Corporate Strategy

The results obtained through external and internal analysis provide the inputs needed by a firm to develop it strategic intent and strategic mission. Strategic intent shows how resources, capabilities and core competencies will be leveraged to achieve desired results in a competitive environment. The Mission used to specify the product, markets and customers, a firm intends to serve through various strategies (at the corporate business unit and functional level). This basically throws light on corporate strategies that help firms to leverage their resources and skills to extend their competitive advantage to new areas of activity.
Corporate strategy is basically concerned with the choice of businesses, products and markets. It tries to answer certain key questions: (1) What businesses the firm should be in in terms of the range of products it supplies. Punjab Tractors is a specialized company. It is involved almost exclusively in the manufacture of tractors. Hindustan Lever Ltd. is highly diversified with interests in soaps, tea, washing powders, detergents, tooth pastes, shampoo, creams, salt, hair oils etc. (2) what should be the optional geographic spread of activities for the firm? In the restaurant business, most firms serve small local markets whereas McDonald’s operates in more than one hundred countries throughout the world. (3) What range of vertically linked activities should the firm encompass? Reliance Industries is a key player in each of the products in the Petrochemical – fibre intermediate chain (synthetic textiles, PSF, PFY, PTA MEG) (4) How the corporate office should manage its group of businesses? Corporate strategy spells out the businesses in which the firm will participate, the markets it will serve and the customer needs it will satisfy. Corporate level strategy thus, pertains to the organizations as a whole and the combination of business units and product lines that make up the corporate entity. It addresses the overall strategy that an organization will follow. The process generally involves selecting a grand strategy and using portfolio strategy approaches to determine the types of businesses in which the organizations should be engaged.
Advantages of Corporate strategy:
Bridge the gaps: Corporate helps a firm identify the strategic planning gaps and bridge.
Exploit the opportunities: Through environmental analysis the firm, and identify the areas where it can profitably operate – keeping its own capabilities in mind. It can also counter the threats posed by competitive forces from time to time. Events are not left to chance. Everything is planned in advance so that the firm can set its own growth plan; in tune with its internal strengths and weaknesses
Develop core competencies: By focusing on its strengths the firm can build core competencies in certain fields, and serve the needs of customers better than its competitors. Corporate strategy provides a sense of purpose and direction to the firm in teams to where to operate and how to integrate the various businesses to ensure strategic competitiveness and above average returns. In a way corporate strategy, is more than the sum of the firm’s individual business unit strategies, it seeks to leverage the firms’ distinctive competence from one business to new areas of activity (Pitts and Lei) .
RS Kaplan and D P Norton came out with a popular balanced score card approach in early 90s linking corporate goals with strategic actions undertaken at the business unit, departmental and individual level. The score card allows managers to evaluate from different complementary perspectives. The arguments run thus (1) A firm can offer superior returns to stockholders if it has a competitive advantage in its products or service offerings when compared to its rivals (2) In order to sustain a competitive advantage a firm must offer superior value to customers (3) This, in turn, requires development of operations with necessary capabilities (4) In order to develop the needed operational capabilities a firm requires the service of employees having requisite skills, creativity diversity, and motivations. Thus, the performance as assessed in none perspective supports performance in other areas.
Source: Strategic Management