The present-day world of start-ups and industries calls for a sound strategy instrumental to achieving long-term success. Corporate strategy is essential in outlining the goal of an organisation. The type of strategy you select is a primary indicator in assessing the company’s financial success. Corporate strategy is focused on delivering value and creating a unique marketing advantage to seize maximum market share. It takes a portfolio approach to strategic decisions to assess how to create optimum value.
Firms must assess how the various business strategies fit together and how they draw an impact on each other. Corporate strategies are based on business strategy and are primarily concerned with strategic decision-making. In this article, let us discuss the different corporate strategies.
Types of corporate strategy
Effective corporate strategy is founded upon self-evaluation. This is derived by asking the primary questions about your business, such as the current state of your company, where you want the company to be, the resources, finances, etc.
Whilst constructing the company’s corporate-level strategy, you must seek the best ways to distribute resources evenly. This helps to serve the needs of the company and achieve planned objectives. In addition, it can help you acquire a contingency plan, helping you to remain prepared for unforeseen circumstances. Obtain a competitive strategy certificate by enrolling in a competitive strategy course to implement the right corporate strategy for your business.
- Growth strategy
Growth strategies focus on achieving considerable business growth in market share, revenue, penetration, etc. This can be achieved by concentrating on the core business or through diversification wherein the company decides to diversify further.
If a company aspires to grow yet stay in the same space, this is referred to as a concentration growth strategy. Diversification, on the other hand, is a popular strategy that may include the aspiration of a company to grow depending on changes in the offerings. This includes introducing new products and services or moving into new spaces. A competitive strategy online course can be of help to those wanting to learn about growth strategy.
- Stability strategy
The term “stability approaches” describes an organisation ‘s attempts to gradually increase operational effectiveness. Little and medium businesses that are happy with their current productivity and functioning in stable environments are more likely to embrace it. This kind of approach aims to maximise the performance of the current company while failing to promote development.
Stability tactics include:
- The slowdown with caution approach
This technique is used as a consolidated phase before moving forward with growth. The main goal is to make sure that organisational levels are affected by the change initiatives. It is followed by organisational systems adapting to new innovative strategies. Additionally, a deliberate attempt has been made to put off the tactical adjustments until a more suitable time.
- No-change approach
Like the name implies, this approach is a decision to maintain ongoing operations and regulations in the foreseeable without trying anything new. Effectiveness of the plan hinges on the corporation not undergoing any major change. Achievement is reliant on the absence of a scenario changing significantly, hence it is infrequently seen as a sound strategy. The organisation ‘s formidable position in a sector with little projected expansion provides stability, which incentivizes it to stick with its current strategy. It incorporates a small inflation correction.
- Profit strategy
The stability approach can be devised to stretch earnings when a company notices its prosperity ebbing away by making existing activities more efficient. It does so by cutting costs, reducing investment, increasing productivity, and raising prices to overcome difficulties. It is linked to a desire to boost the evaluation of a company and has enterprise value as the primary focus. There is a pressing need to understand the types and applications of stability strategies.
- Retrenchment strategy
This is a defensive strategy, and the primary focus lies in changing the negative trajectory whilst improving the company’s position. It is changed by eliminating the parts that pull it down. It is formulated when companies observe the need to revamp the business model and sell assets to generate cash flow. It is also the least used strategy and is considered a protective measure during the company’s time of crisis. It may also require a firm to redefine the business, involving divestment of SBU or product line, whilst abandoning the markets. Retrenchment necessitates a firm to use layoffs whilst increasing the collection of receivables. A corporate strategy course delves further into the benefits and applications of retrenchment strategy.
- Turnaround strategy
This strategy involves making a dramatic change from the previous course of action. It includes measures such as financial restructuring, crisis management, revamping the product line, cost-saving initiatives, etc.
This strategy deals with eliminating several parts of a business. The elimination is performed for various reasons, such as focusing on core businesses, introducing attractive sale opportunities, etc. It leads to lower complexity of the rest of the business and can be reinvested. If you are not familiar with the intricacies of the strategies, charting a course for success can be difficult.
- Combination strategy
When an organisation adopts a blend of all the above strategies, then it is known as a combination strategy. It is used either sequentially or simultaneously to improve performance. In this strategy, strategists consciously apply several strategies to the firm’s parts and distinct future periods. This is popularly used by multinational firms needing multiple strategies to work at the same time.
When to use a combination strategy:
- When the organisation is large and faces a complex changing environment
- The products are in different stages of the life cycle
- For a multiple-industry firm facing a recession
- Ideal for firms, and divisions where they do not share the same prospects
The complex nature of the business drives the need for different strategies to be adopted per requirements. No organisation follows a similar approach throughout as their needs, too, tend to vary. For example, a company interested in divesting businesses might also need to formulate expansion plans focused on strengthening businesses.
An organisation wanting to follow a stable strategy needs to consider expansion at some point, thereby needing a different strategy. Moreover, multi-industry firms need to adopt multiple strategies simultaneously for smooth operations.