Understanding the Value of Corporate Strategy

As your business continues to grow, you may begin to consider the best way to ensure that this growth is both profitable and sustainable. Among other things, this is where corporate strategy comes in. The term corporate strategy may sound slightly grandiose, or else unnecessary, to small business owners.

However, it is both less complicated than it sounds and more important for growing businesses than many recognize.

Simply put, corporate strategy is concerned with two distinct questions: first, what businesses your company ought to be in, and how the company can manage these different business units.

Corporate strategy is distinguished from competitive strategy only in that it addresses how a business can maintain competitive advantage under all business divisions. In other words, a business ought only to concern itself with corporate strategy once it has begun to expand into other areas of business than its original market.

According to economist Michael Porter, corporate strategy has three main concepts that can be used together to maintain success: restructuring, transferring skills, and sharing activities. Restructuring is perhaps the most important aspect of corporate strategy, as it makes a business more nimble in its management and business strategies as it grows.

Transferring skills is part of this restructuring, and involves moving both organizational capability and management to the part of the business that most lends to competitive advantage. Finally, sharing activities makes a business more efficient by combining central functions of its various divisions – such as sales and finance – which ultimately serves to give each of the business’ parts more power to contribute to the whole.

The main objective of corporate strategy is to add and maintain value to your growing business. Diversification has the potential to add value, but may actually end up costing a company if an adequate and efficient corporate strategy is not employed. Therefore, the value of corporate strategy is in the ability it provides to maintain and create value during business growth.

Given this understanding of corporate strategy, the benefits may appear to be beneficial to only large corporations. However, this is no the case. Smaller growing businesses can also use the resources, organizational structure, and decision making of corporate strategy to maintain value in their organization, no matter the size. In short, asking the right questions under corporate strategy can help transition a small business as it generates growth.