1. Introduction
The term “corporate” means anything related to a corporation or a large business entity. It’s a legal entity that is created to conduct business activities, generate general profits, and provide limited liability protection to its owners. When we move forward, all these corporate firms require a strategy to grow their businesses as well as make them profitable.
Corporate strategy refers to a general strategy in public firms applied at various levels of organisation concerning its goals and long-term growth. The responsibility for these strategies lies with the top-level managers of the company to discuss, analyse, and finalise strategies to move forward in the market. It defines the vision, mission, values, and goals of the company. This involves developing a strategic roadmap for the organisation to guide its actions, and because of this, the company stays focused on its long-term strategic objectives.
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2. Key components of corporate strategy
- Objectives: A set of objectives helps firms keep a record and measure their growth, which helps employees track their goals and achieve them.
- Visioning: For setting the high-level direction of the organisation.
- Resources: Allocating resources to best support different areas of business
- Strategic roadmap: a clearly defined strategic roadmap laying out the path forward (changes in management)
- A clear definition of the service provided:
- Who is our client?
- What services do we provide?
- What shares do we issue?
- What markets do we serve?
- Track the execution journey: execution should start at the top of the organisation but must cascade down to be successful. It flows from senior leaders to lower levels in firms.
3. Types of Strategies
3.1 Growth strategy
When we talk about growth strategies, the two things that require focus are concentration and diversification.
(a) Concentration: when a firm aims for growth while remaining in the same space in which it is currently operating, this is known as a concentration growth strategy.
(i). Vertical integration: executing on more value chain steps, like being involved in distribution or supplier activities.
(ii). horizontal integration: same offerings in different geographic areas by remaining in the same market where they’re being operated.
(b) Diversification: diversifying it by upgrading their products or services, changing them, or moving into entirely new spaces.
(i). Basis diversification:
In this way, firms bring a new product or service with new capabilities or characteristics to the customer’s attention. This products/services can also be at higher price.
(ii).Cost leadership:
As the name suggests, cost leadership is a strategy where firms offer the same product or service at a more efficient price.
(iii).Adjacent growth:
This can be done by adding an additional product or service, a set of industries, or additional customers by focusing on the most promising adjacent niches and attacking them.
3.2 Stability strategies
In any business, the most important thing can be stability, which means working on your current offerings and making them more efficient. (STAY-AS-IT-IS)
Status quo: focuses on maintaining the existing performance of firms.
Profitability is linked to a desire to boost the firm’s evaluation and has enterprise value as the focus of the strategy.
3.3 Retrenchment strategies
This is the most defensive strategy in comparison to the above-given two strategies because its objective is to change the firm’s negative points and improve its position by cutting off the unrequired points.
- Turnaround: cutting off the dramatic change from the previous course of action (financial restructuring of the company, crisis management, company’s products and services)
- Divestiture: getting rid of business parts for a number of reasons and lowering the complexity of the rest of the business
3.4 Reinvention strategies
It takes parts that have not changed for decades and re-invents them, often with the support of new technologies.
- Evolutionary: evolves the way services are delivered by not changing the models of the company.
- Revolutionary: changing the entire model and giving it a new look and way of operation
4. Red Ocean Strategy and Blue Ocean Strategy
4.1 Red ocean strategy
As the word red signifies something related to anger, that’s what this strategy talks about: “a bloody fight for leadership”. Many firms compete in the market to get their name out there by focusing on existing demand in society, e.g., low-cost offerings or unique products, services, or capabilities. The main growth from using this strategy comes from “re-distribution” and “winning or losing” market share, and that can be limited. (RED: bloody fight for leadership)
4.2 Blue Ocean Strategy
In this strategy, the company chooses to address a new market with unaddressed demand. This space doesn’t have significant competition yet and often offers vast opportunities for growth. It can be promising, but it still carries the uncertainty of having other successful players to look up to and learn from. (Blue: deep calm ocean)
5. Benefits
- Offers strategic direction through which one can completely change their business environment.
- Guides about optimisation to strategize the coming ups and downs in firms
- It enhances the decision-making process of any firm by improving its way of thinking.
- It makes sure that everything is manageable in an organisation, like if they are planning to expand and need some funding, whether it is available or not.
- A business cannot be stable in this economy, which goes ups and downs over time, so prepare their strategy as boldly as possible, as it will help them in the worst conditions.
- It develops sustainable development in firms.
- Clearly defined success, parameters, and goals
- A well-defined strategy helps a firm differentiate itself from other competitors,allowing it to capture a larger market share.
6. Do they help boost profitability?
It cannot only increase profits but also allow for good cash flow and even some borrowing power. The main pillar of any firm is finance. If there are good corporate strategies, then there will be a good increase in profits.
If you enter a joint venture or invest in some firms, there will be a good profit, and you will also have some ownership. One must know that if their company is getting involved with many firms, they also need to diversify their corporate strategies according to the situation. One must understand that calculating the actual return on your investment is necessary for the overall growth of the company.
7. Ways which contribute to increase profitability
7.1 Market positioning
Effective corporate strategies help in understanding customer needs and preferences; by understanding these, they will identify their market segments and position their product or service in a way that makes them different from their competitors. This type of strategic advancement enhances profitability by capturing a larger market share and maintaining higher profit margins.
7.2 Product and service innovation
By prioritising research and development and innovation, companies can improve the efficiency of their products or services. Innovation allows for satisfying customer needs. New products can generate additional revenue streams, boosting their profitability.
7.3 Diversification and targeted expansion
This allows firms to tap into new customer bases, increase market reach, and minimise the risk associated with a single market or product. Expanding and diversifying can lead to growth and improve profitability by capitalising on new business opportunities.
7.4 Financial management
Financial management includes efficient working capital management, an optimised capital structure, honest investment decisions, and effective risk management. By focusing on financial resources wisely and minimising the costs of capital,firms can improve profitability and create sustainable value for stakeholders.
7.5 Strategic partnerships and collaboration
Alliances with other firms can provide numerous benefits, including new access to markets, technologies, and resources. Such strategic collaborations can enhance a company’s competitive position and create synergies that drive profitability.
7.6 Resource optimisation
Effective corporate strategy involves resource allocation and decisions that optimise the use of capital, labour, and other inputs. By aligning resources with strategic properties, companies can eliminate inefficiencies, reduce costs, and enhance profitability.
However, it is important to note that corporate strategy is just one factor among many that influence a firm’s profitability.
8. Examples of 2 corporation
8.1 Starbucks corporation
Starbucks pursued a different strategy by creating a coffee brand and establishing a strong identity. By focusing on their high-quality coffee, design, and customer service, they differentiated themselves from competitors. This strategy helped them gain a huge rise in finance and achieve higher profits with just a few strategies.
8.2 Walmart Inc
They focused on cost leadership and operational efficiency. By leveraging its vast scale,efficient supply management, and bulk purchasing power, Walmart was able to offer low prices to customers. This helped them attract a large customer base and drive large volumes,leading to increased profitability.
9. Why does corporate strategy matter?
For the success of any business, the thing that matters is a good strategy. If you’ve got every kind of resource—service, employees, and financial support—but you don’t know how to strategize them, then all of them are not worthy. Now, to succeed with a good strategy, we require a bold foundation and the ability to adapt to changes in real-time.
The importance of corporate strategy lies in focusing on an organisation with all its resources and capabilities to accomplish clearly defined mid- and long-term objectives.
Elements required
A good corporate strategy consists of six elements that together promote a corporate advantage. They are:-
- Resources
- Buisnesses
- Organisation
- Competitive advantage
- Control
- Coordination
To achieve a good corporate strategy, each element has to be strong enough to support each other uniformly yet flexible enough to evolve with the business.
10. Conclusion
In conclusion, corporate strategies play a critical role in upgrading your market value and resources, which also helps boost profitability. A well-crafted corporate strategy enables companies to optimise costs, capture new opportunities, build strong customer relationships, and manage financial resources wisely. It also lays the foundation for long-term success and sustainable profitability in today’s dynamic business environment.
Reference
- https://onlinelibrary.wiley.com/doi/full/10.1111/joms.12760
- https://www.google.com/url?q=https://burniegroup.com/good-corporate-strategy/&usg=AOvVaw0fQ25PHjC_xNf0hSslDbyB&hl=en-US
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