Clear direction is very important for businesses to be successful. Types of corporate strategy articulate how a company competes and grows in the marketplace. Corporate strategies are long-term plans to help the company manage its resources, competition, and position in the market to achieve goals. It is with an eye on the big picture that decisions are made at the highest level for sustainability in growth for long-term benefits. Each company adopts a corporate strategy contingent on its size, industry, and objectives. There are four major types of corporate strategy: growth strategy, stability strategy, retrenchment strategy, and combination strategy. These strategies all have particular aspects and advantages that help run a company efficiently. The corporate strategy determines investment decisions, mergers, acquisitions, and market expansion plans. The focus of corporate strategy is different from that of the business strategy.
What is Corporate Level Strategy?
A corporate-level strategy is a long-term plan implemented by an organization concerning its goals and competitive advantage. It defines the actual overall direction of the company. It has aspects related to growth, stability, or retrenchment. It also assists businesses with market entry, product expansion, and acquisitions. A well-defined corporate-level strategy marries all departments. The business operations contribute to the company’s vision and objectives.
Corporate strategy is not to be confused with the individual strategies of business units or functions. These pertain to specific markets or product lines. The functional-level strategy includes daily operations. Corporate-level strategy is, therefore, the entire course for the organization. For example, in diversifying into cloud computing (AWS), e-commerce, and digital streaming, Amazon’s corporate-level strategy helps reduce risk exposure and engenders profitability.
Types of Corporate Strategy
Every type of corporate strategy is defined by its specific features and benefits. The chosen approach will be based on their current position in the marketplace and the resources at their disposal.
Growth Strategy
A growth strategy is developed to increase revenues, improve market share, or achieve other forms of expansion. Businesses may use this strategy to create new products, acquire firms, or enter new markets. The growth strategy makes the companies more substantial and more competitive.
Features of Growth Strategy
- Increases sales and income.
- Expands market presence.
- Includes innovation and product development.
- Demands a lot of investment.
- Involves mergers, acquisitions, and partnerships.
Growth strategy typically signifies enormous investment by companies in research and development, diving into new technologies, and soon entering new territories. Growth strategies also help companies improve profitability and build strong brands.
Stability Strategy
While a stability strategy carries on business without major changes, it is used by companies with a significant market position and little need for quick growth. Efficiency and good profitability depend on it.
Characteristics of Stability Strategy
- Not risking significant financial outlays and investments.
- Keeps a steady revenue and market position.
- Ensures operational efficiency.
- Directs to customer satisfaction and quality control.
- Business profits are maintained within a stable arena.
Stability strategy doesn’t allow organisations to make any drastic changes. This strategy is all about improving processes internally and with customer service. It is suitable for organisations that have reached saturating maturity in the market and want to cement their presence.
Retrenchment Strategy
A retrenchment strategy reduces business operations to cut costs and make operations more efficient. This strategy is employed by companies when they suffer financial constraints or when sales do not meet expectations. It helps companies stabilise by concentrating on core business activities.
Features of Retrenchment Strategy
- Cuts costs by shedding unprofitable operations.
- Better financial improvement.
- It helps companies recover from losses.
- Focuses businesses on core activities.
- It may occasionally include restructuring and layoffs.
Businesses that follow retrenchment strategies may divest assets, close subsidiaries, or reduce headcounts. Such a strategy is not detrimental but helps organisations remain competitive in adverse economic climates while positioning themselves for future expansion.
Combination Strategy
Combination strategies use elements of or all strategies: growth, stability, and retrenchment. Companies apply different approaches to performance-based business units based on performance and market conditions.
Features of Combination Strategy
- Balances risks with rewards.
- Provides flexibility to make decisions.
- Optimises companies’ resources.
- Promotes diversification.
- Adapts to changing conditions in markets.
A company can concentrate on expansion using the combination strategy while minimising risk aspects elsewhere. This way, the company ensures sustainable growth and minimises risk against finance.
Corporate Strategy Examples
These types of strategies are cooperative-related strategies at the corporate level, which are achieved through collaboration with competitors to reach common ends. Through these strategies, firms share resources, knowledge, and risks to be more competitive anywhere in the marketplace. Partnerships, joint ventures, or even alliances are examples of cooperative strategies in which organisations optimise their efforts to synergise benefits and gain a graver influence.
Joint Ventures
Companies pool resources, expertise, and technology together to start a new business entity and generally enter new markets, sharing risks and leveraging each other’s strengths. Example: Sony Ericsson: The joint venture in the mobile phone industry between the two companies, Sony for electronics expertise and Ericsson for telecommunication technology.
Strategic Alliances
Companies cooperate without merging into one new legal entity and then often improve product offerings by sharing technology or co-developing solutions. Strategic alliances are intended to protect independence but still gain access to the expertise found in other firms.
Example: Starbucks strategically partners with PepsiCo to distribute bottled coffee drinks globally.
Consortium
A temporary partnership forged by companies to embark on large-scale projects such as infrastructure development or research projects whereby several pool their resources and skills while limiting the individual risks involved.
Example: Several aerospace companies, Airbus and Rolls-Royce, joined forces to develop fuel-efficient aircraft engines, thus sharing research costs and technological advances.
Technological Licenses
The right, usually granted to one company by another, to use its technology to enable, facilitate, and expand the activity, which does not require that much investment into R&D.
Example: Qualcomm regulates its mobile chip technology for smartphone manufacturers so that the companies can deliver advanced devices without worrying about developing their chipsets.
Importance of Corporate Strategy
Corporate strategy plays an essential role in the performance of an organisation. It establishes a frame around the decision-making process, ensuring it synchronises with the firm’s objectives.
- Resource Allocation: Maximally directing efforts to the core strategic priorities will provide efficiency. However, will investment succeed in that?
- Sustainable Competitive Advantage Improvement: A business can differentiate itself through a strong corporate strategy to assure continuity in competitive advantage and win-win success.
- Sound Decision-Making: Corporate strategy becomes the basis for sound and informed business decisions. It helps the organisation evaluate the risks versus opportunities in business.
- Encourage Growth in Businesses: Carefully and strategically executed continuous corporate strategy ensures that the companies will continue on the growth path and enter new markets, which eventually translates to profits.
Corporate Strategy vs Business Strategy
Business strategy applies to individual units/products, while corporate strategy applies to the whole organisation. Successful companies combine these strategies to sustain themselves competitively in a constantly changing environment. Corporate strategy and business strategy are two different terms. A corporate strategy concerns the entire organisation, while a business strategy deals with a specific business unit.
| Aspect | Corporate Strategy | Business Strategy |
| Focus | Entire organisation | Specific business unit |
| Objective | Long-term growth | Short-term competitiveness |
| Decision Level | Top management | Middle management |
| Scope | Expansion, investment, and risk management | Product positioning and market competition |
Types of Corporate Strategy FAQs
1. What are the four major categories of corporate strategy?
The four principal types of corporate strategy are growth, stability, retrenchment, and combination. The choice of strategy depends upon the organisation’s goals and the market’s state.
2. Why is corporate strategy crucial?
Corporate strategy helps to ensure the long-term existence of a business. It provides the efficiency of resource allocation within the company, its positioning in the market, and the acquisition of competitive advantage.
3. How is corporate strategy different from business strategy?
The key distinction in the ongoing discussion is that Corporate and business strategies are referred to differently. The corporate strategy involves the concern for the whole organisation, while the business strategy revolves around specific units.
4. Write some corporate strategy examples?
Apple is pursuing a growth strategy, McDonald’s is using a stability strategy, General Motors is using a retrenchment strategy, and Samsung is applying a combination strategy.
5. What arethe components of internal corporate strategy?
Components of corporate strategy are vision and mission, resource allocation, competitive advantage, market positioning, and risk management.
