have to face and clarify which ones make the most sense based on your goals.

So, for example, if your organizational goal is to increase profits but your product has already saturated the market, you only have one or two choices (e.g., diversify).

4) Allows your business to adapt

If you are driving to work in the morning and you encounter a detour, do you turn around and go home? No. You follow the detour (or, if you know the area, you find a better way around the construction) until you arrive at your destination.

Your organizational strategy is like that destination (getting to work). If problems arise along the way, you don’t give up completely; you adapt in order to continue moving toward the ultimate goal.

Key features of an organizational strategy

1) Realistic

Your organizational strategy should, first and foremost, be realistic. If your annual profit is consistently $100,000, then setting the goal to make $1,000,000 in profit next year might be a bit unrealistic.

It’s great to have high standards, but maybe creating smaller goals to get you there incrementally (like $250,000 next year, $500,000 the year after that, and so on) is a better, more realistic decision.

2) Measurable

All organizational strategies should be measurable. Saying that you want to get better (a qualitative goal) is fine, but you need to come up with some way to measure how you’re getting better.

3) Specific

When setting your organizational strategy, make it as specific as possible. Instead of saying, “We want to be the best in the industry,” say, “We want to hold 51-percent market share amongst all our direct competitors.” That’s a specific, measurable goal you can work toward.

4) Limited

Your organizational strategy shouldn’t be open-ended. It needs a deadline. Most businesses give themselves three to five years (again, be specific) to reach their organizational goals. This deadline dictates what you do and how quickly you do it.

5) Coordinated

puzzle pieces

Your organizational strategy should be as coordinated as possible. That said, coordination means different things to different businesses.

The dictionary definition of coordination is:

Bringing the different elements of (a complex activity or organization) into a relationship that will ensure efficiency or harmony.

So, depending on the type and size of company you run, those different elements may be individuals, teams, departments, locations, and even other businesses.

Where OS is concerned, the coordination will most likely need to occur between the other large-scale levels of your company — corporate, business, and functional.

Bottom line: You don’t want the rollout of your OS to be haphazard or uncontrolled. Your goal should be to implement the strategy as smoothly and efficiently as possible.

6) Focused

All strategies — whether they apply to the organizational, corporate, business, or functional levels — need to be focused in their intention. That means everyone is working toward (and focused on) the same goal.

Though some employees, teams, or departments may be working on individual tasks or projects, those tasks should serve the purpose of achieving the overarching goals that you’ve set for your organization.

This makes sense if you consider your business like a team of horses. When hitched together, horses will contribute different amounts of energy, but they’re all pulling in the same direction.

If one or two horses decide to do something different than pull with the rest of the team, it becomes more difficult — if not impossible — to get anything done.

The same is true in your business regardless of whether you have individuals, teams, or departments working on implementing the OS. They must all be focused on the same goal.

7) Delegated

Once you’ve established and settled on a strategy, you’re going to need help putting it into practice. You can’t do it all yourself, so it’s essential to delegate and create a clear hierarchy of responsibilities.

Whether you’re delegating to individuals, teams, or departments, everyone needs to know what they’re responsible for. It’s also important to make sure everyone involved knows what everyone else is working on.

Without a clear hierarchy of responsibilities — or clear delegation — some work could be done twice or by those without the proper knowledge and skills to complete it to your business’s exacting standards.

Examples of organizational strategy

Examples of organizational strategy

1) Cost leadership

The cost leadership strategy involves leading your particular market in regard to the cost of the goods or services you provide. In other words, your goal is to have the best (i.e., the lowest) prices in your particular niche.

The cost leadership strategy makes your business more attractive to clients and customers, but it’s not without its concerns.

You can lower your prices all you want, but the product or service you offer must still create a profit. Without it, your business may find itself without enough money to keep the doors open and the business running.

Similarly, you can reduce the quality of your offerings in an attempt to cut costs, but that runs the risk of driving your target market away to some other business.

While this strategy isn’t useful for all businesses, it can be successful for those who have:

  • Access to necessary capital
  • Very efficient and cost-effective logistics
  • Low labor, materials, and facilities costs

The greatest risk in undertaking a cost leadership strategy is that other businesses will copy the methods you use to lower your prices and undercut your efforts.

Be sure you can achieve and maintain the lowest prices before you commit to this strategy or you could find yourself in an untenable situation.

2) Differentiation

The differentiation strategy involves two approaches that work together to drive your business forward.

Those approaches are:

  • Making your product or service different from those of your competitors
  • Making your product or service more attractive than those of your competitors

The way you choose to differentiate your business from others in your industry depends on both the nature of the company you run and the products or services it produces.

Typically, though, making your offering different can involve one or all of the following business or product characteristics:

  • Features
  • Functionality
  • Durability
  • Brand image
  • Value
  • Support

For businesses that choose this strategy, success often rides on research, development, innovation, the ability to maintain high quality, and an effective sales and marketing system.

This last variable is often the most influential because it helps the consumer understand the benefits that come with choosing one product or service over another.

Agility is also an essential component of the differentiation strategy because businesses that use it risk attacks from competitors that are hyper-focused in different market segments.

3) Focus

Focus organizational strategies identify and target niche markets that are smaller than a business’s regular market but can be extremely popular once the business has established a presence there.

Focus strategies require that a business understand the dynamics of each unique niche and the needs of the customers that occupy that space.

For example, a surfboard company may serve the surfing community as a whole but may also focus on targeting both the shortboard and the longboard niches. Each offering serves a different purpose and fills a specific need of the business’s potential customer base.

Once you’ve decided on a focus strategy, you may need to further refine your goals by adding a cost leadership or differentiation dimension into the mix.

The combination of the two variables means that your business will strive to have the best prices within a focused niche or to stand out from the rest (differentiate itself) within a focused niche.

If your business relies solely on the focus theory, it runs the risk of competing against the offerings of broad-market companies with better resources.

To carve out a place for your business, you need something extra to offer your potential customers. That’s where the cost leadership or differentiation variables become so important.

4) Growth

discussing organizational strategy charts

Growth strategy is an umbrella term for any activities that serve to increase some variable within your business.

For example, your business may choose to:

  • Increase sales of existing products
  • Increase the range of products and services you offer
  • Increase the size of the geographical area you serve
  • Buy out a competitor (a.k.a. acquisition)

All of those could serve as methods for stimulating growth and increasing a particular aspect of the business.

That said, growth strategies are typically — though, not always — costly. If you choose to adopt this strategy, take the time to examine and think through the financial and personal costs associated with reaching your goals (i.e., achieving growth).

When you dig down to the bedrock of your operation, you may discover that a growth strategy isn’t actually what your business needs right now and may be better served with another OS.

5) Rationalization

Rationalization is sometimes thought of as the opposite of growth, but that isn’t necessarily the case.

For example, as part of your rationalization strategy, you may decide to discontinue a product, lay off staff, shutter some locations, or simply streamline operations to focus on what your business does best.

While this may look a lot like negative growth or a decline of some kind, it can actually result in financial growth as all of your operations become more efficient.

Don’t set it and forget it

No OS is perfect the first time out of the gate, so don’t set it and forget it.

After you roll out the relevant parts, keep an eye on the results and change things if they’re not going well. Look for pieces of the strategy that aren’t performing as you envisioned and tweak them so that they do.

Or, after six months, eight months, or a year of implementing the OS, review the results and reevaluate the strategy itself to see if there’s any room for improvement.

This may take time and energy, but sometimes the slightest change to the original conditions can have a huge effect and set your business on the road to success.

The best way to create an organizational strategy

meeting using organizational strategy

One of the best ways to start creating an organizational strategy is to examine your current procedures. Scheduling, for example, is notoriously complicated. Preparing your business for the changes to come means streamlining the process so your team can better adapt once you set your organizational strategies.

Few things can help you in that regard the way scheduling software can. Apps like Sling provide everything you need — an easy-to-use interface, powerful communications features, time clock, labor analytics, and more — to reduce the time it takes to schedule your employees.

That means you’ll have more time to set goals and guide your business toward success.

For more free resources to help you manage your business better, organize and schedule your team, and track and calculate labor costs, visit today.

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This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for specific advice.

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