The term corporate strategy was originally coined to describe decisions a company should make to reach its goals and produce policies to achieve them.
However, this definition of corporate strategy is seen as a bit wishy-washy, because it could apply to any issue that a company faces.
Businesses face several challenges when designing and putting into practice corporate strategies. According to McKinsey & Company, a multinational management consulting firm, many fail to distinguish between a strategic review from the annual budgeting process.
There is now a more complete definition that makes a distinction between business-level and corporate-level strategy.
Keep your business strategy simple, concise and easy to understand.
So, what’s the difference between business-level strategy and corporate-level strategy?
- Business-level strategy – according to the University at Albany, State University of New York, business-level strategies “detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets.”
- Corporate-level strategy – Michael E. Porter, professor of business administration at the Harvard Business School, stated in his article “From Competitive Advantage to Corporate Strategy“ that a corporate-level strategy is the overall plan for a diversified economy.
Corporate strategy is essentially answering the question “how should a company manage a set of businesses together?”
Harvard professors, Davis J. Collis and Cynthia A. Montogomery, described corporate strategy as “the way a company creates value through the configuration and coordination of its multimarket activities.”
What is a good corporate strategy?
A good corporate strategy consists of six elements that together promote a corporate advantage. These elements can be represented in a Corporate Strategy Triangle.
Delloite says “corporate strategy is about enabling an organization to achieve and sustain superior performance by overcoming business challenges, understanding industry trends and linking tangible actions to a clear corporation vision.”
According to the U.K. National Occupational Standards for Management and Leadership, you must be able to do the following:
1. Establish a clear, achievable and compelling vision which sets out where the organization should be going.
2. Identify and prioritize strategic objectives that are consistent with the vision of the organization.
3. Balance risk with desired outcomes.
4. Balance innovation with tried and tested solutions.
5. Ensure that your plan is flexible and open to change.
6. Develop policies and values that will guide the work of others towards your vision.
7. Delegate responsibility for achieving goals and allocate resources effectively.
8. Identify measures and methods for monitoring and evaluating the plan.
9. Balance the needs and expectations of key stakeholders and win their support.
The sides of the triangle are the foundations of corporate strategy: resources, organization, businesses.
Video – Good corporate strategy
Professor Richard Rumelt of UCLA says that where companies go wrong is when they make their strategy too complicated. If you can set out your strategy in a few pages, there is something wrong, he believes.