What Is Corporate Strategy?
October 03, 2018 Business Strategy

What is corporate strategy? Simply a well-defined long term portfolio approach set by an organisation after analysing their business carefully. Its main purpose is to create maximum corporate value while motivating their workforce to implement the right actions to win customer satisfaction.

Companies that want to provide customer value successfully must go back regularly to their corporate strategy as it helps them improve in various areas likely to hinder their goals and accomplishments.

 

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What is corporate strategy? Three steps for positive results

A company aiming to develop a corporate strategy with positive results must focus on three things:

1.   Develop a clear vision

Create and share a long term vision to keep their team motivated while engaging investors. Think of where you want to be in the next five to ten years.

2.  Portfolio approach definition

This ensures that your portfolio strategy defines how to achieve the vision. Think about areas of investment you need to venture and areas to expand. Remember to establish corporate process and policies that reflect nurturing approach by your company.

3.    Make corporate strategy a continuous strategy

A company must make corporate strategy an on-going strategy. Keep offering value creation, which is too fast to your competitors. They will regularly go back to the drawing board to renew their strategies.

What to consider when applying corporate level strategy

Long-term objectives

The strategic plan should be long-term and something realistic.  Think about the services or products you would want to make and identify your targeted customers. Think about the markets to supply and activities you would enjoy being part of.

Opportunity`

Take time to analyse the opportunities available and how they might change with time. Get a lot of information and facts about possible evolvement before you make the final decision. Weigh the challenges and risks anticipated in your journey and come up with solutions in advance.

Innovation

Make sure your services or products are unique with a clear differentiation that can only be aligned with your company. It is not easy, but attainable with proper strategies. This is about brand creation. A good example is iPod by Apple. Since they created this product, no one has matched their quality. So people buy their products despite the high prices.

Competition

The corporate strategy you choose must always remain competitive. Go for a market that is in need. It could be underserved or not served at all. This means you lead from the beginning because competition is very little or there is none.  You are able to capture the market before others discover it and position your business. You can build a brand in that industry making it hard for new entrants to get into the field.

Economies of scale

Be innovative but lower the price of your services or goods. Include high quality services to customers and some unique features. A good example is how Wal-Mart (Asda in the UK) has low prices but makes huge sales therefore making higher profits than most stores with highly priced products.

Time to market

Carefully weigh between building and buying services or products you plan to sell. See which is cheaper and profitable. Is it buying or creating the solutions? You can outsource some of these services or buy products and save one costs.

Tests

Keep updating and reviewing your strategy periodically to make sure that it’s still effective. Test it in small phases. You will know if it’s valid and good enough for your firm’s market needs and objectives.

Risks undertaken and possible failures

Identify risks in your plan learn from them by coming with a solution beforehand. Allow your firm to accept and move on beyond failures using insights acquired from failures and successes from your past. Use any positive or negative experience as knowledge to improve the future.

Stakeholders

After completing the plan, share and reason with your company’s employees on how to implement it. Guide them and provide them with information on the various initiatives to be carried out in the business. Let them understand its relationship to the firm and all employees.

However, do not forget about external shareholders including suppliers, customers, industry analysts, partners and investors. Explain to them what it means, reasons behind it, and how it will change revenue generation and impact the value of shareholders.

Examples of corporate strategy

Every business has its mission. Therefore, it has to create business strategies designed to offer support to its specific goal, value and vision in its industry, market and business. As a company or an organization, it’s prudent to take time to understand and analyse the market, external environment and the industry as whole to come up with strategies that will boost your company’s success.

What is corporate strategy? The ‘why’ of corporate strategy

1.    Growth

This is a strategy that a company applies to expand in various markets to offer services or sell their products through new business or current business. Growth strategy may require a company to hire more employees, increase their market or revenues. They grow by applying concentration, diversification, vertical integration or horizontal integration.

Diversification is a strategy that tries to boost profitability of an organization by increasing sales of new products or services in a new market. Both vertical and horizontal integration refers to the process of acquisition or merging with other companies in the same industry.

2.    Stability

The stability strategy means a company does not change doing its current business. They maintain their market share and sell same services or products. This strategy is intended to help a business maintain its position and their focus is incremental improvement.  It involves changing the business operations either collectively or individually in customer functions, technology alternatives or customer groups.

Stability strategy is used by companies that do not find market conditions favourable to them. They choose not to make any major changes in their business operations. The organization remains stable and safe with the stability strategy and will not seek any different options.

3.    Renewal 

The corporate renewal strategy is also known as a turnaround strategy. It’s always an emergency response to a firm’s poor performance. The managers must apply strategies to address the declining performance of a business. If the sales are low or the company has to meet unexpected expenses or costs, a strategy to alleviate the problem can be created. Here are several ways to use the renewal corporate strategy:

                             See Below;

  • Timing: The corporate can be used before a company gets into deep trouble such as bankruptcy. There are different options that can help prevent negative events from occurring and ruining a business. Timing is important because if the management takes a loan while the business is still on its feet and profitable, they can easily appeal to new stakeholders and it will be renewed on time.
  • Division analysis: For a corporation with numerous divisions, renewal strategy considers each division’s future profitability and fixes any problems experienced by a division that has the potential make high profits in the forthcoming days. Unprofitable divisions without a bright future can be sold off.
  • Implementation problems: In some companies, it is hard to implement the turnaround strategy. A good example is a manufacturing company with broken equipment. No matter how high the costs are, they must pay for them to keep the business running. Other industries have it easier like a software company can save on office expenses by hiring people online. They do not need to rent an office in every country where they want to sell their products and services.
  • Company purpose: Sometimes the corporate renewal may bring a change on the firm’s main business. For example, if the costs of manufacturing are too high, a company can decide to import ready products from a country where they are cheaper. Or a newspaper can move from hardcopy to softcopy.  It can also include buying a competitor with popular products or useful patents. All these can help reduce production costs and increase profit.
  • Products: A firm can use corporate renewal to change their product lines. A good example is targeting wrong audience. So they try out new demographic and reach many customers. Redesigning a product or changing its packaging can also increase sales. These are just a few, more can be done.

What is corporate strategy? The benefits of corporate strategy

A corporate strategy not only states the intended outcome, but also devises credible means to achieve these goals. The strategy determines a firm’s scope of activities and the way its business processes back the firm’s goals. A corporate strategy helps to improve a firm’s competitive position, its expectations and resources while increasing shareholder value to an amount more than its physical assets.

Company results allocation

A company can use a corporate strategy to limit its resources allocation to the best available investment opportunities. The performance of every business unit is assessed during budget and strategic planning processes. They may revise resource allocation or acquire assets based on the assessment results. Each business unit is allocated funds according to its market opportunities.

Establish expectations

The corporate strategy is conveyed to business units to enhance performance and establish the expectations of external and internal stakeholders. The objectives focus mainly on profitability, productivity and market standing under which the company sets measurable objectives including attaining a specific amount in return on investments and market share. The established expectations help stakeholders to align activities with strategic goals and lead in some roles until the corporate strategy is successful.

Improvement in competitive position

The corporate strategy checks on the business profit and growth performance. It helps to improve firm’s competitive position by managing and structuring the business units.

Corporate Strategy varies from business to another and its main focus is to manage risk, resources and return. After all, managers will only success if they consider all factors before making any strategic decisions.

It’s evident that strategy is paramount in every business to meet its goals and objectives. Although the types of strategy may differ, results are the same; to enhance customer satisfaction, grow the business and achieve set goals.

Good luck!

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