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Strategic Management and Corporate Finance · Strategic Analysis and Planning

Strategic Planning Process and Levels of Strategy

Updated 11 October 2026 · Fact-checked

Strategic planning is the process of deciding where an organisation wants to go and how it will get there. It runs through set stages: direction setting, analysis, strategy choice, implementation and review. Strategy works at three levels: corporate (which businesses), business (how to compete) and functional (how each department supports).

Understand Strategic Planning Process and Levels of Strategy

Strategic planning is the organised process of setting a long-term direction for an organisation, studying its environment and resources, choosing a course of action and deciding how to carry it out. It answers three questions: Where are we? Where do we want to be? How do we get there?

Think of a trip. You fix the destination, check the roads and your fuel, pick a route, start driving and keep checking the map. A company does the same with its vision, its market, its funds and its people.

The planning process is usually shown as stages. First you set the direction through vision, mission and objectives. Then you scan the external environment and assess internal strengths and weaknesses. Next you generate and evaluate alternatives and choose a strategy. Then you turn it into action through plans, budgets, structure and policies. Finally you monitor results and correct course. The exact number of stages differs between books, so learn the logic and write the stages in order.

Strategy is also made at three levels. Corporate level strategy is set by top management and the board. It decides the scope of the whole group: which businesses to be in, how to allocate funds among them, and whether to grow, stabilise, or retrench. Business level (SBU) strategy decides how one business competes in its market, for example through cost leadership or differentiation. Functional level strategy sets how marketing, finance, production, HR and other departments support the business strategy.

The levels are linked. Corporate strategy sets the frame, business strategy works inside it, and functional strategy delivers it. A mismatch, such as a low-cost business strategy with a premium-quality production policy, wastes resources.

Key rules to remember

Planning process sequence
Direction (vision, mission, objectives) → Environmental and internal analysis → Strategy formulation and choice → Implementation → Evaluation and control
Write in this order. Feedback from evaluation goes back to earlier stages, so planning is continuous.
Three levels of strategy
Corporate (what businesses?) → Business (how to compete?) → Functional (how to support?)
Use the guiding question to place any example at the right level.
Level and decision-maker
Corporate: board and top management | Business: SBU heads | Functional: department heads
Time horizon shortens and detail increases as you move down the levels.

How to solve Strategic Planning Process and Levels of Strategy questions

Most questions ask you to explain the process, distinguish the levels, or classify a case. Use this method.

  1. 1Read the verb: define, explain, distinguish, or identify the level in a case.
  2. 2Open with a one-line definition of strategic planning or the level asked.
  3. 3For process questions, list the stages in order with one or two lines on each.
  4. 4For level questions, cover decision-maker, scope, time horizon and nature of decisions for each level.
  5. 5For case questions, pick out the facts, such as entering a new industry, pricing against rivals or changing a production schedule, and match each to a level.
  6. 6Show the link between levels and between planning and review.
  7. 7Close with a short conclusion on why the planning matters for the company in the question.

Quickest way: Question-word shortcut for levels

When to use it: Use when a case asks you to name the level of a decision or when you have few minutes for a short note.

  1. Ask: does it change which businesses the group is in or how funds are split? That is corporate.
  2. Ask: does it decide how one business wins customers against rivals? That is business.
  3. Ask: does it concern how one department does its job? That is functional.
  4. For process notes, write the five stages as a one-line chain and add one line each.
  5. Add one practical example from an Indian company for full marks.

Common mistakes in Strategic Planning Process and Levels of Strategy

  • Mixing up corporate and business strategy

    Both sound like top-level decisions, and students treat a single-business firm as the same thing at both levels.

    Fix: Corporate asks which businesses to be in. Business asks how to compete in one of them.

  • Listing process stages in the wrong order

    Students memorise names without the logic.

    Fix: Remember that you cannot choose a strategy before you know direction and analysis, and you cannot review before you implement.

  • Treating planning as a one-time event

    Textbook diagrams show straight arrows.

    Fix: State that evaluation feeds back and plans are revised when the environment changes.

  • Calling functional strategy minor

    It looks like routine departmental work.

    Fix: Explain that functional strategies carry the business strategy into action and decide whether it succeeds.

  • Giving theory only in a case-based question

    Students recall notes instead of reading the facts.

    Fix: Quote the facts, name the level, then give the reason in the format of provision, analysis, conclusion.

Worked examples

Example 1

A diversified Indian group owns a cement business, a hotel chain and a software firm. The board decides to sell the hotel chain and invest the proceeds in expanding cement capacity. The cement head then decides to compete on low delivered cost. The cement plant's HR head introduces a skills programme for kiln operators. Identify the level of each decision.

Show the solution
  1. The board selling one business and shifting funds between businesses decides the scope of the group and resource allocation. This is corporate level strategy.
  2. The cement head choosing to compete on low delivered cost decides how one business will win in its market. This is business level strategy, a cost leadership approach.
  3. The HR skills programme for kiln operators is a departmental plan that supports cost-efficient production. This is functional level strategy.
  4. The three are linked: the corporate choice funds cement, the business strategy sets the cost aim, and the HR plan helps deliver it.

Answer: Selling the hotel chain and reinvesting is corporate; competing on low cost is business; the kiln operator skills programme is functional.

Example 2

Explain the stages of the strategic planning process.

Show the solution
  1. Define: strategic planning is the process of setting long-term direction, analysing the situation, choosing strategy and putting it into action.
  2. Stage 1, direction setting: the organisation states its vision, mission and objectives, which tell it where it is going.
  3. Stage 2, analysis: it scans the external environment for opportunities and threats and reviews internal resources for strengths and weaknesses.
  4. Stage 3, formulation and choice: it develops alternatives at corporate, business and functional levels, evaluates them against objectives and risk, and selects one.
  5. Stage 4, implementation: it converts strategy into plans, budgets, structure, policies and responsibilities.
  6. Stage 5, evaluation and control: it compares actual results with targets, finds the reasons for gaps and revises the plan.
  7. Conclude that the process is continuous, because feedback leads to changes in earlier stages.

Answer: The process runs from direction setting through analysis, formulation and choice, and implementation to evaluation and control, with feedback making it continuous.

Exam tips

  • Answer process questions in numbered stages with a short heading each; examiners check order and completeness.
  • For distinguish questions, use points such as decision-maker, scope, time horizon, nature and example, covering each level on every point.
  • In case questions, quote the fact before naming the level.
  • Add a brief Indian company illustration where it fits, without inventing figures.
  • Link this topic to vision and mission and to the strategic management process in the same answer when the question allows.

Practice questions from Strategic Analysis and Planning

Strategic Planning Process and Levels of Strategy in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Strategic Planning Process and Levels of Strategy: frequently asked questions

What is strategic planning in strategic management?

It is the process of fixing long-term direction, analysing the environment and internal strengths, choosing a strategy and planning its execution. It guides how an organisation uses its resources to reach its objectives.

What are the three levels of strategy?

They are corporate, business and functional. Corporate strategy decides the businesses to be in, business strategy decides how to compete in each, and functional strategy decides how departments support the business.

How many stages are there in the strategic planning process?

Books group the stages differently, so there is no single fixed number. Learn the logic of direction, analysis, choice, implementation and evaluation, and write the stages in that order.

Is strategic planning the same as strategic management?

No. Planning is the part that decides direction and strategy. Strategic management is wider and also covers implementation, evaluation and control.