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Why does a Firm Need a Corporate Strategy?

Corporate strategy helps a business shape decisions about where it should go in order to be competitive. First, businesses determine their mission and then develop strategies related to what they have decided. The need for corporate strategies is essential because most of the time there are things you can do as an individual that can cause problems for your organization like making acquisitions that may not serve a corporate goal or taking on debt that looks more advantageous in the short-term but will ultimately end up hurting the company's growth prospects in the future.

It's pretty common knowledge that corporate strategy means making and keeping a profitable company. Both the market-based/industry structure view and the resource-based view of the firm traditionally focus on how successful companies could stay ahead in their respective industries with the advantage of being the only ones who have what it takes to be one of "the best". But these don't really work in today's business.

No one size fits all

When a company operates in two or more industries or businesses, its corporate strategies need to be clear. For example, as someone who has invested in Google and other internet companies, you might know that Google's success is attributed to Strategy A, while Microsoft has been successful with Strategy B. What this means is that it is important to understand your business area and assess what your strategy will be so as to avoid wasting time and resources; ultimately the goal is to ensure that everyone within the organization can better communicate their objectives. So although the two companies mentioned may have started out very differently using different strategies, over time one strategy might be deemed more effective than another; which makes strategic planning so vitally important for all businesses of all sizes.

Strategy vs Tactic Redefined

A strategy is differentiated from a tactic as it's more abstract in its approach and meaning. Unlike tactics, strategies are usually long-term plans that aim to achieve a medium to long-term objective, whereas tactics can extend over shorter periods of days or weeks. Both strategies and tactics are used interchangeably as they derive their meaning from the action or operation itself instead of its purpose - which might differ depending on context. For example, one type of strategy used in business would be marketing whereas an example of a tactic would be spending money on online marketing.

Impact Explained

Formal corporate strategies are essential to successful businesses. They play a vital role in helping companies focus on single objectives which makes it easier for a corporation to know what needs to be done and how quickly they can achieve the desired goal. In its general definition, a formal corporate strategy assists any organization with specific direction in its diversity of departments, divisions and staff members. Formally written strategies help companies stay focused and reach their highest potential.

Acquisitions

Typically, a major investment and divestment decisions are made at this level by top leadership. Mergers and Acquisitions (M&A) are an important part of corporate strategy. Corporate Strategy also helps determine the optimal set of businesses to be integrated into a corporate portfolio.

Diversification

Growth strategies are essential to companies looking to expand their presence in ways that will help them better acquire additional market share. There's no need for companies to rush into the implementation of a new strategy especially if they haven't yet perfected how best to approach such important matters as diversifying or adopting different attitudes related specifically when it comes down to managing competition. Corporate strategies can be a bit more conservative, however, as one has to take measures that will secure their future growth over time or make plans for managing retrenchments. Stability strategies are less risky than growth and corporate, but they need careful attention in order to make sure profit levels don't fall and production costs aren't cut too much as this could eventually have negative effects on the marketplace!

Strengthen Competitive Advantage

According to Peter Drucker, measuring a company’s success is quite simple. He says, “What gets measured improves.” When the company is clear on its strategy, one can more easily measure its progress and results and make improvements accordingly. But if your corporation isn't specific with its goals, then it’s difficult to gauge where you need to go in order to gain the most amount of profit which might not even be possible if you are just competing against yourself as a brand. Global corporations must have clearly defined strategies at all levels of the organization because each business unit is run differently. Unless comprehensive attention is given to nurturing each unit's revenue-generating ability, corporate positioning gets lost in translation and planning goes out the window! Make sure that your strategy or plan aligns directly with your own personal objectives for your team and for the future of your business too!


Case Study: Amazon

Amazon is a global e-retailer and cloud services provider headquartered in Seattle, Washington. From its humble beginnings as an online book store established by Jeff Bezos in 1994, the company quickly grew to become the largest Internet sales platform. The acquisition of Whole Foods Market Inc. has further strengthened the company’s presence in the foods and groceries segment. Amazon's structured approach to acquiring companies can be best described by its goal of becoming Earth's most customer-centric company. Amazon endeavors to offer its customers a seamless digital shopping experience, featuring a wide assortment of products at competitive prices.

Basis of Review

A well-thought-out business plan is an essential aspect of a healthy new company. A business plan allows you to make a clear and precise framework for how your company will grow, what tactics it will use to do so, and how strategic growth is likely to affect other areas of the business in return. Business planning is about honesty and insight, making sure that there are not only feasible plans in place for achieving objectives but also exploring whether or not such goals are realistic and practical from certain angles. It’s about making honest evaluations of where you currently stand as well as where you want your company to be three years from now. It involves creating the most appropriate course of action that links these two points into a foreseeable sequence of steps throughout the intervening time period.

Eliminate cost with sense

Allocating corporate overhead costs may be obvious, but subtle costs and constraints can have a big impact on your business unit that the executive team may not even know about. One such example is having to share limited resources across departments which could result in a loss of motivation among employees. It's important to explain why certain decisions were made, spend time complying with planning processes, live by parent company guidelines, or else give up the opportunity to motivate your team with 100% equity ownership. While it may seem like a sacrifice worth making in good faith, we urge you to take this into account before proceeding without proper preparation.

Conclusion

Strategy is, of course, not the only factor determining a company's success or failure. Competency and leadership are likewise important facets that play a role. But luck can be a factor, too - although what people call good luck is often the product of good strategy. And conversely, the most inspiring leaders or team leaders who happen to excel at their jobs yet work under horrible business conditions will simply have to exert their full competence in order to prevent damage from being done as a result of an inappropriate strategy (i.e.: The company loses money due to mismanagement and/or external forces beyond anyone’s control).

Although economic principles will be in opposition to corporate strategy, this is not necessarily true. Strategies that add value often help diversify a corporation and give it a competitive advantage over others.