Levels of Strategic Decisions

The main hierarchical levels of strategy planning are the below 3:

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

The company gets its direction from the managers at the corporate level. They act as captains guiding the organization and helping it stand up to the challenges of the dynamic business environment. Managers at the business level are responsible for giving shape to the corporate managers’ vision. At the third level, that is, the functional level, are the managers who transform the vision into reality . The contribution made by the managers at all three levels is important.

Corporate-level strategic are aimed at optimum utilization of the company’s competencies in the long term. Decisions made by the managers at corporate level keep in mind the interests of the stakeholders and the society. These strategies ’ mainly concern the choice of operational areas for the company’s business. At this level. strategies are designed with the objectives of the organization in mind. These strategies directly influence the way harmony is maintained in business and the way the business is managed on the whole will be integrated and managed. It also impacts the way resources are managed and shared and also the manner in which financial resources are invested m the various units.

Business-level strategies involve decisions about the competitive advantage of a single business unit. At this level, the managers form functional objectives and individual strategies for the business divisions on the basis of the general statements of corporate strategic planners. The business-level managers determine the basis of the company’s competitive advantage in a particular product or market area. Their goal is to select the most profitable segment and enter it. They also aim to grow in the segment that has the highest potential for growth. In short, this strategy is concerned with the cost-leadership, differentiation and focus strategies to ensure an edge over competition.

Functional-level strategies consist of short-term strategies with fixed annual objectives in research and development; finance and accounting; marketing; and human resource. Functional-level managers are concerned with problems related to the efficiency and effectiveness of production, success of particular products and services in increasing their market share and quality of customer service. The functional objectives are operational and can be quantified. Depending on the requirements and functioning of the business, the functional objectives can be changed or modified. Risk involved in functional strategies is not very high as the cost of failure is small.

PEST Analysis - Online MBA Classes

PEST analysis includes:

• Political Factors
• Economic Factors
• Social Factors
• Technological Factors

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It describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. In some cases two more additional factors are included ie. Environmental & Legal factors. Then it becomes PESTLE Analysis.

What is the impact of each factors?

Political Factors

The changing political rules or policies will have a big impact on the profitability and sustainability of the business. For example, a strict health and safety policy would require a restaurant chain to invest more in systems to ensure hygiene.

Here are some other points to ponder:

- What is the currently ruling parties ideology?
– What is the government’s approach to trade and labour laws?
- What is the government’s approach towards development?
– What is the level of political stability?
- Change in foreign trade policies.
– What is the level of corruption?
– Is the government socialist-leaning, or does it favour a completely free market economy?
– Will the government’s policies influence laws, regulation, or taxes?

Economic factors

The major economic factors include the rate of inflation, rate of economic growth, economic stability, and employment policy. These factors helps to determine the changes required in the business strategies and policies.

For example, the rate of inflation would be a major factor in fixing employee wages, and the higher the inflation, the higher the wages and the higher the business expenditure.
Social factors

Social Factors 

Social factors include the social, religious, and culture mores of the society where a business is operating and serving its customers.


For example, manufacturers of premium products will not expect a high growth in sales in rural areas.

Technological Factors

A study of the technological factors in an external environment would focus on the leverage the use of technology would give a business.

Among questions to ponder are these:

- Is there IT resources available
– What level of automation is available?
– What is the scope for research and innovation?
– Is there facility for online business?

For example, a garment retailer will be able to reduce costs by adopting online sales and reducing dependence on brick-and-mortar showrooms.

The PEST factors may affect companies differently. For example, a home appliance company would be more affected by social factors such as lifestyle than a defence equipment manufacturer.



Expanding the analysis to PESTLE or PESTEL adds:

Legal Factors

It include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

Environmental Factors 

It include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.