corporate-strategy

Why is Corporate Strategy Important

Where we are, where we want to go and how we are going to travel that path. These are some questions raised by a company’s board of directors and its response is developed in the corporate strategy itinerary, a business concept that facilitates the progress of companies towards achieving their objectives.

As in a Formula 1 race, in which riders study in detail what tires to wear, in which curves to risk when to make technical stops and at what points they have the option to overtake, business leaders must analyze “the desired range, competitive contact, activity management, interrelationships and management practices”, according to Quick MBA.

Corporate strategy concept

  • Fred Nichol, in general

    It defines it as a complex network of ideas, thoughts, experiences, objectives, memories and expectations that provide a general guide to take actions in the search for particular purposes.

  • Kenneth R Andrews, in the business field

    It is defined as a scheme of decisions by which the goals of a company are set, the main policies for the granting of objectives are generated and it specifies the type and level of business to which the company will be dedicated.

  • Bruce Henderson

    He defines it as the intentional search for an action plan that allows the development and scope of competitive advantage.

  • Michael Porter

    Corporate strategy refers to being different, to selecting a set of activities different from those that other companies have selected to offer unique value.

  • Pedro Parada and Marcel Planellas

    They highlight the two most important expectations of the corporate strategy, such as where to compete and how to generate value for the company as a whole and from the center of the economic entity.

Corporate Level Strategy vs. Business Level Strategy

Usually used interchangeably, there is a difference between corporate strategy and business strategy , which is that the first refers to the action plan of a certain company in relation to the global market, taking into account various elements such as, setting of countries of operation, accuracy of the projects of diversification and expansion of the market, considering new sectors for the commercialization of its products.

While the second emphasizes the competition within its activity sector, specifying the measures to get its products to market.

For example, the airline Ryanair focuses its corporate strategy on
passenger air transport, while executing a low-cost business strategy.

Types of Corporate Level Strategies

Among the corporate strategy that a company can use, the following sub-types can be distinguished:

    1. Stability Strategy

      These are the strategies that the company uses when it considers that its performance is satisfactory or when the company considers that its growth expectations are very few or zero, so with these strategies it seeks to maintain this situation over time. These are characterized by the total attrition of significant changes.

    2. Growth strategy

      The objective in these strategies is to increase sales, market share, profitability , profits, etc. To this end , product diversification, internationalization, strategic alliances, new acquisitions, the creation of franchises or licenses and many more that fall within the range of corporate growth strategies are applied.

    3. Contraction strategy

      In this case and given by various situations in the market, the company seeks to reduce the magnitude or diversity of operations, after a review and evaluation of those segments that do not question their profitability and become unnecessary segments.

They apply to the reduction of the variety and number of businesses in the corporate portfolio and are considered and represent a strategic outcome of manufacturing and markets without benefits.

  1. Return strategies

    These are strategies that are applied in situations of financial losses, in these efforts focus on converting a situation of loss of money into the return of profits and profitability, restoring the financial strength of the corporate portfolio.

    They are usually used in companies that have problems with short-term solution or in growing companies.

  2. Restructuring strategies

    They are strategic actions undertaken to renew the structural lining of the corporate portfolio or to change the formal relationships of the various components of said portfolio.

Elements that must be taken into account in the design of corporate strategies

The design of corporate strategies is a complex challenge and a huge responsibility that also requires commitment from those in charge of strategic planning.

A strategic plan is designed and designed as a tool that will guide the work and development of the company for a certain period of time.

It is essential that all those who make up the company are informed, adapted and prepared to take on this challenge and that they are clear about what the company expects from them.

For this, a series of essential elements must be considered so that at the time of starting the process of planning, selection and implementation of the strategy everything turns out as expected, these elements are:

  1. The mission or purpose of being of the company.
  2. The vision or direction towards which the company is heading, which it aspires to achieve.
  3. The indisputable values and principles by which the company is governed.
  4. The objectives and goals to be achieved in the short, medium and long term.
  5. The implementation process that includes specific assignments to carry out the work execution.
  6. The internal communication as a tool linking properly to reviewers.
  7. The strategic direction assigned to the different hierarchical levels through the work of supervision of the different tasks and activities.

The monitoring and progressive evaluation of the results, guided by the deadline established for the scope of the objectives and goals set, using measurement tools that facilitate the work. Once the deadlines are met and the evaluation of the results is carried out, the pertinent and necessary decisions must be taken to consolidate the success or correct errors in case one is found.

Ansoff Matrix – Overview, Strategies and Practical Examples

Within growth strategies, it is important to know the Ansoff Matrix, a tool that allows us to study and determine the corporate action plan that best suits the goals and needs of the company.

Created in 1957 by Igor Ansoff and explained in his work Strategies for Diversification, this matrix contributes to the identification of business opportunities in the stages of corporate expansion, structuring the field of action of managers in four directions depending on the relationship between products and the market.

Thus, the so-called product-market matrix establishes four growth strategies:

  • Market penetration: the company seeks to increase sales without modifying the products or services or the markets in which it operates, but using advertising and marketing actions with which to promote greater consumption by current customers and attract new consumers. For example, brand loyalty cards are part of this type of corporate strategy.
  • Development of new markets: the objective is to bring current products or services to new markets, whether geographically or by entering new segments. An example of this corporate growth strategy would be to open to online commerce or disembark in a new country or city.
  • Development of new products: unlike the previous one, this strategy maintains the markets in which the company operates but with a new, updated or renewed offer that best meets the needs of the public. It would be the case of the different firms (focused on age segments and different purchasing power) that Inditex has been creating, such as Uterqüe, Stradivarius, Oysho …
  • Diversification: the fourth option of the Ansoff Matrix is ​​to develop new products for new markets. For example, tobacco company Philip Morris has carried out this strategy by acquiring several food companies.

Practical Example Of A Corporate Strategy

Future Vision Goals

Some real examples:

  1. Position the company as a sales leader in the international market.
  2. Get a portfolio of 1 million international clients.
  3. Reach the top positions in the ranking of most valued business schools.

Mission

Some real examples of successful corporate mission:

  • Manufacture natural foods without preservatives or dyes from organic products.
  • Create useful computer applications for SMEs and individual entrepreneurs.
  • Offer senior management training courses to young people and senior managers for the challenges posed by the new 21st-century economy.