An effective corporate strategy is a crucial component of any successful corporation. A well-crafted strategy has the potential to cause significant growth, an increase in profit, and long-term success. A corporate strategy is a valuable tool for expanding and defining the values of a company. Understanding what a corporate strategy is can help you increase overall profits and financial stability for your company.
Companies use corporate strategies to create and identify long-term goals aimed toward improvement and success.
What is a corporate strategy?
A corporate strategy is a long-term plan that outlines clear goals for a company. While the objective of each goal may differ, the ultimate purpose of a corporate strategy is to improve the company. So a company’s corporate strategy may be to focus on sales, growth or leadership. Another purpose of corporate strategy is to create company value and to motivate employees to work toward that value or set of goals.
Types of corporate strategies
Here are some types of corporate strategies you can implement into your business:
- Growth
A growth strategy is a plan or goal for the company to create considerable growth in different areas. Companies can accomplish growth strategies through concentration or diversification.
- Stability
This strategy maintains the company’s success by continuing practices that work for the company. To do this, the company might invest in areas in which they’re doing well, such as customer satisfaction.
- Retrenchment
The retrenchment strategy encourages the company to change paths to improve the business. The goal of this is to reduce or manage parts of the business that don’t work for the company.
- Reinvention
Reinvention strategies are when a company reinvents, or redesigns, an aspect of the business that may be old or irrelevant. The company might update it with new designs, technologies or products.
Key elements of corporate strategy
Here are few elements of a corporate strategy:
Portfolio management
Portfolio management analyzes the different components of a business to see if they work well together. A corporate strategy uses portfolio management to decide which areas of the company to work on or invest in. Employees use portfolio management to seek security and growth for their business.
Set objectives
To create and implement a corporate strategy, employees typically need to set objectives. A corporate strategy is a plan the company needs to follow, and the plan consists of tasks that describe the company’s mission. Objectives allow a company to record and measure its progress because employees can track whether they’ve completed a goal.
Allotment of resources
Resources refer to the people, materials and capital that run the company. A key component of corporate strategy is to allocate resources to best support the company’s development.
Distribution of power
In a corporate strategy, refer to distributing power within a company, such as determining the hierarchy of the company or how the company makes decisions is an important corporate strategy. An example of this could be deciding how much freedom or authority a certain department receives.
How to evaluate a corporate strategy
Here are steps to evaluate a corporate strategy:
- Consistency
Consistency can help ensure a standardized corporate strategy. Consistent processes can also help identify errors within a system.
- Evaluate resources
Evaluating your resources refers to deciding whether they’re relevant. It can also mean seeing if your company is using all of its resources to increase growth or profits. To evaluate your resources, identify how each resource is working to benefit your corporate strategy. You can always reallocate your resources if you think they could support the company in more beneficial ways.
- Analyze the involved risk
You can also analyze the involved risk within your business to evaluate your corporate strategy. To analyze the risk within your business, look at how your decision-making is affecting your business and decide how much risk you want your company to have.
- Examine the timeline
Timeline is important to guide in corporate strategy for completing your tasks or goals on time and to evaluate the effectiveness of strategy. Consider if your deadlines are reasonable or achievable and ask yourself if you should reduce or extend certain ones.
- Assessment
Understanding how your corporate strategy works can help you think of ways to improve it. You could examine the measurable progress of your processes, such as sales, views or approval rates. Based on your progress, you can assess how efficiently your strategy works and make changes as necessary.
Examples of corporate strategies
Some examples of corporate strategies may include:
- Growth
Growth strategies include a number of approaches from cost leadership and product differentiation to horizontal or vertical integration. The approach a business takes should be governed by detailed corporate strategic planning.
- Stability
With this, organizations are simply maintaining the status quo. They are focused on building the organization at a steady pace. This is a useful strategy to employ following a period of expansion when a company can assess the business and determine a way forward or future strategy.
- Retrenchment
When an organization is facing challenging circumstances part of the corporate strategic planning will involve retrenchment or turnaround. The goal of this strategy is to get the organization back in shape and ready to proceed to either a stability or growth phase.
