What Is Corporate Strategy?
Corporate strategy refers to the overall plan or direction of an organization in pursuit of its long-term objectives. It includes defining the company's mission, vision, values, and goals, as well as identifying the markets and products it will focus on, the competitive advantages it aims to build, and the resources and capabilities it needs to achieve its objectives.
Corporate-level strategy involves developing a strategic roadmap for the organization to guide its actions. By doing so, the organization stays focused on its long-term strategic objectives while remaining agile enough to respond to changes in the business environment.
What Are The 4 Components Of Corporate Strategy?
Understanding the components of corporate strategy will help you formulate a well-thought-out strategy that’s easy to follow and execute.
Visioning involves setting the high-level direction of the organization—namely, the vision, mission, and corporate values.
Objective Setting involves defining specific and measurable outcomes you want to achieve over a chosen timeframe.
This is the practice of allocating human and capital resources to support objectives.
This is an essential part of corporate strategic planning since companies can’t always take advantage of all feasible opportunities. Leaders must learn how to determine the optimal strategic mix that will balance risks with returns.
👉 Use this free corporate strategy template to quickly start the development of your own company-level strategy.
The Corporate, Business, And Functional Level Strategies
A complete organizational strategy has three levels:
Corporate-level strategy is the highest level of corporate strategic planning. (We’ll dive deeper into it in this guide).
Business-level strategy connects the strategic goals of the company strategy with the needs and capacities of the business unit level.
It turns a corporate-level strategic goal into a practical strategic goal based on business-level knowledge and experience.
Functional-level strategy refers to the specific plans and actions developed by individual departments within an organization to achieve the goals and objectives set out in the corporate-level strategy. These strategies are more detailed than corporate strategies, and they focus on the day-to-day activities of the organization.
Functional-level strategies are developed based on the company's overall goals and objectives. Their aim is to ensure that each functional area of the organization contributes to the company's success in a coordinated and strategic way.
For example, let’s say a company has set a corporate-level goal to reduce costs. One of the functional-level strategies that the operations team can set is to streamline the supply chain to reduce the cost of inventory and raw materials. Another functional strategy would be to optimize the use of technology to reduce costs.
Corporate-Level Strategy vs. Business-Level Strategy
Corporate-level strategy and business-level strategy are two different levels of strategic planning that organizations use to achieve their goals and objectives.
Corporate-level strategy involves making decisions about the overall direction and scope of the organization. This includes deciding which industries and markets to compete in, how to allocate resources across different business units or product lines, and how to diversify the company's portfolio of products or services. This strategy level focuses on long-term goals and objectives and often involves mergers and acquisitions, joint ventures, vertical integration, or other strategic alliances.
Business-level strategy, on the other hand, focuses on how individual business units or product lines will compete in their respective markets. This involves making decisions about product differentiation, pricing, marketing, and resource allocation to achieve specific goals and objectives. This strategy level deals with shorter-term goals and objectives, often involving product development, marketing campaigns, and operational improvements.
Both levels of strategy are crucial for organizational success and should be aligned with each other.
📚 Read more: The 7 Best Business Strategy Examples I've Ever Seen
How The 3 Strategy Levels Relate To Each Other
The three levels of strategy are interdependent and must be aligned to achieve an organization's overall goals and objectives.
For example, a corporate-level strategy of diversifying a company's portfolio by acquiring a new business unit would require a business-level strategy to integrate the new business and align it with the company's existing operations. The functional-level strategy would then focus on optimizing processes, allocating resources, and developing capabilities to support the new business unit's operations and ensure its success.
Understanding how the three strategy levels communicate helps you build a solid strategic plan.
What Are The Benefits Of A Corporate-Level Strategy?
The benefits of a well-defined corporate strategy for an organization increase as the organization scales. It’s possible for small or even medium-sized businesses to get by without investing time in developing their corporate strategy. However, as the needs of an organization grow, it becomes increasingly necessary to develop the strategic planning process in a way that reflects the complexity of that organization.
In the end, corporate strategy benefits any organization, regardless of size.
The three main benefits of having a solid corporate strategy are:
1. Provides strategic direction
The three main benefits of having a solid corporate strategy are:
By implementing a corporate strategic plan, an organization can establish its desired direction and provide clear guidance to leaders, stakeholders, and employees on how they prioritize decisions, making strategy execution and goal achievement much easier.
2. Helps you stay flexible and adapt when needed
In a dynamic world, organizations need to keep pace with changes as they happen.
By continually defining corporate strategies and strategic goals in relation to opportunities or threats as they appear, your organization will be able to consistently perform optimally.
3. Improves decision making
Without clearly defined strategies at a corporate level, business, and functional level units will perform sub-optimally.
The abstract level of decision-making at the corporate level will translate to better results at other decision-making levels and help employees feel that their organization has a clear direction and purpose.
The Common Problem With Corporate Strategy
One of the most common problems with strategy, especially corporate strategy, is that it gets stuck in the boardroom. Leaders are the experts, they’ve climbed the ropes, and they have the scars to prove it. It is obvious that they are best suited to make strategic decisions and put together a plan that steers the company in the right direction.
That statement seems reasonable, but it contains a lie.
Creating a static PowerPoint document is not a strategy, no matter how long or beautiful it is. As Mike Lardner, former Director of Corporate Strategy at Whirlpool points out in Cascade’s state of strategy report: "The main problem with the strategy is that it's usually not even strategy. It's just the first pass at next year's budget!"
There is an annual cycle of secret meetings that exhaust resources and no one can figure out where, why, or what to do. Often, the strategy is left in a PowerPoint until the next year, and it's so manual to synthesize that it's not even updated or tracked on regular basis.
Types Of Corporate Strategy And Examples
Your corporate strategy must reflect an optimal approach that responds to the needs and the environment of your business. Thus, it’s helpful to divide corporate strategy into four classifications based on external and internal factors.
These are strategies that focus on a company’s growth and might include entering new markets, increasing or diversifying existing ones, or using forward or backward integration to take advantage of economies of scale.
Growth strategies are typical with most tech companies like Facebook (Meta), Google, and Amazon, which consistently take advantage of new opportunities.
When Facebook launched in 2004, it was a small social media network among several competitors. Using a market penetration growth strategy aimed at Harvard college students and eventually a tech acquisition strategy that purchased emerging technology, Facebook grew from that small campus social network into the ubiquitous company it is today.
These are designed to consolidate an organization's current position, with an eye toward creating a strategic environment that will provide greater flexibility for the future employment of growth or retrenchment strategies.
Stability strategies are more conservative strategies, focused on preserving profit, reducing costs, and investigating future strategic possibilities.
Steel Authority of India adopted a stability strategy focused on increasing efficiency rather than increasing the number of plants. This move helped address the over-capacity in the industry and retain the company’s position as the third-fastest growing steel producer in the world.
These are a response to unprofitable or damaging elements of a business or organization, such as eliminating unprofitable assets or product lines.
General Motors (GM), once the world’s largest automaker, started implementing retrenchment strategies as it pulled out its brands from major global markets like Russia, India, and Western Europe. Declining sales and profitability were the main culprits as its competitors consistently took the top sales spots.
📚Recommended read: Strategy study: The Journey of General Motors
Sometimes, organizations combine the above-mentioned strategies even if they appear contradictory.
For example, a company may utilize a stability and retrenchment strategy to keep profits growing while preserving capital. Or they can continue taking risks to pursue growth while keeping certain portions of the enterprise stable.
A combination strategy is useful when organizations are large and operate in complex environments, such as having several enterprises operating in different industries with different needs.
For example, McDonald’s continues to pursue growth by expanding to new markets worldwide while maintaining a profitable core menu and focusing on improving operational efficiency.
Another example is the move by Hewlett-Packard to split the company into two in order to pursue a stability and growth strategy at once. HP Inc., the stagnant arm that sells personal computers and printers, focuses on a stability strategy to maintain profitability. Meanwhile, HPE, the exciting business that sells industrial-grade server computers to enterprises, focuses on a growth strategy as it taps an underserved market segment.
📚Want to study strategies of leading global companies, including Heineken, Coca-Cola, and Unilever? Click here to check out our Strategy Factory with 100+ strategy studies.
What Should My Corporate Strategy Model Look Like?
There are a number of different models you can apply to the strategic planning process, each with its own merits. We’re going to show you how to build your corporate strategy model based on our tested and proven strategic planning model—the Cascade model, used by +20,000 teams worldwide.
Corporate strategy planning is the highest level of strategic planning within a business or organization and must take into account a huge number of variables.
1. Defining A Vision
Reducing complexity is a must. The basis for corporate planning is defining an abstract vision or overarching goal based on the current organization and its environment.
The vision will provide a point of reference for your mission, and the mission will serve as a benchmark for measuring goals and evaluating strategies.
Follow our guide for an in-depth explanation of the process of writing a vision statement.
2. Describe Your Company’s Values
Your company’s vision statement is a destination. Company values describe how you will arrive at this destination.
The values that you outline should be clear, concise, and, above all, real. To get a good sense of how to define your company values, read our guide.
3. Choose Focus Areas
Think of focus areas as the foundation for your corporate planning. They are strategic priorities that your organization will be focusing on within a given timeframe.
4. Define Objectives
Once you’ve defined a clear vision and selected your focus areas, you must outline the strategic objectives.
These objectives will represent a more concrete example of what you want to achieve, with stated deadlines and milestones.
5. Establish KPIs
The corporate planning process ends with the definition of KPIs that will allow corporate strategists to track and adjust the strategic objectives based on results.
📚Dive deeper into each element with this comprehensive guide on how to write a strategic plan.
Get A Blueprint For Corporate Strategic Planning
Corporate strategic planning gives your company the essential conceptual tools to succeed in competitive markets. Taking the time to plan a well-structured corporate strategy will quickly yield benefits that are quantifiable and provide insights into your operations.
Get your free corporate strategy template to follow a structured approach and create a highly effective corporate strategic plan that keeps everyone aligned with the business objectives.