Corporate strategy defines a company. An organisation’s corporate strategy will outline a company’s vision, mission, and goals. This strategy is designed to create value, develop a unique selling point, and capture a maximum market share. In many ways, a corporate strategy is similar to a business strategy. However, it’s important to be able to differentiate between the two. Business-level strategy is used to develop a customer base and market a product, whereas corporate strategy identifies which products to sell and how to integrate operations.
If a corporate strategy is effective, it has significant benefits; for example, a well-planned corporate strategy can accelerate growth, drive profit, reduce overheads, and streamline operations. owever, the results of your strategy are dependent on your ability to create one. Largely, this hinges on a robust understanding of approaches to corporate strategy. In essence, there are three key types of corporate strategy: growth, stability, and renewal. In this article, we explain these three frameworks and explore the different approaches to their implementation. Armed with this knowledge, you can work towards developing a strategy that benefits your business at every level.
Index of Content
A company will implement a growth strategy when they want to expand. This could include selling in new markets; growing the number of products offered; or buying out other companies. Growths strategies can have a number of benefits, including increased revenue and greater market share. There are numerous approaches to growth, including vertical and horizontal integration, diversification and concentration.
Case study: Vertical integration
Vertical integration is a growth strategy that places greater control in the hands of a key player in a supply chain. For example, in 2015, Swedish furniture giant Ikea bought enormous swathes of Romanian and Baltic forests to produce wood for their iconic flat pack furniture. Interestingly, this move was prompted by sustainability as much as productivity.
According to an Ikea spokesperson, this purchase was driven by a desire to source raw materials from more responsibly managed forests.
A stability strategy does what you might expect – it enables an organisation to remain operating as it is. For instance, a company may seek to continue to serve its existing client base by offering a consistent level of service. Equally, the business could seek to maintain its market share by keeping its marketing efforts in stasis. Although the business doesn’t grow, nor does it fall behind.
Case study: Caution
When deploying a caution strategy, a firm will continually assess the market before outlining a long-term approach. Often, this strategy is temporary; it seeks to avoid making significant resource investments whilst outcomes are unclear. This strategy is common among manufacturers that are about to launch a new product. For instance, when Cadbury Schweppes launched a new chocolate bar, they conducted meetings with more than 70 trade customers before launching to the public.
If a business is under strain, C-levels need to develop a plan to save the business. For instance, if consumers start to buy fewer products or if costs unexpectedly increase, companies can struggle. Therefore, management will develop a plan to reduce the pressure and make the business more productive. Common forms of renewal strategies are retrenchment and renewal strategies.
Case study: Retrenchment
A common way companies seek to reduce pressure is to cut costs. For example, a company may seek to scale back operations to reduce overheads. A useful case study is British supermarket chain Tesco. At one point, it was estimated that every £1 in £7 was spent with Tesco. However, over-accelerated growth meant that Tesco’s profits began to decline. In response, the company closed 43 unprofitable stores; cut 1,700 management jobs; and sold off Blinkbox and Tesco broadband to Talk Talk.
Drive your company forward with an effective corporate strategy
Corporate strategy focuses on resources, risk and return. The leadership responsible for strategic decisions have to consider numerous factors including operational design, resource allocation, and business portfolio. As the highest strategic plan of any organisation, it is critical that C-levels develop an appropriate corporate strategy. There are numerous approaches to corporate strategy depending on the specific needs of your company. With an expertly crafted corporate strategy, businesses can expand, increase profit, and ensure long-term success.