Corporate-level strategy is about making big decisions. When it comes to where a company will go, how it will get there and how much money will be invested, corporate-level strategy is everything!
When running multiple businesses, the resource allocation process is handled at the company level. Scrutinizing your budgets and giving attention to each company's spending patterns helps maintain corporate profitability for any size business.
A company's strategy is something it should be doing on a regular basis. It's the way that a business creates value, generates revenue and keeps its objectives on pace with its competitors as well as how it wants to grow.
Without strategic business activities, companies can end up just turning to their usual projects and hoping they do better this time around. This is especially when there isn't really any structure in place to help them make internal changes or implement new ideas aimed at improving the way they do business.
Strategies Worth Mentioning
Any successful corporate strategy builds on a number of premises. These are facts of life about diversification. They cannot be altered, and when ignored, they explain in part why so many corporate strategies fail.
So let us take a look at the various business strategies which must be kept in mind for success.
1. Stability Strategy
Stability should be adopted when a business finds that it is doing well in the same business, but no longer has room for significant growth.
In this situation, stability is the best option. This strategy entails efforts to operate in the same business areas that were previously defined - or as similar as possible and apply functionality improvements along the way.
Business decisions will focus on incremental improvement of functional performance rather than structural change.
A business operating under this strategy should not be considered a "do nothing" operation either. It can involve making small changes during the process, but overall it represents the most stable of strategies and organization members may experience positive benefits like less stress than usual because their jobs are typically secure.
2. Horizontal Integration
This growth strategy takes existing products and services and acquires new business operations. A merger is one way of doing a horizontal integration strategy for example. Apple for example began focusing more on music (from only computers) after acquiring another company that specializes in music called Beats Electronics.
Often, the most profitable method of growth is through horizontal integration which is usually done in a time of consolidation where businesses that compete with one another come together so as to not directly compete going forward.
Through mergers and acquisitions, it was less expensive for them to grow instead of opening hundreds of new branches to reach their clients.
3. Vertical Integration
This growth strategy takes the form of the integration of businesses into the company's key segments.
Another function that it serves is the management of cost control at the corporate level since they are able to negotiate more effectively as a single buying entity (i.e. purchasing power) and utilize vertical integration to decrease costs.
A fashion manufacturer, for example, could acquire a textile company or supplier in order to use this secondary source of fabric as an input into their primary production process with respect to clothing manufacturing since it controls flow and adds a secondary source of income because they will be supplying other clothing manufacturers with fabric.
4. Market Expansion
Differentiation is key for any business with a global expansion strategy.
Diversification allows for businesses to tap into local markets and understand what is popular or desired in that area, and then make adjustments to satisfy that need.
This concept can be adapted to a more regionalized business model. For example, if a local farmer provides fresh fruits and vegetables to local restaurants, he might use a specialty mix of salad greens that he offers to his gourmet restaurant clients while keeping the standard items for his other customers.
5. Strategic Collaboration
This corporate business strategy, designed to take advantage of strategic alliances, can be a win-win for all parties if done correctly.
When one company helps another company through its own marketing and promotion, then both partners seek to increase brand awareness, service quality and products.
However, businesses don't formalize these types of partnerships and refer to them as strategic alliances; two parties are aligned with the same goals.
For example, an estate planning attorney develops a strategic alliance with a life insurance agent. A plumbing company might develop a strategic alliance with an electrician. In both cases, they serve the same market, thus they have the same clients with budgets in line with each other's products or services.
You need to take a step back and look at all the businesses as a whole, and make sure that the risk management and return goals complement each other.
A lot of times, people try to increase value by buying another company and then cutting costs to improve margins and cash flow. But in other cases, the acquirer also tries to grow revenue. A corporate strategy is essential, as it can help us understand where we might be heading in the future and how these decisions will affect our development.
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