Good Corporate Strategy—Meaning, Types, and How to Evaluate it Correctly
Strategic planning isn’t a new concept but it’s become more important lately, given the rise of digital transformation and agile project management. Consequently, these shifts are reshaping how businesses work. Therefore, companies must have a clear plan for what lies ahead to adapt and succeed. This is where corporate strategy steps in. It is the plan for what a company chooses to achieve in the long term. In this article, we delve deep into understanding what corporate strategy is, the different types of corporate strategy endeavors to undertake, and how to evaluate which is best for the business.
In this blog, you will learn:
- What is a corporate strategy?
- What are the different types of corporate strategies?
- How can an organization evaluate its existing corporate strategy?
- What factors should be considered when selecting a corporate strategy?
What is a Corporate Strategy?
Seasoned politicians wouldn’t start a political campaign without a solid strategy. It is, in fact, the foundation for their campaigns. Similarly, a corporate strategy is the foundation for business success in business management. It is the plan of action that the company takes to achieve its long-term goals. Furthermore, it is a blueprint for a company’s internal teams to minimize business risk, centralize operations, and maximize growth.
Some of the key aspects of a corporate strategy include resource distribution, organizational structure, portfolio management, and strategic decision-making and trade-offs. While resource allocation ensures the effective assignment of human and capital resources, organizational design makes sure the business objectives are met. On the other hand, portfolio management ensures that the business’s portfolio is in line with its strategic goals. Prioritization creates a balanced strategic mix for minimizing risk and maximizing returns.
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What are the Different Types of Corporate Strategies?
1. Growth Strategy
A growth strategy examines the possibilities of business expansion into new markets and industries. The main focus of this corporate strategy is to achieve business growth without compromising the company’s foundational objectives. It analyzes the company’s current portfolio and suggests different growth strategies through concentration or diversification. Concentration refers to a company developing the core of its business, such as a bookstore investing in selling more books. On the other hand, diversification is when a company enters new markets to expand its business; for example, a retailer foraying into hospitality.
2. Stability Strategy
A stability strategy aims to maintain the company at its current pace of development. Simply put, this type of corporate strategy encourages businesses to continue practices that have worked for them in the past. Companies can achieve stability through status-quo and probability-driven strategies. While status-quo strategies focus on maintaining the company’s existing performance, probability-driven strategies try to boost the company’s value through portfolio optimization and cost-cutting.
3. Retrenchment Strategy
A retrenchment strategy focuses on improving the existing condition of the company. This means switching business models or changing markets to see what works and what doesn’t. The main goal of this type of corporate strategy is to effectively manage different aspects of the business in order to improve operations. Companies can improve their existing condition through turnaround and divestiture strategies. Turnaround strategies focus on making aggressive changes in the company’s processes, products, or services to achieve dramatic changes in the company. On the other hand, divestiture is getting rid of the parts that don’t perform.
4. Reinvention Strategy
Reinvention strategies are when a company reinvents or redesigns an aspect of its business that may be redundant or hasn’t changed for decades. Companies can reinvent themselves with evolutionary and revolutionary strategies. Evolutionary strategies bring new changes to the way services or products are delivered. Revolutionary strategies change the entire business model, leading to significant shifts in market dynamics.
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How Can an Organization Evaluate Its Existing Corporate Strategy
Whether starting out or taking over an established business, periodically evaluating corporate strategies is very important. Doing so ensures that the business is using its resources efficiently. Moreover, companies can take advantage of new developments. Here’s how to evaluate a corporate strategy.
1. Gather Data and Information
Start by collecting relevant data and information about how the current corporate strategy is doing. Additionally, try to gather information about the prevalent market trends, competitor strategies, how the strategy has impacted the finances of the business, customer feedback, and other relevant metrics. This will help businesses understand the effectiveness of the existing strategy and gain a competitive advantage over others.
2. SWOT Analysis
Businesses can conduct a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis to gain insights into how well the corporate strategy leverages the internal capabilities of the business. Additionally, SWOT analysis will also help companies solve any underlying performance issues.
3. Competitive Benchmarking
One of the best ways to evaluate a corporate strategy is to compare it with that of competitors. Simply put, it involves comparing the company’s performance, products, services, and practices against those of competitors. This way, companies can identify areas for improvement.
4. Stakeholder Feedback
Gather feedback from stakeholders such as customers, employees, investors, and suppliers. This is important because their perspectives can provide valuable insights into the corporate strategy’s impact on various aspects of the organization.
What Factors Should be Considered When Selecting a Corporate Strategy?
The factors that influence a corporate strategy depend on the organization’s current situation, the industry in which it operates, market conditions, and the overall objectives. However, here are some broad-based key considerations:
1. Competitor Analysis
Competitor analysis assesses competitors’ strengths, weaknesses, opportunities, and threats. Additionally, it helps companies determine how a business’s products or services will stand out from the rest.
2. Internal Capabilities
Before selecting a corporate strategy, it’s important to determine if the organization has the required financial resources, human capital, technological capabilities, and operational capabilities to execute the strategy.
3. Financial Considerations
When choosing a corporate strategy, keep in mind the company’s financial objectives, such as projected revenue growth, expected profitability and return on investment, and cash flow generation. This helps in allocating resources appropriately to support the strategy’s execution.
4. Stakeholder Expectations
Try to determine the expectations of various stakeholders, including customers, employees, investors, suppliers, and the community. Take their interests into account when choosing a corporate strategy execution plan. Essentially, choose a corporate strategy that creates value for shareholders over the long term.
5. Environmental Impact
Companies must choose a corporate strategy that aligns with the external environment. That is, the strategy should consider environmental factors. Strategy evaluation that aligns with sustainable goals, therefore, is essential. Companies can analyze the impact of a strategy on the ecology by conducting a detailed environmental analysis.
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Learn How to Create a Successful Corporate Strategy With Emeritus
Emeritus offers an array of leadership courses that help learners implement strategic planning to transform their businesses and achieve organizational goals. These courses offered by the best Indian institutes provide the skills needed to redefine their organization’s growth trajectory through proven frameworks and best practices in business strategy.
