Everything You Need to Know to Create a Corporate-Level Strategy

Corporate-Level Strategy

Corporate level strategy is a holistic view of an organization and addresses its entire strategic scope. It includes decision-making regarding the markets to compete in and regions to operate. If yours is a multi-business firm, the Corporate-Level Strategy also covers the resource allocation process. 

In other words, the corporate-level strategy helps a firm identify the business it shall engage in and determine which direction to take to reach its objectives. You can use digital signage to show your employees the business goals you need to achieve.

Role of corporate-level strategy

  1. It gives a company direction on which business areas it should take part in to maximize its profitability.
  2. It outlines a company’s business strategies to enter or exit from various business areas. This includes: 
  • Resource allocation among a firm’s different business units 
  • Transferring resources from one business to another 
  • Managing your portfolio to ensure you achieve your corporate objectives.

Types of corporate-level strategies

1. Stability strategy

Companies adopt this strategy when their existing businesses are doing well but lack prospects for significant growth.

A company should pursue this strategy when: 

  • Its major strategic decisions lean towards the incremental improvement of its functional performance. 
  • It serves customers in the same service or product market outlined in its business definition.

This growth strategy requires reinvestment, innovation, strategic planning, and research and development while maintaining its business definition. 

Reasons to adopt stability strategy 

  • It has minimal risks. Frequently introducing new methods and products may lead to a firm’s failure. But the larger your firm and the greater its success, the lower the risk of failure. 
  • If your company is flourishing and you expect the same success in the future, the stability strategy is what you need. 
  • It can evolve since company managers constantly seek action and do not consider other alternatives. To react to the forces of change in the environment, companies adopt the stability strategy. 
  • Many companies primarily embrace it to improve their firm’s functions through better distribution and usage of resources. 
  • It does not require you to redefine your core business as your markets, functions, and products remain the same. 
  • This strategy is easy to implement as most activities are done routinely.
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2. Retrenchment strategy- Corporate-Level Strategy

This strategy requires companies to redefine their businesses to include a new product line, exit some markets, and reduce their functions. It consists of layoffs, research and development, marketing reduction, and increased receivables collection. 

Restructuring can be a great turnaround strategy. It comes as: 

  • backward integration  
  • vertical integration 
  • horizontal integration 
  • forward integration

Redefining the business and reducing its activities can improve a firm’s performance, but requires strategic management. Retrenchment strategy is the least used strategy and involves total or partial withdrawal from markets, functions, and products in one or more business areas. 

Reasons to adopt retrenchment strategy 

  • If your firm is experiencing a period of decline, and you have prospects of bringing back its profitability. However, if your prospects are not good enough, you can use controlled divestment to abandon market share and reduce assets and expenses. 
  • If your firm’s top management is pressuring you to improve performance 
  • If there are better or new business opportunities where your firm can leverage its strengths and competencies.

This strategy is mainly used during crises. For serious crises, you may need a liquidation strategy; for minor crises, pace retrenchment is ideal; for moderate crises, divestiture of several units or divisions may be necessary.

3. Expansion strategy

Companies adopt this strategy as a diversification strategy, aiming for joint ventures or mergers and acquisitions. 

They focus their major decisions on significant increments in their activities within their current business definition and serve additional service or product sectors or add functions and markets, not in the original definition. 

This strategy requires you to set strategic goals on redefining your business to widen its scope. When adopted, expansion strategy leads to the inclusion of new markets, functions, or new products. However, you can adopt this strategy without changing your business definition. All you need is to increase the pace of your activities and strategic alliances. 

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This business growth strategy is entrepreneurial because it involves introducing and developing new markets and products or market penetration to build share. It is the way to improve your performance. 

Reasons to adopt expansion strategy 

  • Your business is volatile. This will require expansion for survival. 
  • It gives your firm a growth-oriented perception and CEOs pride in presiding over such a company. 
  • Most executives already embrace prospects of expansion and growth. 
  • The expansion brings in more cash flow. 
  • Expansion benefits the whole society. 
  • It gives the firm a competitive advantage because of its experience and operations scale.

4. Combination strategy

This strategy entails a mix of expansion, retrenchment, and stability strategies. You can adopt these strategies simultaneously or sequentially to improve a firm’s performance. In this case, strategists apply these strategies to different aspects of the company. 

This strategy aids differentiation and diversification in the industry. Some possibilities from a simultaneous approach are: 

  • Stability in some parts, expansion in others 
  • Stability in some areas, retrenchment in others 
  • Retrenchment in some, expansion in others 
  • All three are in different areas of your company

A time-phased combination has greater possibilities when a firm considers its function, markets, and products and chooses to change its business definition or pace of activities. 

Reasons to adopt combination strategy 

  • If you have a large firm operating in a rapidly changing environment 
  • If your firm is multi-industry during the recession period 
  • If your existing products are in different life-cycle stages 
  • When your divisions do not perform evenly, and their future potential is not the same

Conclusion

Many firms explore different strategy alternatives when creating their corporate strategy to identify the suitable route for achieving their business goals. Besides the four major types above, you can also incorporate a merger strategy, restructure strategy, and defensive strategy. 

The bottom line is that you should choose the strategy that will work best in your business environment to ensure your business plan is successful.

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