Which type of strategy sets the overall direction for an organization?

Corporate strategy is designed to set the overall direction and framework for an organization as a whole. This strategy encompasses the long-term goals and initiatives of the entire company, guiding decisions about resource allocation, portfolio management, and overall company structure. It addresses key questions such as which markets to enter, how to manage business units, and how to achieve competitive advantage. This high-level strategic approach is crucial as it aligns the various sectors of the organization towards a common vision, ensuring that all functional strategies within the organization are cohesive and supportive of the overarching goals.

In contrast, functional strategies tend to focus on specific departments or areas within the organization, such as marketing or finance, addressing how to optimize resources and processes to achieve departmental goals. Business strategy is more about how to compete successfully in particular markets or industries. Institutional strategies, while relevant in certain contexts, do not typically define the overarching direction of an organization in the same comprehensive way that corporate strategy does.