Corporate Level Strategy- Definition and Types

Corporate level strategy- Definition and types
Corporate level strategy- Definition and types

Do I tell you a secret? I used the word corporate-level strategy for many years without knowing what it actually meant. Later on, on finding out the meaning, I realized I was using it aright. A miracle right? Join us as we x-ray the concept of corporate-level strategy. It promises to be an interesting one.


 

What is Corporate Level Strategy?

Business owners need targeted corporate-level strategies to position themselves for success.

Corporate-level strategies define a plan to hit a specific target needed to achieve business goals.


Strategies tend to be long-term in nature but you should have a medium for adjustments, based on uncertainty and changing market conditions.

Let me explain.


Decision making in organizations come under 3 strata of management; the top, middle, and low-level management.

Strategies or what you can call business decisions are made by each of these levels. These strategies are made in 3 different ways by these management levels.

That is to say, strategies can be formulated at three levels, namely, the corporate level, the business level, and the functional level.

At the corporate level, the strategy is formulated for the organization as a whole. In essence, a corporate strategy deals with decisions related to various business areas in which the firm operates and competes. It is when a business makes a decision that affects the whole company.


The decision affects the company’s finances, management, human resources, where the products are sold, just about everything in the company. The purpose of a corporate-level decision is to maximize profitability and maintain financial success in the future.

In addition, this decision is utilized to help increase competitive advantage over competitors and to continue to offer a unique product or service to consumers.

I hope you understood the concept of Corporate level strategy or decision?

Let us now move to the types of corporate-level strategy.

 

What are the Types of Corporate Level Strategy?

Strategies can come in diverse forms. For the sake of this post, we will discuss the four major types of corporate strategy.

 

 

 

 

 

Expansion/Growth  Strategy

Every business wishes to grow and occupy a substantial market share if it wants to continue in that niche.

Growth strategies look at methods to get more revenues from the sales of products or goods.

There is a vertical and horizontal strategy when referring to growth strategies. A vertical strategy seeks growth by taking over various components of the operation it usually outsources.

For example, a juice company farming for the fruits it uses. By taking over part of the supply chain, they are able to better control quality and supply needs.

A horizontal growth strategy refers to a business extending its reach of existing products or services to new geographic areas or new target markets.  

I hope you know that this horizontal growth strategy can come in the form of niche marketing? That is expansion into other niches or market segments you never were involved in.

Mediums through which a company can expand are; Concentration, Integration, Diversification, Cooperation, and Internationalization. Concentration is done by Market penetration, Market Development, and Product development.

During the growth stage, you can promote it using Advertising. Learn Low-cost Advert Strategies.

 

Stability Strategy

It is possible for a company to reach its optimal market share goals.

At this point, management might choose a stability strategy to maintain market shares. Methods used to achieve this include making processes more cost-efficient through automation, cutting costs where possible, and negotiating better costs on raw materials.

So, when a company is convinced that it should continue in the existing business and is doing reasonably well in that business but no scope for significant growth, the stability is the strategy to be adopted.

This strategy also requires management to focus on customer retention. This is a popular strategy used during adverse economic periods.

However, there are times when this strategy makes sense for a small business, regardless of the external business environment. You have to figure that out.

If your business operating in the stability strategy, you can Pause/Proceed with caution, make no change or operate with a Profit strategy.

 

 Retrenchment Strategy

Retrenchment strategy may require a firm to redefine its business, abandon some markets or reduce its functions. It may make a firm layoff, reduce R&D or marketing or other outlays,  and increase the collection of receivables.

Redefining the business and reducing the pace of activities can improve the performance of a firm. Expansion in combination with Retrenchment is a very common strategy. Retrenchment alone is probably the least frequently used strategy.

Retrenchment strategy involves a partial or total withdrawal either from products, markets or functions in one or more of a firm’s businesses.

This strategy is used during periods of decline and crisis when a business is not thought to bring profitability back to the firm.

Reasons for following retrenchment strategy:

1. The firm is doing poorly, but if it is worth saving, you adopt a turnaround strategy.

2. If there is pressure from various groups of stakeholders to improve performance. You cut the loss-making portion of the business in a divestment strategy.

3. If better opportunities for doing business are available elsewhere a firm can better utilize its strengths. The company can liquidate.

 

Combination Strategy

Combination strategies are a mix of expansion, stability, or retrenchment strategies applied either at the same time in different businesses or at different times in the same business.

Actually, no organization has grown and survived by following a single strategy.

Normally, businesses require owners to adopt different strategies just to suit different situations.

For instance, as companies divest, they also need to formulate expansion plans that will strengthen the remaining businesses, start new ones or make acquisitions.

An organization following a stability strategy for quite some time has to consider expansion. And one that has been on expansion for long has to pause to sustain his businesses. Multi-business firms have to adopt multiple strategies either simultaneously or sequentially.

 

Conclusion

Corporate-level strategies are directives given by top management who make strategic/longterm decisions.

Don’t shy away from this because you are not a management expert.

In like manner, read slowly and ask questions where you don’t understand.

It is quite easy and can save your business from liquidation. In addition, know the strategy to use at every point in the business’s life.

Be wise!

0 Shares:
Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like