Corporate-level strategies occupy the highest level of strategic decision-making and cover actions dealing with the objectives of the firm, allocation of resources, and coordination of strategies of various SBUs for optimal performance. Corporate-level strategy focuses on how to manage resources with risks and returns across a firm.
These strategies are normally expected to help the firm earn above-average profits and create value for shareholders. Corporate-level strategies also address the issues of a multi-business firm as a whole.
What Is Corporate Level Strategy And Why Is It Important
What Is Corporate Level Strategy?
A corporate-level strategy can be used in outlining your company’s goal for the following year. The type of corporate-level strategy you select can be an indicator of the company’s financial success and the method it takes to generate profits.
A corporate-level strategy is a multi-tiered company plan that leaders use to define, outline, and achieve specific business goals. A corporate-level strategy can be used by a small business to increase its profits over the next fiscal year.
Meanwhile, a large corporation might be overseeing the operations of multiple businesses to achieve more complex goals like selling the company or entering a new market.
Why Is Corporate-Level Strategy Important?
The purpose of a corporate-level strategy is to maximize its profitability and maintain its financial success in the future. A corporate-level strategy is utilized to help increase its competitive advantage over its competitors and to continue to offer a unique product or service to customers.
Now, let’s see why implementing a corporate-level strategy is important for your business;
- Strategic Direction: Devising a corporate-level strategy prepares you for changing business environments.
It helps anticipate risks and have a plan for responding to risk factors, in all, you gain strategic direction for your business development.
- Informed Decision-Making: The importance of corporate-level strategies lies in the way businesses make and practice decisions. They are not only preparing organizations for unpleasant situations they also motivate employees toward overall objectives.
- Increased Sustainability: Corporate-level strategies are often developed with the goal of sustaining a business. A corporate-level strategy can measure the growth of your business and inform you whether investments and policies are relevant or not.
While designing a corporate-level strategy may be easy, getting everyone on the same page may be a little bit tough and might require more time.
Types Of Corporate-Level Strategies
When you are constructing your company’s corporate-level strategy, you are also seeking the best ways to distribute resources to serve the needs of the company to complete planned objectives.
Here are the different types of corporate-level strategies that you can employ;
Stability Strategy
The stability strategy is when you proceed in working with clients in your industry, this strategy also assumes that your company is doing well under this current business model.
You should employ a stability strategy to ensure incremental progress that would still bring in revenue, and such stability strategies include; research and development and product innovation.
Expansion Strategy
The expansion strategy would be great if your company is planning on creating new products and reaching new audiences.
The expansion strategy can also be used if you are upgrading the level of activity within your business like taking on new clients and hiring more employees, you can also apply this strategy if eventually, the region you are operating in has a strong economy or if your focus is to enhance your performance.
This strategy has large earning potential for executives, which can lead to raises and expansion of employee benefits packages as well. The company can adopt an expansion strategy in the following five ways;
- Concentration
- Integration
- Diversification
- Cooperation
- internationalization
Retrenchment Strategy
A retrenchment strategy requires you to strongly consider switching your business model, this may involve stopping the manufacturing of a product or reducing its functionality.
This strategy is only used when the company is looking for ways to take protective measures to keep the solvency of the business.
Combination Strategy
A combination strategy is a hybrid of the previous three strategies to create your business model. Its main purpose is to increase the company’s performance and find out which areas of your company can grow based on market conditions.
This strategy makes it easier for you to make adjustments to your strategy because you can be more flexible with your time and how much should be allocated to each function of your strategy.
Merger Strategy
Merger strategy has long been an interest to economics, a merger combines two firms leaving one surviving firm.
It also describes the case where firms who are involved in the same business line get together and form a separate firm.
Restructure Strategy
Restructure strategy involves expansion and contraction of the portfolio or changes in the ownership pattern and control. It is normally not required only when a business is about to fall but rather it is required for improving the performance of the units.
Furthermore, this concept is important for the growth and expansion of the companies and it is necessary to prevent a unit from falling apart
Examples Of Corporate-Level Strategies
When you are considering the corporate-level strategies you should undertake keep these examples in mind;
- Diversification
- Forward or backward integration
- Horizontal integration
- Profit
- Turnaround
- Divestment
- Market penetration
Diversification
Diversification can give you the chance to build a long-lasting relationship linked to the execution and satisfaction of the products and services you render.
Forward or backward Integration
Forward integration is when you take the position of a company that served a previous role in your supply chain. Your business becoming a distributor changes the scope of your operations and you will need to move resources to help move and store products for companies in your area.
Backward integration entails that you start in the supply chain business and you move to be a supplier of goods and services.
Horizontal Integration
Horizontal integration happens when a business comes together with another business in the same vertical.
If you merge with another company you will need to make sure you have the operational capacity to handle the merger and work with new employees eager to learn your process and how they differ from the company you acquired.
Profit
The profit strategy is only dedicated to having more capital to spend once you take out your expenses.
Turnaround
Turnaround refers to increasing the effectiveness of existing products, so you can sell more of them. This may require you to boost your testing processes and raise your quality assurance standards to generate more profit.
Corporate Level Strategy vs. Business Level Strategy
Business and corporate-level strategies tend to differ primarily in their objectives, corporate-level strategies function higher than the business-level strategy. Managers should develop a business-level strategy with the overall corporate-level strategy in mind.
A business strategy focuses on competing in the market place while a corporate strategy focuses on business growth and profits.
Here are the differences between corporate-level strategies and business-level strategies;
Corporate Level Strategy
A corporate-level strategy entails a clearly defined, long-term vision that organizations set, seeking to create corporate value and motivate the workforce to implement the proper actions to achieve customer satisfaction.
Corporate-level strategy is also a continuous process that requires a constant effort to engage investors in trusting the company with their money, thereby increasing the company’s equity.
Business Level Strategy
Business-level strategies refer to the combined set of moves and actions taken with the aim of offering value to the customers and developing a competitive advantage.
A business-level strategy examines how firms compete in a given industry, firms derive such strategies by executives making decisions about whether their source of competitive advantage is based on price or differentiation.
Also, business-level strategies are mainly concerned with the firms having multiple businesses, it determines how the firm is going to compete in the market with each line of business.
Frequently Asked Questions
What does corporate level strategy deal with?
Corporate level strategy deals with the objectives of the corporate. this simply means that corporate-level strategies are concerned with questions about what business to compete in
What is corporate level strategy in strategic management?
Corporate level strategy is the strategic level that concerns itself with the entirety of the organization, where decisions are made with regard to the overall growth and direction of a company.
What is the correct corporate level strategy definition?
It refers to the top management’s approach or game plan for administering and directing the entire concern, these are based on the company’s environment and internal capacities.
