Why is Corporate Strategy Important?
A corporate strategy can focus every employee and resource in a company on the same objectives, and it aims to use them all efficiently. It gives every employee a set of guidelines they can use in their everyday work to move toward certain targets, which promote the vision and mission of the company. Corporate level planning can also improve efficiency within the organization and help identify unseen bottlenecks or pain-points.
The corporate strategy gives leaders and employees ideas to use for the improvement of distinctive activities (processes and operations) that create a competitive advantage. The strategy can also help executives to protect the company from entering into costly or irrelevant opportunities.
What are the steps involved in strategic corporate planning?
Corporate strategic planning begins by clarifying the vision and mission of the organization and the space the business chooses to compete in. Clarifying the organizations position will help you develop and effective strategic planning framework.
1) Competitive Analysis
A competitive analysis needs to be conducted, to understand the trends that could impact the success of your strategy. Common factors that could be analyzed include political, legal, social, environmental, technological. There may be other factors you may want to consider that are relevant to your business and industry.
2) Strategic Goals & Priorities
Once you have completed a competitive analysis, the corporate leadership team will set the overarching strategic goals and priorities for the organization.
Once the strategic goals and priorities are finalized, each business unit needs to define its strategic goals and plans on how it can contribute to the overall direction of the enterprise. That includes not only what is to be accomplished, but how it will be accomplished including high level plans, budgets, human resources, etc.
Once business unit plans and directions have been set, the information needs to be communicated and shared with leadership inside the business unit so that priorities and plans can be aligned and integrated within a single budget.
What is Strategic Business Planning?
At the corporate level, an enterprise develops a portfolio of businesses they choose to compete in. This is a high-level analysis of a business’s competitive and core capabilities, and how each business contributes to the overarching corporate goals. Supported by the corporate strategic business planning process, these businesses are then set up, sponsored, and supported as business units at the operating level.
What Are The Types of Corporate Strategy?
When looking at the types of corporate strategy, it is important to consider a positioning grid that looks at the source of competitive advantage as well as the space where the business competes (markets, geography, size, etc).
Strategy 1: Low Cost Strategy
This type of strategy is one in which your source of advantage is simply competing on cost and being the low-cost provider. With this strategy an organization must exploit all sources of cost advantage. This includes things such as:
Economies of scale
Cost of inputs
Operations excellence to help drive down costs
This type of strategy requires an organization to compete more broadly (markets, geography, size)
Strategy 2: Differentiated Strategy
In a Differentiated Strategy, the focus is on competing by being unique or distinctively different in your industry. A differentiated strategy provides a product or service in more of a niche market where customers see the importance of offerings and are willing to pay a premium price. While this strategy still has a broad focus on how and where it competes (markets, geography, size), it serves its customers in a differentiated way. Differentiation can include factors such as:
Products or services that are difficult to copy
Strategy 3: Segmented Strategy
A segmented strategy is one in which you have clearly differentiated yourself from the competition. The space in which you compete has a narrow focus. You serve a distinct group of customers with specialized needs. In this space, there are few product or service substitutes that can be offered and while you may not have the volume of customers, profit margins tend to be higher because of the lack of substitutes. and there are few substitutes for your offerings.
It is important for every organization to understand where on a strategic position grid it currently sits and where it may want to be — adapted from Michael Porter
What Is the Difference Between Corporate Strategy and Business Strategy?
Corporate strategy, in contrast, involves the plans that a larger enterprise must form when it is composed of multiple smaller businesses or entities. For example a business unit may need to examine factors unique to the industry or competitive landscape that is fundamentally different than its corporate parent.
As a large enterprise, company, or private equity group takes on more acquisitions, it must work with its respective businesses to craft a business strategy and plan that is unique to them and drive competitive advantage through their products, services, and market positioning.