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There are several levels of planning , including:

Strategic planning : This involves setting long-term goals and objectives for an organization , and determining the best course of action to achieve them.
Tactical planning : This involves developing specific plans and actions to implement the strategic goals and objectives.
Operational planning : This involves the day-to-day management and execution of plans and actions to achieve the tactical goals.
Contingency planning : This involves developing plans and procedures to respond to unexpected events or emergencies that could disrupt operations.
Emergency planning : This involves developing plans and procedures to respond to an imminent threat or crisis that could have a significant impact on an organization.
1 Levels of planning in relation to organizational structure
2 Levels of planning in relation to time horizon
3 Example structure of plans in a company
4 Strategic, tactical, operational planning in detail
5 Contingency and emergency planning in detail
6 References

Levels of planning in relation to organizational structure

In a corporate structure, the levels of planning can be related to different functional areas and levels of management . These can include:

Corporate-level planning : This involves setting overall strategic goals and objectives for the entire organization, and determining the best course of action to achieve them.
Business-unit level planning : This involves developing specific plans and actions for individual business units or divisions within the organization to implement the corporate-level strategic goals.
Functional-level planning : This involves developing plans and actions for individual functional areas within the organization, such as finance, marketing , or operations, to support the business-unit level goals.
Operational-level planning : This involves the day-to-day management and execution of plans and actions to achieve the functional and business-unit level goals.
Contingency and emergency planning : This involves developing plans and procedures to respond to unexpected events or emergencies that could disrupt operations, both at the corporate and functional levels.

Levels of planning in relation to time horizon

The levels of planning can also be related to different time horizons, such as:

Long-term planning : This involves setting goals and objectives for a time horizon of several years or more, and determining the best course of action to achieve them.
Medium-term planning : This involves developing specific plans and actions for a time horizon of one to three years to implement the long-term goals.
Short-term planning : This involves developing specific plans and actions for a time horizon of one year or less to implement the medium-term goals.
Operational planning : This involves the day-to-day management and execution of plans and actions to achieve the short-term goals.
Contingency and emergency planning : This involves developing plans and procedures to respond to unexpected events or emergencies that could disrupt operations, regardless of the time horizon.

It's worth noting that different organizations might have different time horizons for their planning, and the specific labels and time frames may vary.

Example structure of plans in a company

The structure of plans in a company can vary depending on the organization's size, industry , and specific needs . However, a typical structure of plans in a company might include the following:

Corporate-level plans : These plans set the overall strategic direction and goals for the entire organization, and may include a corporate mission statement, vision, values, and long-term strategic objectives .
Business-unit level plans : These plans provide specific strategic direction and goals for individual business units or divisions within the organization, such as product lines, customer segments, or geographic regions.
Functional-level plans : These plans provide specific direction and goals for individual functional areas within the organization, such as finance, marketing, or operations.
Operational plans : These plans describe the day-to-day activities and processes that will be used to achieve the strategic, business-unit, and functional-level goals.
Contingency and emergency plans : These plans provide procedures and protocols for dealing with unexpected events or emergencies that may disrupt the normal operations of the organization.
Project plans : These plans provide specific steps and actions to achieve specific goals within a specific time frame, usually for a one-time project or a specific initiative.

All of these plans should be aligned, and work together to achieve the organization's goals and objectives. The structure of plans can also be supported by policies, procedures, and guidelines that provide specific instructions and guidelines for employees to follow.

Strategic, tactical, operational planning in detail

Strategic, tactical, and operational planning are three different levels of planning that organizations use to achieve their goals and objectives.

Strategic planning : Strategic planning is the process of setting long-term goals and objectives for an organization, and determining the best course of action to achieve them. This level of planning typically involves high-level decision-making and is focused on the overall direction and vision of the organization. It is often done by top management and stakeholders , and it can take into account both internal and external factors that may impact the organization's success.
Tactical planning : Tactical planning is the process of developing specific plans and actions to implement the strategic goals and objectives. This level of planning is typically focused on a time horizon of one to three years and involves a more detailed analysis of the resources and capabilities needed to achieve the strategic goals. It is often done by middle management and is focused on the specific steps and actions that need to be taken to achieve the strategic goals.
Operational planning : Operational planning is the process of the day-to-day management and execution of plans and actions to achieve the tactical goals. This level of planning is focused on the short-term and is often done by front-line managers and employees. It involves the management of resources, such as people, equipment, and materials, and the coordination of activities to achieve the tactical goals. This level of planning is often called "business as usual" and is focused on the day-to-day operations of the organization.

It's worth noting that the levels of planning are not always distinct and separate, and there's often overlap and interaction between them. The main goal is to have a clear and aligned set of plans and actions that will help the organization achieve its goals and objectives.

Contingency and emergency planning in detail

Contingency and emergency planning are related but distinct types of planning that organizations use to prepare for and respond to unexpected events or emergencies.

Contingency planning : Contingency planning is the process of developing plans and procedures to respond to unexpected events or disruptions that could impact the normal operations of an organization. This type of planning is focused on identifying potential risks and vulnerabilities, and developing plans to mitigate or manage them. The goal of contingency planning is to minimize the impact of an unexpected event on the organization and its stakeholders, and to ensure a quick and efficient recovery.
Emergency planning : Emergency planning is the process of developing plans and procedures to respond to an imminent threat or crisis that could have a significant impact on an organization. Emergency planning is focused on ensuring the safety and well-being of employees, customers, and other stakeholders, and on minimizing damage to the organization's assets and reputation. The goal of emergency planning is to minimize the impact of an emergency on the organization and its stakeholders, and to ensure a quick and efficient recovery.

Both contingency and emergency planning involve identifying potential risks and hazards, developing plans and procedures to respond to them, and conducting training and exercises to test and improve the plans. It also involves involving the right stakeholders, such as employees, customers, and other key partners, in the planning process .

Dzurik, A.A., Theriaque, D.A., (2003). Water Resources Planning , Rowman & Littlefield.
Grenning, J. (2002). Planning poker or how to avoid analysis paralysis while release planning . Hawthorn Woods: Renaissance Software Consulting , 3, 22-23.
Pandey, A.K., (1990). Local Level Planning and Rural Development , Mittal Publications.
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What is Business Strategy? Definition, Importance, Levels, and Examples

Business strategy is the battle plan for a better future. - Patrick Dixon

Scaling up a business without a clear strategy is like captaining a ship without a rudder. The success of any business depends on the strategy that one follows. The business strategy establishes the needs of the business. Business strategy plays an important role for businesses of all sizes and entrepreneurs. It sets the direction of the organization and helps to create goals to aim towards.

What is Business Strategy?

Business strategy is defined as the course of action or set of decisions that support entrepreneurs in achieving certain business goals. It is a master plan that outlines the direction the organization intends to make, the actions it will undertake, and the resources it will give to attain certain competitive benefits and drive sustainable growth. It involves a combination of decisions, actions, and resource allocation that positions an organization in its industry or market.

Why is a Business Strategy important?

Business Strategy plays a crucial role in guiding a firm’s growth, competitiveness, and success. It offers a roadmap for decision-making, resource providing, and adaptation to transforming circumstances, ensuring that the firm stays agile, focused, and well-prepared to achieve its goals successfully. It is carefully planned and flexibly designed with the purpose of:

Achieving effectiveness
Perceiving and utilizing opportunities
Mobilizing resources
Securing an advantageous position
Meeting the challenges and threats
Directing efforts, behavior and
Gaining command over the situation

What is the Difference between Business Strategy & Business Plan & Business Model

Business Strategy, Business Plan, and Business Model are three distinct elements that offer various purposes in the world of business. They are vital for the success and sustainability of a business, and they are interconnected, with slight changes which are often confused by several aspiring business strategists , especially during their interviews. Here's a breakdown of the important differences between these:

Levels of Business Strategy

Effective strategic management consists of coordination and alignment across various levels of strategy to achieve the organization's long-term goals and competitive advantage. Business strategy can be categorized into different levels depending on its scope, focus, and the organizational hierarchy at which it functions.

The three primary levels of business strategy are:

Corporate level strategy Corporate level strategy is a long-range, action-oriented, integrated, and comprehensive plan, which is formulated by the top management of a company. It is very helpful to ascertain business lines, expansion, growth, takeovers and mergers, diversification , integration, and the latest fields for investment.
Business level strategy The strategies that relate to a specific business are known as business-level strategies. It is developed by the general managers, who convert mission and vision into concrete, clear, and result-driven strategies. It acts like a blueprint for the total business.
Functional level strategy Developed by the first-line managers or supervisors, the functional level strategy involves decision-making at the operational level concerning functional areas such as marketing, production, human resources, research and development, finance, and so on.

How to Implement a Successful Business Strategy?

A business strategist feels that it is tough to ideate any plan in a few hours. It requires a step-by-step procedure to be associated with completing a SWOT analysis . Here are the top steps that can be considered to build the best business strategies and execute them with precision:

Understand the targets One of the clearest challenges for growth is poor targeting. Clear target markets offer an organization the ability to create an integrated sales and marketing approach, where marketing enables sales productivity. Sales and marketing business plan gets executed more efficiently if the targets are fixed in a proper way.
Outline the tactics A successful business strategy is made up of several various tactics, including both online and offline options. The goals, target audience, and industry factor into this decision. For instance, if the target audience is young, focusing on social media is more beneficial as this is primarily where this group consumes content. If the industry is product-based (for instance, jewelry designing), then using a more visual platform would better showcase the products. To be most effective, one must choose which methods are right for the business. Once the selection of tactics is done, list them in the plan and determine how they’ll help to reach the goals.
Think long term In the scope of constant change, planning the horizons is usually shorter than it can be. However, only thinking quarter to quarter is a trap that may rob organizations of their ability to see around the bend. Best-in-class organizations create processes designed for a series of financial and non-financial metrics to treat strategy as an annual cycle rather than a one-time, static event.
Create a timeline Time is precious mainly when it is about the business. Based on the goals and objectives one can set for the business. Creating a timeline that will define what tasks can be completed and when they can be completed. It is highly advisable to allocate extra time for unexpected events that may delay some of the goals.
Focus on growth A thriving organization is a growing organization. It is only through growth that the firms can afford to invest in aspects such as technology, the best staff, and the latest tools. The business strategy should identify the segments where an organization will grow and in what proportion.
Have a budget plan Creating a budget for the business strategy can inform the efforts by determining what can be done and cannot be. Choosing the most cost-effective options for the business ensures the success of the overall business strategy. This doesn’t have to limit the options. Paid advertising on social media and search engines gives access to manage budgets well.
Make fact-based decisions Several executives often complain about a lack of fruitful data, but they consistently find information that is useful in the formation of business strategy. The business has a set of values that guides it. Making fact-based decisions will outline the values and ensure that the people who interact with the business are aware of them. It will also ease the message that reflects on the brand honestly so it can actively demonstrate the values outlined in the mission statement through the interactions with clients.
Invest in pre-work Always allocate time to do proper pre-work so that one can be up to date. It is better to conduct proper end-to-end research and prepare relevant information in advance of the business strategy meetings. The goals and needs will change over time. Ideally, it is important to revisit the business plan every annum to make adjustments as needed. Follow industry news and trends that can add to the existing strategy.
Execute well and measure results Measuring the effectiveness of the business strategy will inform the current plan and future efforts. Always be sure to track and measure the business so these measurements are effective. Set up a corporate calendar to enhance the productive meetings, and also to form a performance management cycle. One should write the marketing plan with this growth in mind so they can measure it. The execution of strategic planning needs discipline, and it must be taken care of by the senior executives to promote processes that keep the team focused.

Examples of Business Strategy

Hubspot developed and executed a perfect business strategy where it created a market that didn’t even exist – inbound marketing. It created an online resource guide explaining the limitations of interruption marketing and informing about the advantages of inbound marketing. The organizations even offered free courses to help the target audience understand its offering better.

Apple Inc. differentiated its Smartphone operating system iOS by making it simple as compared to Android. This differentiated it and built its followership. The organization has been following a similar business strategy for its other products as well.

Wrapping up

Establishing the business strategy keeps the business goals organized and focused, saving valuable time and money. With the increase in the competition, the demand for business strategy is becoming apparent and there is a tremendous increase in the types of business strategies used by the businesses.

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Levels of Business Planning

Planning is vital to the continued success of small businesses. Business planning is performed at various levels in an organization, often in a hierarchical fashion, with each level drafting plans to achieve the goals set in the level directly above. Planning at various stages involves nearly everyone in an organization, from the business owner who crafts a strategic vision to front-line employees who plan their daily tasks to meet individual performance goals.

Strategic Planning

The owner of a small business, or the company's senior executives, develop strategic plans. This level of planning crafts the overall direction of the company over the long term. Company officials create vision and mission statements at this level, setting wide-reaching goals. Decisions made at this level concerning organizational structure, company values and business philosophies can influence company culture directly.

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At this stage, managers define what business the company is in, exactly what the company does and what makes the company distinct from its competitors. These goals should be the basis for creating all other organizational plans.

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"To be the No. 1 producer of organic pasta" is an example of a strategic level vision statement for a small business.

Company-Wide Goals

Company-wide goals are a bit more pragmatic than an overarching strategic vision; planning at this stage is concerned with making the grand vision of top executives a reality. Managers set performance goals for all departments, including financial goals, production-oriented goals such as cost control and goals for market share growth and new market penetration.

Plans made at this stage develop the core competencies needed to achieve the company's mission and vision. Plans to develop and grow the effectiveness of operations over time are paired with plans to grow the company's reputation in the marketplace and in its industry.

To realize the pasta company's vision, executives may set goals of achieving 15 percent market share growth per year, cutting production costs by 5 percent per year and aggressively growing a national network of local suppliers.

Departmental Goals

Planning within each department is highly practical, and is mainly concerned with bringing the objectives set at the company level to realization. Middle and front-line managers, who set performance goals for groups and individual employees, perform department planning activities. Innovation in business process design is encouraged at this level, and strict time lines are set for meeting company objectives.

To cut production costs by 5 percent per year, as mentioned in the pasta company example, production managers may plan to implement new ongoing best-practices training programs and alter incentive structures to favor cost-cutting activities, such as material conservation.

Operational Objectives

The lowest level of business planning has to do with setting goals and creating implementation plans for small groups and individual employees. At this level, employees put plans into place to achieve their contribution to the department-specific goals. Operational objectives are concerned with such things as efficiency, reduction of mistakes and reorganization of personal work processes.

To implement the training program in the pasta company example, managers could create specific training curricula, set aside time for training and communicate training attendance requirements to all employees.

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David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.

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Home » Management Concepts » Levels and Stages of Planning

Levels and Stages of Planning

Levels of planning.

In management theory, it is usual to consider that there are three basic levels of planning , though in practice there may be more than three levels of management and to an extent, there will be some overlapping of planning operations. The three levels of planning are discussed below:

Top level planning: also known as overall or strategic planning , top level planning is done by the top management, i.e., board of directors or governing body. It encompasses the long-range objectives and policies or organisation and is concerned with corporate results rather than sectional objectives. Top level planning is entirely long-range and inextricably linked with long-term objectives. It might be called the ‘what’ of planning.
Second level planning: also known as tactical planning, it is done by middle level managers or departmental heads. It is concerned with ‘how’ of planning. It deals with development of resources to the best advantage. It is concerned mainly, not exclusively, with long-range planning, but its nature is such that the time spans are usually shorter than those of strategic planning. This is because its attentions are usually devoted to the step-by-step attainment of the organisation’s main objective. It is, in fact, oriented to functions and departments rather than to the organisation as a whole.
Third level planning: also known as operational or activity planning, it is the concern of departmental managers and supervisors. It is confined to putting into effect the tactical or departmental plans. It is usually for a short-term and may be revised quite often to be in tune with the tactical planning.

Steps/Stages of Planning

Planning is a process consisting many steps, which may differ from one plan to another. But following are the common steps:

Setting organisational objectives: planning is total based on the objectives, which an organisation wants to achieve by way of planning. In other words first of all objectives will be fixed and then we will make plan regarding how to gets success in achievement of such predetermine objective. While making plan and setting objectives management should make analysis of internal resources available with the business and arrangement of external resources, external environments and corrective measures to face with the environment.
List of alternatives to achieve the objective: there may be so many ways available with the business to achieve the objective. So business should prepare a list of such ways by considering the merits and demerits of each for which ever is better should be adopted. E.g. target of increasing profitability may be achieved by increasing sale, decreasing cost, introducing new product of better technology, rise in process etc. which of these alternatives is beneficial for business be adopted. Considering the merits and demerits of each alternative is also termed as development of premises of each alternative.
Choose the best alternative: after considering the list of alternatives and merits of each management has to decide which of these alternatives will be the best in consideration with the human and nonhuman resources available with the business.
Formulation of supporting plans: supporting plans are those plans, which provides support to the main plan. E.g. if the business wants to produce according to objective there may be many supporting plans like planning of purchase of raw material, planning of recruitment and training of the man power etc.
Put the plans into action: after that plan formulated is ready to be put into action and so function should be started according to the plan all supporting plans should effort to help the main plan in reaching the objective and so in this all process is done in any effective manner we will get desired results of the plan.
Follow up: once the plan is put into action it monitoring/supervision is equally important. In the main time management should see whether we are going towards achievement of objective or not. There may be some changes required before reaching the objective. E.g. a company is to sell 1200 refrigerators per year than directors should see that at least 100 units per month on average basis should be sold to achieve the target.

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Four Levels Business: Strategies for Entrepreneurial Success

Understanding the Four Levels Business framework is essential for entrepreneurs and small business owners seeking to elevate their ventures. This comprehensive approach allows businesses to evolve from basic commodities to more sophisticated, idea-driven enterprises. In this blog post, we will delve into each level of the Four Levels Business model, discussing examples and strategies for success.

We’ll explore Level 1 – Commodities Business and its challenges, followed by Level 2 – Conversion Businesses with insights on overcoming price competition. As we move further up the hierarchy, we will examine Level 3 – Service-Based Businesses along with an in-depth look at ODM systems’ benefits within such enterprises.

Finally, our analysis culminates in examining Level 4 – Idea-Based Businesses as well as learning valuable lessons from McDonald’s unique four-level business model implementation. Comprehending and utilizing these ideas strategically can open up fresh avenues of growth and long-term success.

Examples of commodity-based businesses, challenges faced by companies operating at this level, examples of conversion-based businesses, strategies for overcoming price competition, examples of service-based industries, benefits and challenges associated with running a service-oriented enterprise, four levels of business, level 1: customer service, level 2: marketing and sales, level 3: systems and processes, how the four levels of business work together, key components and principles behind odm system, how adopting odm strategies could benefit your business, example idea-driven ventures (online courses teaching specific skills/knowledge), how to create and market a successful idea-based business, overview of how mcdonald’s operates at each level, lessons other businesses can learn from this model, what are the 4 levels of business, what are the levels of innovation in business, what is an example of an organizational level, what are the levels of organization in management.

Level 1 – Commodities Business

The first level of business is the commodities sector, where businesses sell natural resources to make money. This level often involves a race to the bottom in terms of pricing and profitability due to intense competition. Entrepreneurs must comprehend the difficulties they face and devise tactics to surpass them in order to succeed at this level.

Commodity-based businesses face several challenges that can limit their growth potential:

Volatile prices: The value of commodities like oil or gold can fluctuate dramatically based on factors such as supply and demand or geopolitical events. This volatility makes it difficult for these companies to predict revenues and manage expenses effectively.
Fierce competition: With numerous players vying for market share, commodity-based businesses must constantly strive to reduce costs while maintaining quality standards in order to remain competitive.
Regulatory constraints: Governments around the world impose strict regulations on industries like mining or forestry in an effort to protect natural resources. These rules can significantly impact operations, forcing companies at this level to adapt quickly to changing environments.
Limited differentiation: Since commodities are essentially undifferentiated products, it can be challenging for businesses operating at this level to differentiate themselves from competitors and command higher prices.

Despite these challenges, entrepreneurs who understand the dynamics of commodity markets can still find success by adopting innovative strategies that set them apart from their rivals. In doing so, they position themselves for growth in a highly competitive landscape.

The commodity-based business model requires a strong understanding of the market and careful planning to ensure success. Moving on, Level 2 – Conversion Business is an alternative option that offers more control over pricing and product design.

Level 2 – Conversion Business

The second level of business revolves around converting raw materials into finished goods or basic materials for other products. Although more profitable than commodities, these businesses still face limitations as they compete primarily on price.

Steel manufacturing: Companies that convert iron ore and other metals into steel products used in construction, automotive, and various industries.
Textile production : Businesses that transform fibers like cotton or synthetic materials into fabrics for clothing, upholstery, and industrial applications.

To succeed at the conversion level of business, entrepreneurs must find ways to differentiate their offerings from competitors while maintaining cost efficiency. Some strategies include:

Innovation: Developing new processes or technologies can lead to better-quality products with lower production costs. For example, companies like Tesla have revolutionized battery technology by creating energy-efficient batteries with longer lifespans compared to traditional options (source). This innovation allows them to offer competitive pricing without sacrificing quality.
Niche specialization: Focusing on a specific market segment can help your company stand out among competitors. By catering exclusively to certain customers’ needs (e.g., environmentally-friendly textiles), you can create a unique selling proposition that justifies higher prices.
Value-added services: Offering additional services, such as custom design or installation support, can enhance your product’s perceived value and justify premium pricing. For example, many steel manufacturers provide value-added processing , like cutting or coating the material to meet customers’ specific requirements.

In summary, conversion businesses must focus on innovation, niche specialization, and value-added services to overcome price competition while maximizing profitability. As a business leader, it’s important to prioritize customer service and satisfaction at all levels of your business, from level 1 to level 3.

Conversion-based businesses can be extremely profitable, but it’s important to have strategies in place for overcoming price competition. Service-oriented enterprises offer a variety of benefits and challenges that require careful consideration when running such an enterprise.

Level 3 – Service-Based Business

At the third level are service-based businesses that provide support systems to individuals, organizations or governments. These enterprises can generate higher profits compared to levels one and two because they offer specialized expertise and tailored solutions.

Consulting firms: Management consulting companies like McKinsey & Company or Boston Consulting Group help clients improve their business performance by offering strategic advice on areas such as operations, finance, and marketing.
Marketing agencies: Advertising agencies like Ogilvy & Mather create targeted campaigns for brands looking to increase their market share and build customer loyalty through effective communication strategies.

The advantage of service-based businesses is their capacity for higher profit margins due to the extra value provided by such services. Clients may be willing to pay extra for tailored solutions that address their individual needs, as opposed to generic items at more economical prices. Additionally, since most services don’t require significant upfront investments in physical assets (such as manufacturing plants), entrepreneurs can typically launch new ventures with relatively low capital requirements.

However, there are also difficulties connected with managing a service-based enterprise. One major hurdle is building trust among prospective clients who may be hesitant about outsourcing critical functions without tangible proof of your capabilities. To overcome this obstacle, it’s essential for businesses at this level to develop strong reputations by consistently delivering high-quality results and maintaining excellent customer relationships. Staying abreast of sector shifts and investing in ongoing training are also important for businesses to be able to continually adjust their offerings according to changing market requirements.

Overall, Level 3 – Service-Based Business is an excellent way to generate revenue and increase profits. By utilizing the ODM system in service-based businesses, entrepreneurs can gain a competitive edge over their competitors by optimizing operational efficiency and maximizing customer satisfaction.

As a business leader, it’s important to understand the different levels of business and how they relate to your success. In this article, we’ll explore the four levels of business and what they mean for your company.

At the first level of business, customer service is key. This is where you establish a relationship with your customers and build trust. Providing excellent customer service can lead to repeat business and positive word-of-mouth marketing.

This is where you attract new customers and convince them to buy your products or services. Effective marketing strategies can help you stand out from the competition and increase your customer base.

Level 3 is where you focus on creating systems and processes that streamline your business operations. This can include automating tasks, delegating responsibilities, and implementing technology to improve efficiency. By doing so, you can free up time to focus on growing your business.

Level 4: Strategic Planning

The final level of business is strategic planning. This is where you set long-term goals and develop a plan to achieve them. By having a clear vision for the future of your business, you can make informed decisions and stay ahead of the competition.

While each level of business is important on its own, they also work together to create a successful company. For example, providing excellent customer service can lead to positive reviews and word-of-mouth marketing, which can attract new customers. Effective marketing and sales strategies can then convince those customers to buy your products or services. By creating efficient systems and processes, you can handle the increased demand and free up time to focus on strategic planning.

Understanding the four levels of business is essential for any business leader. By focusing on customer service, marketing and sales, systems and processes, and strategic planning, you can create a successful and sustainable company.

ODM System in Service-Based Businesses

In the world of service-based businesses, adopting effective marketing strategies is crucial for success. An effective way to maximize income for service-based businesses is the Omnipresence Direct Marketing (ODM) system, which has seen great success in many entrepreneurs. This framework helps clients grow their income exponentially through strategic marketing approaches.

Omnipresence: The idea behind omnipresence is to make your brand visible across multiple platforms, both online and offline. By consistently showing up where your target audience spends time, you increase brand awareness and trust.
Direct Marketing: Unlike traditional advertising methods, direct marketing focuses on targeting specific customers with personalized messages designed to elicit a response or action. This can include email campaigns, social media ads, or even direct mail pieces.
Data-Driven Decision Making: Successful implementation of ODM relies heavily on data analysis to identify trends and patterns in customer behavior. By leveraging this information, businesses can make informed decisions about which channels are most effective for reaching their target audience.

The benefits of implementing an ODM strategy within your service-based business are numerous:

Increase Brand Visibility: An omnipresent presence ensures that potential customers will encounter your brand more frequently – increasing the likelihood they’ll remember it when making purchasing decisions.
Better Customer Targeting: A well-crafted advertising effort can help to pinpoint a select audience who are probably more likely to be interested in what you’re selling. This leads to higher conversion rates and ultimately, more sales.
Improved ROI: By focusing on data-driven decision making, businesses can allocate their marketing budget more effectively – ensuring they’re investing in channels that yield the highest return on investment (ROI).

Incorporating ODM strategies into your service-based business can lead to significant growth and success. By understanding the key components of this system and leveraging its benefits, you’ll be well-equipped to compete in today’s ever-evolving marketplace.

ODM systems provide a great opportunity for service-based businesses to increase efficiency and streamline operations. By utilizing an idea-driven business model, entrepreneurs can create unique products or services that meet customer needs in innovative ways.

Key Takeaway:

This article explores the four levels of business, including customer service, marketing and sales, systems and processes, and strategic planning. Understanding these levels is essential for any business leader to create a successful company. Additionally, adopting effective marketing strategies such as Omnipresence Direct Marketing (ODM) can lead to significant growth in service-based businesses by increasing brand visibility, better customer targeting and improved ROI through data-driven decision making.

Level 4 – Idea-Based Business

The fourth and highest level of business involves selling ideas or intellectual property rather than tangible goods or services. This model allows entrepreneurs greater flexibility in setting prices based on perceived value while also enabling them access to global markets via online platforms such as YouTube videos or e-learning courses.

Digital marketing: Entrepreneurs can create and sell online courses that teach digital marketing strategies, such as search engine optimization ( SEO ), social media management, and content creation.
Coding: With the increasing demand for skilled programmers, offering coding lessons through an e-learning platform is a lucrative idea-based business opportunity.
Fitness coaching: Personal trainers can develop workout routines and nutrition plans tailored to clients’ needs, then offer these programs through online video tutorials or live streaming sessions.
Create valuable content: Your course material should be informative, engaging, and original. Invest time in researching your topic thoroughly before developing the curriculum.
Promote your expertise: To establish credibility with potential customers, showcase your qualifications by sharing testimonials from satisfied clients or highlighting relevant professional experience on your website’s bio section.

As a business leader, it’s important to understand the different levels of business. Level 1 involves selling physical goods, while level 2 involves providing services. Level 3 is all about customer service, and level 4 is the highest level, which involves selling ideas or intellectual property. By understanding these levels, you can better position your business for success.

With the emergence of idea-based enterprises, entrepreneurs now have an opportunity to capitalize on their expertise and abilities. By studying McDonald’s four-level business model, we can learn how the fast food giant has achieved success in its operations at each level.

McDonald’s Four-Level Business Model

McDonald’s, a globally renowned fast-food enterprise, exemplifies an organization that has implemented all four tiers of business competently. This integrated approach has allowed them to achieve massive growth by leveraging their resources effectively. In this section, we will explore how McDonald’s operates at each level and discuss lessons other businesses can learn from this model.

Commodities: McDonald’s sources raw materials like potatoes for fries and beef for burgers from suppliers worldwide. By purchasing in bulk, they can negotiate better prices and ensure consistent quality across their restaurants.
Conversion: The company converts these raw materials into finished products through its extensive supply chain management system. They maintain strict standards to guarantee food safety and consistency throughout the process.
Service-Based: At its core, McDonald’s is a service-based business providing quick meals to customers globally. Their focus on customer satisfaction includes drive-thru services, efficient order processing systems, and continuous innovation in menu offerings and customer service.
Idea-Based: The brand itself represents an idea – affordable fast food with consistent taste regardless of location or country. They also invest heavily in marketing campaigns that promote their values such as convenience and affordability.
Integration: McDonald’s success lies in its ability to integrate all four levels of business effectively. Business leaders should consider how they can leverage each level for maximum growth and profitability.
Consistency: Maintaining consistent quality across products and services is crucial for building a strong brand reputation. This requires strict standards, processes, and continuous improvement efforts.
Innovation: Staying ahead of competitors requires constant innovation in product offerings, service delivery methods, and marketing strategies. Embrace change as an opportunity rather than a threat.

Taking inspiration from McDonald’s four-level business model can help businesses identify opportunities for growth by leveraging their resources more effectively while maintaining consistency and embracing innovation.

McDonald’s utilizes all four levels of business, including sourcing raw materials, converting them into finished products, providing quick meals to customers globally and representing an idea. The company’s success lies in integrating these levels effectively while maintaining consistency and embracing innovation. Other businesses can learn from this model by leveraging their resources more effectively for maximum growth and profitability.

FAQs in Relation to Four Levels Business

The four levels of business are: Level 1 – Commodities Business, which involves trading raw materials; Level 2 – Conversion Business, where companies transform commodities into finished products; Level 3 – Service-Based Business, focusing on providing services to clients; and Level 4 – Idea-Based Business, centered around creating and selling intellectual property or unique concepts.

Innovation in businesses can be categorized into four main types: Incremental Innovation (small improvements to existing products/services), Disruptive Innovation (introducing new offerings that displace established market leaders), Radical Innovation (creating entirely new markets with groundbreaking solutions), and Architectural Innovation (reconfiguring existing technologies for novel applications).

An example of an organizational level is the functional level within a company. This refers to specific departments or teams responsible for carrying out specialized tasks such as marketing, finance, human resources, or operations. Each functional area contributes towards achieving overall corporate objectives.

The three primary levels of organization in management include top-level management (executives who set strategic goals and make key decisions), middle-level management (managers overseeing multiple departments/teams while implementing strategies from top-level managers) and lower-level management/supervisory positions (responsible for day-to-day operations). These tiers work together to ensure smooth functioning across all aspects within a company.

In summary, it is essential for business owners to comprehend the four tiers of commerce so as to recognize their present market standing and devise a way to expand their venture. Each level presents unique challenges that require different strategies to overcome. From commodity-based businesses facing price volatility to idea-driven ventures requiring creative marketing, there are various ways to succeed at each level.

At Leads & Sales, we specialize in helping businesses at all levels reach their full potential through customized digital marketing solutions. Let us help you maximize your success and reach your desired outcomes with our tailored digital marketing solutions. Reach out now to discover how our services can help you reach your objectives!

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4 Types of Planning in Management

Table of Contents

What are the 4 Types of Planning?

Planning is an essential function of business. Effective planning is crucial for every business to achieve the desired goals effectively. The following are the four key types of planning in management . Let’s explore them:

Strategic Planning

Definition: Strategic planning is like a roadmap for a company’s long journey. It’s a big-picture plan that guides where the company wants to go and how it aims to get there.

Purpose: Think of it as setting the ultimate destination for a road trip. It defines the company’s goals, vision, and the main strategies to achieve them. It’s a big dream.

Key Details:

Who Makes It: Top-level leaders and executives in the company are like the masterminds behind this plan. They gather to brainstorm and set the course for the future.
Importance: Imagine trying to build a house without a blueprint. Strategic planning provides focus and direction. It helps a company grow, adapt to changes, and stay competitive.
Example: Suppose a toy company decides it wants to be the leader in eco-friendly toys within five years. Their strategic plan might include goals like designing sustainable toys, expanding into new markets, and improving their brand’s environmental image.

Related: Strategic Goal – Definition

Operational Planning

Definition: Operational planning is the day-to-day plan that keeps the company running smoothly. It’s like the to-do list for each day, making sure everyone knows what needs to be done.

Purpose: If strategic planning is the big dream, operational planning is the practical step to make it happen. It’s about managing resources, tasks, and deadlines efficiently.

Who Makes It: Operational plans are crafted by managers and supervisors who oversee specific areas or teams. They take the big goals from strategic planning and break them into smaller, manageable tasks.
Importance: Without operational planning, it’s like having a dream but not knowing how to take the first step. It ensures that everyone in the company knows their role, resources are used wisely, and things get done on time.
Example: Consider a restaurant. The strategic plan might include a goal to become the go-to place for healthy dining. The operational plan for the kitchen staff would include tasks like sourcing fresh ingredients, creating daily menus, and maintaining kitchen equipment to serve healthy meals efficiently.

Related: Operational Goals

Tactical Planning

Definition: Tactical planning is like a playbook for a sports team. It’s about making specific, short-term moves to score points and win the game. In business, it’s all about the specific details of a business.

Purpose: Think of this type of planning as breaking down the big goals from strategic planning into smaller, achievable actions. Tactical planning tells us exactly what to do, like a game plan for success.

Who Makes It: Middle-level managers are like the coaches here. They take the strategic game plan and create tactical plays for their teams. They decide who does what, when, and how.
Importance: Imagine playing chess without thinking about your next move. Tactical planning ensures that each part of the organization is working together efficiently. It’s all about executing the strategy and getting results.
Example: If a tech company’s strategic plan is to dominate the mobile app market, tactical planning might involve setting specific targets for app downloads, designing marketing campaigns, and allocating resources to app development teams.

Contingency Planning

Definition: Contingency planning is like having a backup plan for when things go wrong. It’s preparing for unexpected twists and turns, much like having a spare tire in your car.

Purpose: This type of planning is all about being ready for surprises. It’s like having a fire escape plan in case of emergencies. It helps a company respond to unexpected challenges effectively.

Who Makes It: Just like having a first-aid kit at home, contingency plans are developed by experts in risk management or crisis response. They identify potential risks and create plans to deal with them.
Importance: Life is unpredictable, and so is business. Contingency planning ensures that when a crisis hits, the company knows exactly what to do. It minimizes damage and helps the organization bounce back quickly.
Example: Consider a manufacturing company. While their strategic plan may focus on increasing production, a contingency plan could include steps to address disruptions like equipment breakdowns, supplier issues, or even natural disasters. This way, they’re ready to keep production going no matter what.

Read More: Contingency Management Theory

How Do the 4 Types of Planning Work in Management?

The four types of planning in management work together like building blocks:

Strategic Planning: It’s a big dream, setting long-term goals. Top leaders create the vision.
Tactical Planning: Think of it as the game plan. Middle managers break down big goals into short-term actions.
Operational Planning: This is the daily to-do list. Supervisors ensure tasks are done efficiently.
Contingency Planning: It’s the backup plan for surprises. Experts prepare for unexpected challenges.

These types fit like pieces of a puzzle. Strategic planning sets the direction, tactical planning creates the plays, operational planning manages daily tasks, and contingency planning handles unexpected bumps in the road. Together, they help a company succeed and adapt to a changing world.

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What is a business plan, the advantages of having a business plan, the types of business plans, the key elements of a business plan, best business plan software, common challenges of writing a business plan, become an expert business planner, business planning: it’s importance, types and key elements.

Every year, thousands of new businesses see the light of the day. One look at the World Bank's Entrepreneurship Survey and database shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.

According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.

Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.

Several other statistics expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.

This isn’t surprising at all.

Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%) don't have a formal business plan in place.

It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.

But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.

Now before we begin with the details of business planning, let us understand what it is.

No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.

More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.

A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained.

However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes.

Before getting into learning more about business planning, let us learn the advantages of having one.

Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.

Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals.
Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest.

Now let's look at the various types involved in business planning.

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Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.

Here’s an overview of a few fundamental types of business plans.

Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments.
Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.

There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them.

Here are the key elements of a good business plan:

Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.
Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time.
Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.

The importance of business planning is it simplifies the planning of your company's finances to present this information to a bank or investors. Here are the best business plan software providers available right now:

Business Sorter

The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:

Create a business plan to determine your company's direction, obtain financing, and attract investors.
Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.

Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success.

Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.

While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.

Simpliearn’s Executive Certificate Program in General Management will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive general management program by IIM Indore can serve as a career catalyst, equipping professionals with a competitive edge in the ever-evolving business environment.

What Is Meant by Business Planning?

Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.

Strategic Planning

Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.

Tactical Planning

Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.

Contingency Planning

When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.

What Are the 7 Steps of a Business Plan?

The following are the seven steps required for a business plan:

Conduct Research

If your company is to run a viable business plan and attract investors, your information must be of the highest quality.

Have a Goal

The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.

Create a Company Profile

Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.

Describe the Company in Detail

Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.

Create a marketing plan ahead of time.

A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.

Be Willing to Change Your Plan for the Sake of Your Audience

Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.

Incorporate Your Motivation

Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

Briefly describe your company, its objectives, and your plan to keep it running.

Services and Products

Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.

Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.

Operations are the process of running your business, including the people, skills, and experience required to make it successful.

How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.

Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.

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An A–Z of business planning for APC

Planning ahead is an essential requirement for any successful business. What do you need to know about the Business planning competency when completing your APC?

Jen Lemen FRICS

24 February 2023

Commercial property

Corporate real estate

Running your business

Valuation of business and intangible assets

Business planning, a mandatory competency for all APC candidates, requires an understanding of the principles and tools used when devising a business plan, as well as how the process contributes to achieving corporate objectives.

But in addition to this general understanding, you should appreciate the importance of business planning and processes at the firm where you work, as detailed below.

Analysis: analysing a business is a key part of planning for it. This can involve the analysis needed to set up a new business, to manage change in an existing one, or to identify areas for growth or investment. Among the many tools that can be used is a strengths, weaknesses, opportunities and threats (SWOT) analysis. This is a framework that can be applied to any business, helping to identify internal and external factors that affect its performance and to understand current and future potential (see Figure 1).

Analysis of sample business strengths, weaknesses, opportunities and threats

Figure 1: Example SWOT analysis matrix for a new surveying business

Business types: businesses have a variety of structures, including sole traders, limited companies and partnerships, and understanding the type is important when planning ahead. Being a sole trader is a very simple way to set up a business, but you are then personally liable for its debts. To avoid such liability, you could form a limited company or limited liability partnership (LLP), each of which has its advantages and disadvantages. For example, both are treated very differently for tax purposes, with the former paying corporation tax, and the partners in a latter being taxed individually on their share of the profits. Advice from a tax specialist is always recommended when business planning or considering company structure.

Competition: typically occurring between similar companies serving a similar target market, competition could still come more widely from the same industry or sector. Therefore, analysing who your competitors are and how they are performing can help to inform your business planning, including identifying areas for growth or expansion, or where competition may otherwise be eroding profitability or opportunities.

Debtors and creditors: another part of business planning is understanding who owes money to a business – its debtors – or to whom the business itself owes money – its creditors. For example, a business may have taken a loan, in which case the lender is its creditor; alternatively, it may be owed payment of an invoice by a customer, who would be its debtor. Maintaining good payment practices and being aware of when sums become due is essential for business planning to maintain a good relationship with creditors. Likewise, understanding the amount that debtors owe and recognising any red flags that they are not able to pay can help avoid cash-flow issues and keep the business running smoothly.

Close-up macro photo of vintage abacus for calculation

An A–Z of accounting practice for APC

Elements: a business plan will typically include some or all of the following elements:

an executive summary
a business description
a market analysis and strategy
a marketing and sales plan
an analysis of the competition, including their services
an operating plan
detail of company structure
financial analysis
objectives or goals
summary of the strategy.

There is no fixed format or structure to a business plan, however, as this will be tailored to the specific business in question. You should still have read and be familiar with your firm's business plan.

Forecasting: this is an essential part of business planning, allowing consideration of what may happen in the future. However, as business planning can be akin to gazing into a crystal ball, it is often impossible to predict accurately. Using a variety of business planning tools and accurate, up-to-date data will help you make forecasting as useful as possible. You may for instance use work-in-progress schedules or forecast planned billing for instructions on which you are currently working.

Goals: these are what a business wants to achieve in the short, medium and long term, and could include improving service quality or profitability, or simply completing a project on time. Goals are most effective when they are specific, measurable, achievable, relevant and time-bound (SMART). For example, a goal of delivering reports within seven days of instruction is SMART whereas one that requires reports 'as quickly as possible' is not; the former is measurable and will be far more effective than the latter when considering whether the business has achieved its goals or not.

Horizons: businesses should plan to short-, medium- and long-term horizons, as their goals will apply not only to tomorrow but to longer periods as well – for instance, five to ten years. Planning over these different time horizons will help to keep a business on track and ensure that it is not just focusing on short-term gain – which often results in long-term pain.

Investment: at some stage in its journey, a business will need investment to grow. This could be financial, in the form of a loan or equity finance from a creditor, or it could be investment in training, service development or resourcing, such as hiring more staff or buying better equipment. Planning will identify the investment needs of a business and help develop a strategy to fund and resource these appropriately over the correct time horizon.

Joint ownership: most businesses will be jointly owned, with directors, shareholders or partners – depending on the business type – having a variety of views and goals. Being able to balance the needs of these joint owners will be key to success: a business that is being pulled in more than one direction or facing volatile management and leadership is unlikely to be successful. Having a clearly written plan that aligns the owners' interests to the goals and strategy of the business is therefore essential.

Key performance indicators (KPIs): these are quantifiable measures of performance over time for a specific objective, such as delivering reports within seven days or achieving a certain level of sales per department. Measuring KPIs consistently helps a business to track progress and identify trends, or to put plans in place where the indicators are not met. They can also keep a business focused on the right goals and avoid it becoming side-tracked. KPIs are typically monitored in a monthly report using a bespoke spreadsheet or database, shared with key staff.

'As business planning can be akin to gazing into a crystal ball, it is often impossible to predict accurately. Using a variety of business planning tools and accurate, up-to-date data will help you make forecasting as useful as possible'

Liquidity: this is a measure of how quickly a business can convert assets into cash, thus being able to meet short-term financial obligations. Lacking liquidity can be a problem when payments such as VAT or tax are due. However, holding too much money in liquid sources such as cash can limit a business's capital growth. In contrast, investing in property can make funds particularly illiquid – although this might be a good strategy for capital growth and supporting business strategy.

Market research: this is essential for a business, whether it is at the start-up stage or more mature, to understand the market in which it operates and its trends, as well as potential threats and opportunities. Market research is not just something to do once; it is a continuous process because markets are dynamic, and changes to interest rates, tax or competitors, for example, may dramatically affect business strategy. Any research completed should be summarised in the business plan, and the source documents kept on file for future reference.

Net profit: there is a popular saying that turnover is vanity, profit is sanity and cash is reality. Business health is important to consider when planning ahead and a key measure of this is net profit, also known as the bottom line. This is calculated by deducting operating, interest and tax expenses from growth profit. Net profit gives a good indication of business health and available funds, whereas turnover can mask the actual cost of operations: knowing both figures is essential to robust business planning.

Objectives: when planning, it is essential to align a business's goals with its wider corporate objectives. These are usually developed from the mission statement and set by those at the top of an organisation. Departmental-level objectives can be developed from the main corporate ones, and this helps to align the organisation's work. If a business strategy does not support these objectives, you could question whether it is the right strategy for the business.

Political, economic, sociological, technological, legal and environmental (PESTLE): this is another form of business analysis, based on the six named external factors. A business can consider these to assess the context in which it is operating for planning purposes. For example, what wider economic factors are affecting business performance? What technological innovations might help make the business more effective? And what environmental concerns does the business need to consider?

'Planning will identify the investment needs of a business and help develop a strategy to fund and resource these appropriately over the correct time horizon'

Quantitative and qualitative: business analysis tools can be both quantitative and qualitative. The former are based on facts and figures, whereas the latter use non-numerical data such as opinions or statements. Combining these forms of data can inform more robust business planning: for example, measuring performance data from a variety of sources and then discussing this with the staff or management involved to better understand their thinking.

Ratios: measuring financial ratios, such as working capital, debt and equity, profit margin and current ratio, can help to analyse a business's performance and inform planning. Using these ratios helps when trying to understand how efficient a business is, either by comparing past and present performance or its own performance with the ratios of competitors. These ratios could be included in the financial analysis section of a business plan.

Structure: understanding the structure of an organisation is key to successful business planning. There are various possible business structures, such as vertical, vertical and horizontal – or matrix – and open-boundary. A vertical structure could be functional, with a president at the top and roles such as head of HR and head of finance immediately beneath them. A vertical structure could also be divisional, with divisions beneath the president then split under various heads. Matrix structures have dual command, with employees reporting to two managers: say, one who is head of HR and another who is head of a division. Finally, open-boundary structures are varied and flexible, with connections where they are most effective between teams. There are many other types of organisational structure, though, and you should be sure you are able to explain how your firm operates.

Types of business plan: these include corporate, or top-level; departmental, at a lower level; strategic, with a specific function or service and a longer-term horizon; and operational, concerning how things work on a day-to-day basis. A business may therefore have more than one business plan: it is likely to have an overall corporate plan and then separate lower-level plans for departments, teams or specific services. The lower-level plans should align to the wider corporate business plan, however.

Unique selling point (USP): a USP helps define a business and the way it differentiates itself in the market. This should be included in the business plan, marketing campaigns and in the values set out by the business. Some firms may focus on a high-priced, high-quality product, while others may focus on low-cost, volume services, for example.

Variability: a business's fortunes and prospects will vary from year to year and with business cycles. It is vital, therefore, to monitor and update the business plan on an ongoing basis to help a business remain stable and avoid too variable a performance. All businesses will not only experience but also require change. However, if this can be planned and managed well, a business can remain profitable and efficient.

Working capital: this represents the funds available for a business to meet its current, short-term obligations. The amount of working capital required is calculated by dividing current assets by current liabilities, with the ideal ratio being between 1.5 and 2. This would suggest that a business is healthy and can meet its obligations in the short term.

X-ray: taking an X-ray approach means exploring all data about a business, speaking with relevant personnel and leaving no stone unturned. This will help to ensure that business plans are relevant and offer the best chance of success. While no one can predict the future, having good data available will still help you to manage change when required.

Year-end: knowing when a company's financial year ends can help when business planning, including managing tax payments and staff bonuses. Its year-end may differ to the end of the tax year, which falls on 5 April. Business plans may run on the company year-end, the tax year-end or on calendar years, depending on when a business was registered. Tax advice should be sought on whether staggering year ends may be beneficial, but this will depend on the specific circumstances.

Zenith: the Oxford English Dictionary defines this as 'the time or period at which something is at its best, most successful [or] most powerful'. A plan will help a business to project itself towards its zenith, and aiming realistically high will give it the best chance of reaching this point.

As an example of the aspects of business planning discussed in this article, all candidates should read and be familiar with the current RICS Business Plan . This includes the organisation's corporate objectives, market plans, risks and strategy for the years ahead.

'All businesses will not only experience but also require change. However, if this can be planned and managed well, a business can remain profitable and efficient'

Jen Lemen FRICS is co-founder of Property Elite Contact Jen: Email

Related competencies include : Business planning

🎧 Real entrepreneurs. Real stories.

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7 Different Types of Business Plans Explained

Apples and oranges. Representing different business plan types and how they are similar and different at the same time.

11 min. read

Updated April 10, 2024

Download Now: Free Business Plan Template →

Business plans go by many names: Strategic plans, traditional plans , operational plans, feasibility plans, internal plans, growth plans, and more.

Different situations call for different types of plans.

But what makes each type of plan unique? And why should you consider one type over another?

In this article, we’ll uncover a quick process to find the right type of business plan, along with an overview of each option.

Let’s help you find the right planning format.

What type of business plan do you need?

The short answer is… it depends.

Your current business stage, intended audience, and how you’ll use the plan will all impact what format works best.

Remember, just the act of planning will improve your chances of success . It’s important to land on an option that will support your needs. Don’t get too hung up on making the right choice and delay writing your plan.

So, how do you choose?

1. Know why you need a business plan

What are you creating a business plan for ? Are you pitching to potential investors? Applying for a loan? Trying to understand if your business idea is feasible?

You may need a business plan for one or multiple reasons. What you intend to do with it will inform what type of plan you need.

For example: A more robust and detailed plan may be necessary if you seek investment . But a shorter format could be more useful and less time-consuming if you’re just testing an idea.

2. Become familiar with your options

You don’t need to become a planning expert and understand every detail about every type of plan. You just need to know the basics:

What makes this type of plan unique?
What are its benefits?
What are its drawbacks?
Which types of businesses typically use it?

By taking the time to review, you’ll understand what you’re getting into and be more likely to complete your plan. Plus, you’ll come away with a document built with your use case(s) in mind—meaning you won’t have to restart to make it a valuable tool.

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3. Start small and grow

When choosing a business plan format, a good tactic is to opt for a shorter option and build from there. You’ll save time and effort and still come away with a working business plan.

Plus, you’ll better understand what further planning you may need to do. And you won’t be starting from scratch.

Read More: How to identify the right type of plan for your business

Again, the type of business plan you need fully depends on your situation and use case. But running through this quick exercise will help you narrow down your options.

Now let’s look at the common business plan types you can choose from.

Types of business plans include internal, traditional, one-page plan, 5-year business plan, growth plan, and lean plan.

Traditional business plan

The traditional (or standard) business plan is an in-depth document covering every aspect of your business. It’s the most common plan type you’ll come across.

A traditional business plan is broken up into 10 sections:

Executive summary
Description of products and services
Market analysis
Competitive analysis
Marketing and sales plan
Business operations
Key milestones and metrics
Organization and management team
Financial plan
Appendix

Why use this type of plan?

A traditional business plan is best for anyone approaching specific business planning events—such as presenting a business plan to a bank or investor for funding.

A traditional plan can also be useful if you need to add more details around specific business areas.

For example: You start as a solopreneur and don’t immediately need to define your team structure. But eventually you hit a threshold where you need more staff in order to keep growing. A great way to explore which roles you need and how they will function is by fleshing out the organization and management section .

That’s the unseen value of a more detailed plan like this. While you can follow the structure outlined above and create an in-depth plan ready for funding, you can also choose which sections to prioritize.

Read More: How to write a traditional business plan

One-page plan

The one-page business plan is a simplified (but just as useful) version of a traditional business plan. It follows the same structure, but is far easier to create. It can even be used as a pitch document.

Here’s how you’ll organize information when using a one-page plan:

Value proposition
Market need
Your solution
Competition
Target market
Sales and marketing
Budget and sales goals
Team summary
Key partners
Funding needs

A one-page plan is faster and easier to assemble than a traditional plan. You can write a one-page plan in as little as 30 minutes .

You’ll still cover the crucial details found in a traditional plan, but in a more manageable format.

So, if you’re exploring a business idea for the first time or updating your strategy—a one-page plan is ideal. You can review and update your entire plan in just a few minutes.

Applying for a loan with this type of plan probably wouldn’t make sense. Lenders typically want to see a more detailed plan to accurately assess potential risk.

However, it is a great option to send to investors.

“Investors these days are much less likely to look at a detailed plan,” says Palo Alto Software COO Noah Parsons. “An executive summary or one-page plan, pitch presentation, and financials are all a VC is likely to look at.”

Creating a more detailed plan is as much about being prepared as anything else. If you don’t dig into everything a traditional plan covers, you’ll struggle to land your pitch .

If you don’t intend to seek funding, a one-page plan is often all you need. The key is regularly revisiting it to stay on top of your business.

Let’s explore two unique processes to help you do that:

Read More: How to write a one-page business plan

Lean planning process

Lean planning is a process that uses your one-page plan as a testing tool. The goal is to create a plan and immediately put it into action to see if your ideas actually work. You’ll typically be focusing on one (or all) of the following areas:

Strategy – What you will do
Tactics – How you will do it
Business Model – How you make money
Schedule – Who is responsible and when will it happen

Why use this process?

Lean planning is best for businesses that need to move fast, test assumptions, revise, and get moving again. It’s short and simple, and meant to get everyone on the same page as quickly as possible.

That’s why it’s so popular for startups. They don’t necessarily need a detailed plan, since they’re mostly focused on determining whether or not they have a viable business idea .

The only drawback is that this planning process is built primarily around early-stage businesses. It can be a useful tool for established businesses looking to test a strategy, but it may not be as helpful for ongoing management.

Read More: The fundamentals of lean planning

Growth planning

Growth planning is a financials-focused planning process designed to help you make quick and strategic decisions.

Again, it starts with a one-page plan outlining your strategy, tactics, business model, and schedule. The next step is to create a working financial forecast that includes projected sales, expenses, and cash flows.

From there, you run your business.

As you go, track your actual financial performance and carve out time to compare it to your forecasts . If you spot any differences, these discrepancies may indicate problems or opportunities that call for adjusting your current strategy.

Growth planning combines the simplicity of the one-page plan and the speed of lean planning, with the power of financial forecasting.

This makes the process useful for every business stage and even allows you to skip to the forecasting step if you already have a plan.

With growth planning, you’ll:

Regularly revisit your financials
Better understand how your business operates
Make quick and confident decisions

This process focuses on growing your business. If diving into your financials isn’t a priority right now, that’s okay. Start with a one-page plan instead, and revisit growth planning when you’re ready.

Read More: How to write a growth-oriented business plan

Internal plan

Sometimes you just need a business plan that works as an internal management tool.

Something to help you:

Set business goals
Provide a high-level overview of operations
Prepare to create budgets and financial projections

You don’t need an overly long and detailed business plan for this. Just a document that is easy to create, useful for developing or revisiting your strategy, and able to get everyone up to speed.

The internal plan is a great option if you’re not planning to present your plan to anyone outside your business. Especially if you’re an up-and-running business that may have created a plan previously. You might just need something simple for day-to-day use.

Read More: 8 steps to write a useful internal business plan

5-year business plan

Some investors or stakeholders may request a long-term plan stretching up to five years. They typically want to understand your vision for the future and see your long-term goals or milestones.

To be honest, creating a detailed long-term business plan is typically a waste of time. There are a few exceptions:

A long-term plan is specifically asked for
You want to outline your long-term vision
Real estate development
Medical product manufacturing
Transportation, automotive, aviation, or aerospace development

The reality is, you can’t predict what will happen in the next month, let alone the next one, three, or five years.

So, when creating a long-term plan, don’t dig too deep into the details. Focus on establishing long-term goals , annual growth targets, and aspirational milestones you’d like to hit.

Then supplement these with a more focused one-page plan that actually describes your current business, which you can use in your business right now.

Read More: How to write a five-year business plan

Nonprofit business plan

A nonprofit business plan is not too different from a traditional plan. You should still cover all of the sections I listed above to help you build a sustainable business.

The main differences in a nonprofit plan are tied to funding and awareness. You need to account for:

Fundraising sources and activities.
Alliances and partnerships.
Promotion and outreach strategies.

You also need to set goals, track performance, and demonstrate that you have the right team to run a fiscally healthy organization. You’re just not pursuing profits, you’re trying to fulfill a mission. But you cannot serve your community if your organization isn’t financially stable.

If you can use your business plan to show that you’re a well-organized nonprofit organization, you are more likely to attract donors and convince investors to provide funding.

Read More: How to write a nonprofit business plan

Resources to help write your business plan

Don’t get too hung up on the type of business plan you choose. Remember, you can always start small and expand if you need to.

To help you do that, I recommend downloading our free one-page business plan template . It’s especially useful if you’re exploring an idea and need a quick way to document how your business will operate.

If you know you’ll pursue funding, download our free traditional business plan template . It’s already in an SBA-lender-approved format and provides detailed instructions for each section. And if you want to explore other options, check out our roundup of the 8 best business plan templates you can download for free.

Lastly, check out our library of over 550 sample business plans if you need inspiration. These can provide specific insight into what you should focus on in a given industry.

Remember, just by deciding to write a business plan, you are increasing your likelihood of success. Pick a format and start writing!

Types of business plans FAQ

Which type of planning should be done for a business?

The type of planning fully depends on your business stage and how you intend to use the plan. Generally, whatever format you choose should help you outline your strategy, business model, tactics, and timeline.

How many types of business plans are there?

There are seven common types of business plans, including: traditional, one-page, lean, growth, internal, 5-year, and nonprofit plans.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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The Three Levels of Strategy: Corporate Strategy, Business Strategy, and Functional Strategy

Published: 20 April, 2024

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Implementation & Execution

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Understanding the intricate levels of strategy is crucial for any organization aiming to sustain and enhance its competitive edge. Strategies operate on multiple layers within an organization’s framework. At the corporate level strategy , overarching decisions shape the scope and direction of the entire enterprise. Business-level strategies hone in on competitive tactics within specific industries or markets. Functional level strategies detail how various departments contribute to broader objectives, while operational strategies focus on day-to-day execution. Tactical maneuvers adapt short-term plans to dynamic conditions, while strategic initiatives propel transformative projects forward. Each layer is intricately woven, ensuring alignment and coherence throughout the organization’s pursuits.

At Digital Leadership, we understand that navigating the complex landscape of strategic planning is essential for any organization looking to maintain and enhance its competitive edge. As experts in digital transformation strategy and strategic innovation, we share not just theoretical insights but practical, actionable strategies that have driven success for numerous organizations in the real world. In this article, we will explore the three essential levels of strategy —Corporate Strategy, Business Strategy, and Functional Strategy—each playing a critical role in crafting a company’s future. Let’s delve into these strategic layers, which serve as the building blocks for creating a robust and resilient business.

What are the Three Levels of Strategy in Organizations?

Creating a business that stands out in its industry involves a strategic blend of initiatives that support the corporate whole, align with the mission and vision, and contribute to the company’s overall success at various levels of strategy . For instance, diversifying into two or more business areas can help a business gain a competitive advantage by tapping into various market segments. This approach leverages corporate, business, and functional levels of strategy to create a cohesive plan that enhances market position and ensures sustainable growth.

Corporate Level Strategy : At the pinnacle of strategic planning is the corporate-level strategy, which sets the overarching direction and goals for the entire organization. This strategy is about defining the path an organization will take to achieve long-term success and often involves decisions on diversification, acquisitions, and new market entry.
Business Level Strategy : The Business Level Strategy focuses more narrowly on how a business competes in its chosen market(s). It’s about carving out a competitive position, leveraging unique strengths, and delivering value to customers in ways that are difficult for competitors to match.
Functional Level Strategy : Operational effectiveness is the realm of the Functional Level Strategy, which is concerned with maximizing efficiency and performance in specific areas of the business such as marketing, human resources, IT, and operations.

Strategy is often detailed at the functional level within the organization, where specific departments like marketing and finance focus on tailored actions and projects. For example, the marketing team might launch campaigns targeted at a particular market while the finance team manages investment and divestment decisions, including those involving mergers and acquisitions.

1- Corporate Level Strategy: Shape the Organization’s Future

Corporate Level Strategy - Levels of Strategy

Corporate level strategy refers to the process where a company evaluates its overall operations and sets its course to boost growth or enhance value. This type of strategy is crucial for companies aiming to establish and achieve long-term objectives.

Importance of Corporate Level Strategy

Corporate Level Strategy is critical because it defines the broad contours within which all other business strategies operate. It is about setting long-term goals, managing resources at a macro level, and aligning various business units towards common business goals .

Establishing a cohesive vision and shared goals : This ensures all business units move cohesively towards common objectives, fostering unity and efficiency.
Selecting the right mix of investments and distributing resources effectively : Critical for achieving optimal growth and sustainability.
Optimizing synergies between entities : Maximizes efficiency and innovation by leveraging strengths across the business.

Types of Corporate Level Strategy

Growth Strategies : Focus on expanding the company’s reach through new markets, products, or acquisitions.
Stability Strategies : Aim to maintain current operations, focusing on consistent revenue generation.
Retrenchment Strategies : Involve cutting back to focus on core competencies and stabilize the company during turbulent times.
Combination Strategies : Employ a mix of growth, stability, and retrenchment depending on market and internal conditions.

Examples of Corporate-Level Strategies:

A retail company might expand its online presence (growth strategy) while maintaining its brick-and-mortar stores (stability strategy).
A pharmaceutical company might invest in developing new drugs (growth strategy) while also optimizing its manufacturing processes to reduce costs (retrenchment strategy).

Steps for Implementing a Corporate-Level Strategy:

Strategic Analysis: Conduct a thorough market analysis to understand your competitive landscape, customer needs, and industry trends. Evaluate your company’s internal capabilities, strengths, and weaknesses.
Define Goals: Set clear, measurable goals for the company, both short-term and long-term, aligned with your chosen strategy.
Strategy Selection : Consider different corporate-level strategies (growth, stability, retrenchment, portfolio management) based on the analysis and your goals. Choose a strategy that leverages your strengths and addresses market opportunities.
Develop a Strategic Plan: Translate your chosen strategy into a detailed plan with specific initiatives, timelines, and resource allocation.
Communication and Alignment: Communicate the strategy clearly to all levels of the organization to ensure everyone understands the direction and their role.
Performance Measurement and Monitoring: Establish key performance indicators (KPIs) to track progress towards your strategic goals .Monitor performance regularly and make adjustments to the strategy as needed.
Feedback and Adaptability: The business environment is constantly changing, so be prepared to adapt your strategy based on new information and feedback.

Implementing a successful corporate-level strategy involves detailed planning and strategy execution , including market analysis, strategic alignment of resources, and continuous monitoring. For instance, a company might decide to use the UNITE Strategic Options Matrix to evaluate potential growth avenues.

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The SWOT / TOWS Analysis Framework

Business level strategy: drive competitive advantage.

Business Level Strategy - Levels of Strategy

A business-level strategy represents an innovative approach for a company to highlight its distinctive assets, enhance its competitive advantage, and foster seamless integration among its various components to operate as a unified entity.

Importance of Business Level Strategy

This strategy layer focuses on competitive positioning within the industry. It’s about how a business can offer unique value to its customers, differentiate itself from competitors, and capture market share.

Establishing the initial position and developing a primary focus: Sets the foundation for competitive advantage.
Unleashing forthcoming opportunities for growth: Identifies and exploits new business opportunities.
Formulating a concise strategic blueprint: Guides the deployment of resources and efforts to maximize impact.

The BCG matrix is a valuable tool in these scenarios, helping to define and explain which business units should receive more investment and which might need divesting. Such financial decisions are crucial in shaping the business and its external environment, ensuring that services are relevant to its specific function and that current processes are optimized for maximum efficiency.

You can now access the complete Growth Share Matrix Package, including a full presentation, related models and instructions for use.

The Growth Share Matrix (also known as BCG Matrix)

Types of business level strategy.

Cost Leadership : Building a competitive advantage by achieving the lowest operational cost in the industry.
Differentiation : Offering unique attributes that set the company’s products or services apart from competitors.
Focus : Concentrating on a niche market to serve a well-defined customer group exceptionally well.

Examples of Business Unit-Level Strategies:

Cost Leadership Strategy: Aims to be the low-cost provider in the market by optimizing production processes, minimizing waste, and achieving economies of scale (e.g., Walmart’s focus on efficient supply chain management and low prices).
Differentiation Strategy: Focuses on offering unique products or services that stand out from competitors. This could involve superior quality, innovative features, or exceptional customer service (e.g., Apple’s focus on design and user experience).
Focused (Niche) Strategy: Targets a specific customer segment or market niche with specialized products or services that cater to their unique needs (e.g., a sports apparel company that focuses on high-performance running gear).
Integrated Cost Leadership/Differentiation Strategy: A hybrid approach that seeks to balance both cost efficiency and product/service differentiation (e.g., Toyota’s strategy of producing reliable, fuel-efficient cars at competitive prices).

How To Create Business Unit Level Strategies for Success

Internal Analysis : Conduct a SWOT analysis to identify the unit’s Strengths, Weaknesses, Opportunities, and Threats. Evaluate the unit’s resources, capabilities, and core competencies.
External Analysis : Analyze the competitive landscape, including competitor strengths and weaknesses, market trends, and customer needs. Identify your target market and understand their buying behavior.
Strategic Objectives : Define clear, measurable objectives for the business unit aligned with the overall corporate strategy. These objectives should consider factors like profitability, market share growth, or customer satisfaction.
Strategy Selection : Based on the internal and external analysis, choose a business-level strategy that best leverages the unit’s strengths and addresses market opportunities. Consider factors like cost structure, product/service differentiation, and target market focus.
Develop Action Plans : Translate your chosen strategy into specific action plans with timelines, resource allocation, and responsibilities. Identify key performance indicators (KPIs) to track progress towards your objectives.
Implementation and Monitoring : Communicate the strategy effectively to all employees within the business unit. Implement the action plans and monitor progress regularly. Be prepared to make adjustments as needed based on performance data and changing market conditions.
Customer Focus : Ensure your strategy keeps the customer at the core. Understand their needs and tailor your offerings accordingly.
Innovation : Be open to innovation in products, services, or processes to stay ahead of the competition.
Alignment with Corporate Strategy : While the business unit strategy should be specific to its market, ensure it aligns with the overall goals of the larger organization.

A practical example could involve using the UNITE Business Model Scorecard to continuously assess and refine business-level strategies. Steps include market segmentation analysis, competitive analysis, and strategic resource allocation.

You can now access the complete Business Model Scorecard Package, including a full presentation, related models and instructions for use.

The UNITE Business Model Scorecard

Functional level strategy: support business operations.

Functional Level Strategy - Levels of Strategy

Functional-level strategies outline the specific actions and objectives designated to different departments within a company, supporting both business and corporate-level strategies. These strategies define the desired results from the everyday activities of specific business functions or departments.

Importance of Functional Level Strategy

Functional Level Strategy ensures that each department’s activities align with the overall business and corporate strategies, enhancing operational efficiency and effectiveness.

Marketing : Turns strategy into action for customer acquisition and sales.
Financial : Ensures financial health and informs business unit decisions.
HR : Attracts, retains talent, and builds skills to execute the strategy.
Operations : Optimizes processes to meet goals (cost, quality, delivery).
R&D: Drives innovation for new offerings and future growth.
Purchasing : Gets the right resources at the best price/quality.
IT Strategy : Provides the technology infrastructure and data for smart decisions.

Functional Level Strategy Examples

Marketing Strategy : Develop a social media campaign to reach a specific target audience and increase brand awareness (aligned with a market expansion goal).
Financial Strategy : Implement cost-saving measures to reduce operational expenses by 10% (aligned with a cost leadership strategy ).
Human Resource Strategy : Launch a training program to upskill employees on new technologies needed for a product launch (aligned with an innovation strategy ).
Operations Strategy : Streamline production processes to improve efficiency and reduce waste (aligned with a cost reduction goal).
Research and Development Strategy : Invest in research on new materials to develop a more sustainable product line (aligned with a social responsibility focus).
Purchasing Strategy : Negotiate bulk discounts with suppliers to secure lower raw material costs (aligned with a cost leadership strategy).
Information Technology Strategy : Upgrade the company’s data analytics software to gain better customer insights (aligned with a customer-centric strategy ).

Steps of Implementing Functional-Level Strategy

Align with Business Unit Strategy: Ensure each functional strategy directly supports the overarching business unit strategy and its goals (growth, stability, etc.).
Define Departmental Objectives : Set clear, measurable objectives for each department that contribute to the business unit’s goals.
Develop Action Plans: Translate objectives into specific action plans with timelines, resource allocation, and ownership for tasks.
Communication and Collaboration: Clearly communicate the functional strategies and their connection to the overall business unit strategy to all department personnel. Encourage collaboration across departments for successful implementation.
Performance Measurement: Establish key performance indicators (KPIs) to track progress towards departmental objectives and the overall business unit strategy.
Monitoring and Adjustments : Regularly monitor progress and be prepared to adjust the functional strategies as needed based on performance data and changing market conditions.

Using tools like the UNITE Value Creation Framework, companies can align functional strategies with business goals . Steps involve detailed planning, implementation of tailored solutions, and ongoing evaluation to adjust tactics as needed.

You can now access the complete Value Creation Model Package, including a full presentation, related models and instructions for use.

The UNITE Value Creation framework

Exploring additional strategy level: operational level strategy.

Operational Level Strategy - Levels of Strategy

An operations level strategy is the framework a company uses to reach its long-term objectives and mission. This strategy involves making decisions influenced by various elements such as product management, supply chain, inventory, forecasting, scheduling, quality control, and the planning and management of facilities.

Importance of Operational Level Strategy

Operational Level Strategy focuses on the efficiency and effectiveness of company operations on a day-to-day basis. It’s about optimizing processes and ensuring that the strategies at higher levels translate into actionable tasks that produce results. This strategy level is essential for aligning daily operations with the broader strategic objectives set by functional and business level strategies .

Operational Level Strategy Examples

Retail : Optimize inventory, streamline checkout (faster, fewer lines).
Manufacturing : Lean manufacturing (reduce waste), automate quality control.
Healthcare : Standardize treatment protocols, optimize appointment scheduling.
Logistics : Optimize delivery routes, automate warehouse processes.

Steps of Implementing Operational-Level Strategy

Align with Business Unit Strategy : Ensure your operational strategy directly supports the overarching business unit strategy and its goals (growth, cost reduction, etc.).
Analyze Current Operations : Conduct a thorough assessment of your existing processes, identifying areas for improvement in terms of efficiency, quality, and cost. Tools like process mapping can be helpful here.
Define Operational Objectives: Set clear, measurable objectives for your operational strategy. These objectives should be specific, time-bound, achievable, relevant, and measurable (SMART goals).
Develop Action Plans : Translate your objectives into detailed action plans. These plans should outline specific tasks, timelines, resource allocation, and ownership for each initiative.
Communication and Training : Clearly communicate the operational strategy and its objectives to all employees involved in the operations. Provide necessary training to ensure everyone understands their role and responsibilities.
Implementation and Monitoring : Begin implementing the action plans outlined in your strategy. Regularly monitor progress and track key performance indicators (KPIs) aligned with your objectives.
Continuous Improvement : Be prepared to adapt and improve your strategy as needed. Use data from performance monitoring to identify areas for further optimization.

What are The Differences Between Corporate Strategy, Business Strategy, and Functional Strategy

Within the realm of strategic management, organizations navigate a complex landscape of decisions and actions across multiple levels. At the helm of this strategic architecture lie Corporate Strategy, Business Strategy, and Functional Strategy, each serving distinct purposes and operating within different horizons. Understanding the disparities among these strategic layers is crucial for effective organizational planning and execution. Here’s a breakdown of the key differences between Corporate, Business, and Functional Strategies:

1) Decision-Making Horizons: Short-Term vs. Long-Term

Corporate Strategy often involves long-term decision-making horizons, setting out the vision and goals for the entire organization for years into the future. Business level strategy has a medium-term focus, translating the corporate level strategy into competitive actions and goals typically spanning several years. Functional level Strategy , on the other hand, focuses on short-term goals and day-to-day operational decisions that support higher-level business and corporate strategies.

2) Focus Areas: Big Picture vs. Day-to-Day Operations

Corporate level strategy is concerned with the big picture, including choosing which industries and markets the organization will compete in. Business level strategy is more narrowly focused, determining how the organization competes within those markets. Functional level strategy dives into the specifics, dealing with the management of resources at the operational level to efficiently execute the business and corporate strategies.

3) Impact and Scope: Broad Strokes vs. Specific Actions

Corporate strategies impact the entire organization and are formulated with broad, sweeping decisions that govern the company’s overall direction. Business level strategies have a narrower scope, aimed at achieving competitive advantage in specific markets. Functional strategies have the most limited scope, focusing on specific actions and initiatives that enhance the performance of different departments within the company.

Why Integration Matters:

A successful organization aligns its strategies across all levels: corporate, business unit, and functional. This creates a unified direction where each level supports the others. Here’s how to achieve that integration:

Clear Communication : Clearly communicate the corporate strategy and objectives to all levels of the organization. This ensures everyone understands the big picture and how their role contributes to it.
Cascading Objectives : Break down the corporate goals into measurable objectives for each business unit. These unit-level objectives should directly contribute to achieving the overall corporate strategy.
Functional Alignment : Ensure each functional department’s strategy (marketing, finance, HR, etc.) directly supports the business unit strategy and its objectives.
Performance Measurement : Utilize consistent metrics across all levels to track progress towards goals and identify areas where strategies might need adjustments.
Cross-functional Collaboration: Encourage collaboration between departments. Information sharing and teamwork are crucial for successful strategy execution.

Benefits of Integration:

Improved Efficiency: Eliminates duplication of efforts and ensures everyone is working towards the same goals.
Enhanced Decision-Making: Provides a clear framework for decision-making at all levels, aligning with the overall strategy.
Faster Response to Change: Aligning strategies allows for a more coordinated response to changing market conditions or opportunities.
Increased Motivation: Employees are more motivated when they understand how their work contributes to the bigger picture.

Importance of Adaptability and Agility in Different Levels of Strategy Execution

Adaptability and agility have become essential components of strategic execution at all levels of an organization. From corporate to functional strategies, the ability to rapidly respond to market changes, technological advancements, and emerging customer needs is crucial for sustaining competitive advantage and achieving long-term success. Here’s why adaptability and agility are so important across the different levels of strategy execution:

Corporate Level Strategy

Adaptability: Adjust strategic direction in response to global trends and economic shifts.
Agility: Quickly implement changes and make decisions efficiently.

Business Level Strategy

Adaptability: Modify marketing, products, and customer interactions based on market and competitor dynamics.
Agility: Rapidly execute strategic changes to capture opportunities and respond to threats.

Functional Level Strategy

Adaptability: Each department adjusts strategies and operations to align with broader business goals .
Agility: Quickly implement departmental changes and optimize operations to support business strategies .

Overall Impact

Seamless Execution: Ensures cohesive strategic changes across all levels.
Competitive Advantage: Quick adaptation and response can outpace competitors.
Organizational Resilience: Enhances the ability to withstand disruptions.
Employee Engagement: Promotes a proactive and dynamic work environment.

These points emphasize how crucial adaptability and agility are across all levels of strategy for achieving efficient execution and long-term success.

Ensuring that all levels of strategy are cohesive and aligned towards the organization’s ultimate goals is paramount. At Digital Leadership, our expertise in strategic management and digital transformation ensures that our clients not only devise winning strategies but also implement them successfully to achieve long-term success.

Frequently Asked Questions

1- what are the four levels of a company’s strategy formulation.

The four levels typically include Corporate Strategy, Business Strategy, Functional Strategy, and often Operational Strategy, each focusing on different aspects of strategic planning and execution.

2- How to avoid failure to execute strategy?

Avoiding failure in strategy execution involves clear communication, ensuring all levels of the organization understand their roles in achieving strategic goals, adequate resource allocation, and continuous monitoring and adjustment of strategies based on performance metrics and external changes.

Examples and types of effective functional level strategy for business support.

A key objective of any business strategy is to improve operational efficiencies1

Corporate Level Strategy: Meaning, Types, and Examples

Corporate-level strategy is a crucial aspect of strategic management that focuses on1

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The 4 Levels Of Strategy: The Difference & How To Apply Them

Every business leader should be familiar with different levels of strategy. Strategy comes in various forms: the strategy for a multi-national company will differ from that of a startup.

Yet, the principles remain. To understand how strategies shift, we'll examine the existing strategy levels and how an organization can apply them.

The key takeaway from this article is that strategy is for everyone .

You don't have to wait until your business grows to a certain size to “get strategic.” Be aware of where you are as a business so you can develop a strategy that fits and grows with your organization.

In this article, we'll discuss how the strategy levels in an organization differ and provide context on how to use these different levels of strategy in strategic management .

We’ll also show you how you can centralize your strategy in Cascade and ensure the alignment between the different levels for successful and effective strategy execution!

#1 Strategy Execution Platform Say goodbye to strategy spreadsheets. It’s time for Cascade. Get started, free forever

The Levels Of Strategy

Strategists often refer to three levels of strategy: corporate level strategy, business level strategy, and functional level strategy.

But, they are missing a fundamental level that is key for successful strategy execution : operational level strategy .

This article outlines the basics of the four levels in strategic management, but if you're interested in delving deeper into a specific level, we also offer individual articles dedicated to each one:

Corporate Level Strategy

Business level strategy, functional level strategy, operational level strategy.

pyramid diagram showing the four levels of strategy: corporate, business, functional, operational

No matter the level of strategy, "organizations that promote transparency and a collective culture when it comes to strategy, generate a stronger commitment and sense of accountability from their employees." This statement by Guillermo Hermosillo Cue, Global Innovation Director at Burger King in our state of strategy report echoes the importance of strategic communication regardless of the strategy level.

pyramid diagram showing the corporate level strategy, definition, roles and example

The corporate strategy is the highest-level strategy in an organization. It defines the organization’s overall direction and the high-level ideas of how to move towards it.

These plans are usually created by leadership, such as the CEO and top management. Generally, this is the group involved because they have a deep understanding of the company and the strategic business knowledge needed to steer the organization in the right direction.

A corporate strategy is generally broader than the other strategy levels. Strategies at this level are more conceptual and futuristic than the other levels. They usually span a 3-5 year period.

A corporate strategic plan generally encompasses:

The core business metrics
The strategic focus areas
The corporate goals
The strategic objectives
The most important KPIs

⚠️ Important! The corporate level strategy needs to take into account the foundational elements of the organization: its vision statement , mission statement, and company values .

Why create a corporate strategy?

In the corporate strategic plan, you're essentially mapping out where your organization should play.

This master plan sets the stage for developing business unit strategies and functional level strategies, along with nitty-gritty operational plans.

These strategies, in turn, will guide the downstream decisions made by employees of all levels. Therefore, every decision made in the organization should directly or indirectly contribute to the strategy's corporate objectives.

diagram mentioning benefits of a corporate level strategy: strategic direction, decision making, flexibility

Every organization needs a corporate strategy. There is no such thing as a too-small organization nor a too-large one to define what they want to achieve and how they will do it.

👉🏻 Grab your free corporate strategy template to follow a structured approach and create your corporate strategic plan.

pyramid diagram showing the business level strategy: definition, roles and example

The business level strategy is the second tier in the strategy hierarchy. Sitting under the corporate strategy, the business strategy is a means to achieve the goals of the specific business units in the organization.

The objectives and strategic initiatives within each business unit’s strategy will be focused on gaining a competitive advantage in the particular market in which the business unit operates.

There are different types of business level strategies organizations adopt depending on the competitive advantage they want to gain. Organizations face crucial decisions here, with options like adopting a growth strategy, differentiation strategy, or embracing a cost leadership approach.

📚 Learn more about the different types of business strategies in our article: What Is A Business Level Strategy? How To Create It + Examples

Each business area must make a strategic decision and define the approach they’ll choose to get closer to their goals.

Business strategy examples

A large bank is a prime example of an organization selling multiple services in different industries.

To name a few, it has business units like retail banking, investment management, and insurance company . Each of these business units has distinct goals and a distinct business unit strategy to achieve them.

diagram of strategy levels - corporate, business, functional, operational - example for a bank

📚 Read more: The 7 Best Business Strategy Examples I've Ever Seen

Include middle managers in the business strategy

Strategies at the business level should be constructed by VPs and —global or regional— business unit heads. However, also including other middle managers within each business unit is a best practice.

Including a range of managers from each unit to participate in the strategy process has two main benefits:

It increases buy-in: Managers who've had a chance to contribute to the strategy formulation feel included in the decision-making. Therefore, they’re more likely to accept the strategy and jump on board with its execution.
It improves ownership: Employees who are given the opportunity to contribute to the strategy development are more likely to take ownership of its completion.

💡 Pro Tip: If your organization has multiple business units, this strategy level becomes crucial. However, if you only have one business unit, you don't need to worry about this level and can skip to the functional strategy level.

👉🏻 Grab your free business strategy template to follow a structured approach and create your business strategic plan.

pyramid diagram showing the functional level strategy: definition, roles and example

This level of strategy designs the approach for the different functional areas or departments —we’ve already given you a little spoiler with the previous image of the bank strategy levels example. These functions can include the marketing department, finance, supply chain, manufacturing, human resources, and more.

The primary objective of functional strategy is to align the activities and efforts of these individual departments with the broader goals and strategic objectives set at higher levels, such as corporate and business strategy.

Functional strategies have a fairly narrow focus. They are designed to address the unique challenges and opportunities within each functional area.

Your finance strategy, marketing strategy, human resource strategy, etc., all have goals and responsibilities to deliver. Having a visible functional level of strategy that aligns with the overarching corporate strategy will increase the chances of success.

These strategies involve resource allocation , measurable goals, and a focus on continuous improvement, all within the context of individual functions.

The secret to a successful functional strategy

Having each department equipped with a well-defined functional strategy is an excellent beginning. But beware of the pitfalls of isolating each functional area in its own strategy bubble; that's venturing into siloed territory.

There are two pivotal aspects to keep in mind for a successful functional strategy:

Cross-functional collaboration : The magic happens when different departments join forces. Fostering collaboration between these functions opens the door to innovation and synergy.
Strategic alignment : Ensuring that the strategy of each functional area seamlessly matches the overall corporate strategy goals is the foundation of success.

In Cascade , you can create strategic plans for each function in your organization, which link back to the main corporate plan to ensure everything is moving in the right direction.

"A journey of a thousand miles begins with one step,” as the saying goes.

Check out strategic planning templates for different functions:

Marketing Strategy Template
HR Strategy Template
Financial Strategy Template
Supply Chain Strategy Template

📚 Explore thousands of other free strategy templates in our Template Library !

Companies usually stop at the first three levels of strategy, but the fourth level is the most important one to ensure successful execution. These three levels of strategy—corporate, business, and functional—set the foundation, but it's the operational strategy that brings all the plans to life on the ground.

pyramid diagram showing the operational level strategy: definition, roles and example

Operational level strategy, situated at the lowest tier of the strategic hierarchy, focuses on the day-to-day actions and tactics needed to run the business, manage processes, and implement change effectively . It’s the “boots-on-the-ground” aspect of strategy, ensuring that plans are translated into tangible actions and results.

In simple terms, this is the strategy that will inform the day-to-day work of employees and will ultimately keep your organization moving in the right direction.

It's primarily concerned with short-term objectives and the practical execution of plans, detailing the specific actions, procedures, and activities that need to be executed to meet organizational goals.

The operational strategy involves roles like PMOs , team leaders, individual contributors, and team members, and plays a pivotal role in the successful implementation of broader strategies.

Cascade Strategy Execution Platform improves operational efficiency by eliminating duplication and aligning teams toward common goals. It helps reduce waste caused by misalignment, promoting streamlined operations and optimal performance.

Key characteristics of operational strategy

Tactical Execution : Operational strategies focus on executing tactical steps to achieve business objectives, offering a detailed roadmap for execution.
Short-Term Focus : Geared towards short-term goals and might encompass quarterly, monthly, or even daily activities.
Resource Utilization : Deals with resource allocation at a detailed level, including workforce management, budget allocation, and technology deployment for specific projects and initiatives .
Project Management : Operational strategies often include project management to coordinate teams and meet time and budget constraints.
Feedback and Adaptation : They incorporate feedback loops, allowing adjustments as circumstances change.
Immediate Impact : Success at the operational level directly contributes to achieving broader business and corporate goals, serving as a linchpin in strategy execution.

Differences Across The Four Strategy Levels

Understanding the differences helps ensure that each strategy level is tailored to its unique role within the organization.

Decision-making timeframes

Corporate-level strategy involves decisions that span several years to decades, defining the organization's overall direction and long-term vision. In contrast, business-level strategy concentrates on 3-5 year plans, dealing with the competitive position in specific markets or industries. Functional-level strategy targets optimizing department functions like marketing, HR, or finance within annual cycles, while operational-level strategy addresses day-to-day decisions to implement higher-level strategies.

Scope of influence

The entire organization is influenced by corporate-level strategy, which sets broad strategic objectives affecting all business units and functions. On the other hand, business-level strategy focuses and zeroes in on individual units to create competitive advantage in the market. Aligning departmental activities with business and corporate goals is the main focus of functional-level strategy. Operational-level strategy, however, details steps for teams and individuals to achieve functional objectives and ensure smooth operations.

Focus areas

Growth, mergers and acquisitions, diversification, and portfolio management are central to corporate level strategies. Competitive strategy, market segmentation, and value proposition for a specific target market or product take precedence in each business unit strategy. Functional-level strategy aims to optimize department-specific activities and resources to support business unit goals. Finally, operational-level strategy emphasizes executing tasks, managing projects, and meeting immediate objectives to support functional goals.

Chart comparing Corporate Strategy, Business Strategy, Functional Strategy, and Operational Strategy

Strategy Levels Aligned: The Key To Effective Execution

Understanding the levels of strategy is a big part of getting the creation right. However, with increased levels, there can be increased confusion.

Our dedicated strategy execution platform , Cascade , allows you to centralize your strategy into one central hub. It empowers you to build your strategic plans and visualize how they work together. Easily see how your corporate strategy breaks down into business, functional, and operational plans , all in one cohesive platform.

screenshot showing how to align strategy levels in cascade strategy execution platform

Cascade simplifies the alignment of projects and encourages collaboration across plans and departments, making strategic execution a breeze.

Sign up to Cascade for FREE or book a demo with one of our strategy experts to learn how you can plan, execute, and track your strategy in one easy-to-use platform.

#1 Strategy Execution Platform Book a time to see the Cascade platform in action. Book a demo

VRIO Framework Overview: Step-By-Step, Template & Examples

The 7 Best Business Strategy Examples I've Ever Seen

Corporate Strategy Breakdown: Components, Types & Examples

Strategic Analysis Complete Guide: Definition, Tools & Examples

Your toolkit for strategy success.

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HM Treasury

Summary of reforms to agricultural property relief and business property relief

Published 30 October 2024

This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected] .

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This publication is available at https://www.gov.uk/government/publications/agricultural-property-relief-and-business-property-relief-reforms/summary-of-reforms-to-agricultural-property-relief-and-business-property-relief

Introduction

The government announced reforms to agricultural property relief and business property relief from inheritance tax at Autumn Budget 2024.

Changes from 6 April 2025

The government has confirmed it will extend the existing scope of agricultural property relief from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or relevant approved responsible bodies. Legislation will be included in Finance Bill 2024 to 2025 and details were set out in the consultation response published by the previous government at www.gov.uk/government/consultations/taxation-of-environmental-land-management-and-ecosystem-service-markets .

Changes from 6 April 2026

The government has also announced it will reform agricultural property relief and business property relief from 6 April 2026. Relief of up to 100% is currently available on qualifying business and agricultural assets. In addition to existing nil-rate bands and exemptions, the 100% rate of relief will continue for the first £1 million of combined agricultural and business property to help protect family farms and businesses, and it will be 50% thereafter. The government will also reduce the rate of business property relief available from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM. A full list of recognised stock exchanges can be found at www.gov.uk/government/publications/designated-recognised-stock-exchanges-section-1005-income-tax-act-2007 .

The reforms mean the majority of claims for these reliefs will be unaffected. Almost three-quarters of estates claiming agricultural property relief and the majority of estates claiming business property relief in 2026 to 2027 are expected to be unaffected by these reforms. This means more than 3,000 estates making claims each year are expected to be unaffected. The reforms are expected to only affect around 2,000 estates each year from 2026 to 2027, with around 500 of these claiming agricultural property relief and around 1,000 of these holding shares designated as “not listed” on the markets of recognised stock exchanges. [1]

The government has decided to retain these reliefs but better target them, as it is not fair or sustainable for a very small number of claimants each year to claim such a significant amount of relief. This also contributes to the very largest estates paying lower average effective inheritance tax rates than smaller estates. More information is in the statistical annex at the end of this summary and in section 4.4 at www.gov.uk/government/statistics/inheritance-tax-liabilities-statistics/inheritance-tax-liabilities-statistics-commentary#iht-liabilities-and-taxpaying-estates .

Detailed summary of reforms from 6 April 2026

A more detailed summary of the reforms from 6 April 2026 is below. The government will publish a technical consultation in early 2025. This will focus on the detailed application of the allowance to lifetime transfers into trusts and charges on trust property. This will inform the legislation to be included in a future Finance Bill.

The £1 million allowance

A new allowance will apply to the combined value of property in an estate qualifying for 100% business property relief and 100% agricultural property relief. For example, the allowance will cover £1 million of property qualifying for business property relief, or a combined £400,000 of agricultural property relief and £600,000 business property relief qualifying for 100% relief.

If the total value of the qualifying property to which 100% relief applies is more than £1 million, the allowance will be applied proportionately across the qualifying property. For example, if there was agricultural property of £3 million and business property of £2 million, the allowance for the agricultural property and the business property will be £600,000 and £400,000 respectively.

Assets automatically receiving 50% relief will not use up the allowance and any unused allowance will not be transferable between spouses and civil partners.

The allowance covers the following transfers:

property in the estate at death

lifetime transfers to individuals in the 7 years before death (“failed potentially exempt transfers”)

chargeable lifetime transfers where there is an immediate lifetime charge, so for example when property is transferred into trust

Where the rate of relief for the agricultural property or business property is at 50%, for example quoted shares in company giving the transferor control, the rate of relief will not be affected by the new allowance.

£1 million allowance for trusts

The trustees of certain trusts are liable to an inheritance tax charge of up to 6% of the value of property held in a trust every 10 years. There is also an exit charge when property leaves the trust. Agricultural property relief and business property relief can apply to property in trust.

There will be a combined £1 million allowance for trustees on the value of qualifying property to which 100% relief applies, on each ten-year anniversary charge and exit charge, consistent with the treatment of qualifying property chargeable to inheritance tax on death. The government will publish a technical consultation in early 2025 on the detailed application of the policy to charges on property within trust.

Settlors may have set up more than one trust comprising qualifying business property and/or agricultural property before 30 October 2024, in which case from 6 April 2026, each trust would have a £1 million allowance for 100% relief.

The government intends to introduce rules to ensure that the allowance is divided between these trusts where a settlor sets up multiple trusts on or after 30 October 2024.

The rates of relief

The rates of relief will apply in the following way for transfers on or after 6 April 2026.

First £1 million

The existing 100% rate of relief will continue to be available for the first £1 million of property qualifying for business property relief and agricultural property relief.

The existing rate of relief will continue at 100% where it is currently this rate. The exception is for shares designated as “not listed” on the markets of recognised stock exchanges, such as the AIM, where the rate of relief will be 50% and will not be affected by the new allowance.

The existing rate of relief will continue at 50% where it is currently this rate and will also not be affected by the new allowance.

Over £1 million

The existing 100% rate of relief will be 50% for the value of any qualifying assets over £1 million. For example, this means an interest of £2 million in shares in an unquoted company would attract 100% relief on the first £1 million and 50% relief on the second £1 million. This means a potential inheritance tax liability of £200,000, and an effective inheritance tax rate of 10% before the application of any other exemptions and the nil-rate band.

The rate of relief for shares designated as “not listed” on the markets of recognised stock exchanges will be 50%.

The existing rate of relief will continue at 50% where it is currently this rate.

Lifetime transfers prior to 6 April 2026

The new rules will apply for lifetime transfers on or after 30 October 2024 if the donor dies on or after 6 April 2026. This prevents forestalling. For example, a lifetime gift of unquoted shares of £2 million made on or after 30 October 2024 will be a failed potentially exempt transfer if the donor dies within 7 years. 100% relief would apply to the first £1 million and 50% to the next £1 million under the new rules if the recipient owned the shares until the donor’s death and the donor’s death is on or after 6 April 2026.

Nil-rate band and other exemptions

Estates will continue to benefit from the nil-rate band, residence nil-rate band, and other exemptions (such as for transfers between spouses and civil partners). Transfers to individuals more than 7 years before death will continue to fall outside the scope of inheritance tax in the normal way.

Inheritance tax liabilities relate to the overall value of the estate so these can be paid from the proceeds following the disposal of other assets within an estate or by other means. Liabilities relating to agricultural and business property can currently be paid in equal annual instalments over 10 years in certain circumstances. More detail is available at www.gov.uk/paying-inheritance-tax/yearly-instalments .

Statistical annex: distribution of claims at death for agricultural property relief and business property relief in 2021 to 2022

The tables below provide information on claims at death in 2021to 2022, the latest available data. These tables include the value of assets qualifying for relief and the estimated tax cost to the Exchequer. Qualifying assets could be subject to 100% or, more rarely, 50% relief.

Agricultural property relief

2021 to 2022.

Totals may not sum due to rounding to 3 significant figures.

Business property relief

Totals may not sum due to rounding to 3 significant figures.

HMRC does not routinely data capture the type of business property relief qualifying shares from IHT400 accounts into its digital systems, as it is not currently required for the administration of the tax. Around 40% of all estates claiming business property relief claimed it on AIM shares (at least partially) in a sample of 2021 to 2022 tax returns. Around 20% of the value of all qualifying investments for business property relief were AIM investments. HMRC estimate the tax cost to the Exchequer relating to AIM shares was £185 million.

[1] Source: HMRC analysis.

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