Learn about the 4 pillars Show What is Corporate Strategy?Corporate Strategy takes a portfolio approach to strategic decision making by looking across all of a firm’s businesses to determine how to create the most value. In order to develop a corporate strategy, firms must look at how the various business they own fit together, how they impact each other, and how the parent company is structured, in order to optimize human capital, processes, and governance. Corporate Strategy builds on top of business strategy, which is concerned with the strategic decision making for an individual business. Learn more in CFI’s Corporate & Business Strategy Course. What are the Components of Corporate Strategy?There are several important components of corporate strategy that leaders of organizations focus on. The main tasks of corporate strategy are:
In the following sections, this guide will break down the four main components outlined above. #1 Allocation of ResourcesThe allocation of resources at a firm focuses mostly on two resources: people and capital. In an effort to maximize the value of the entire firm, leaders must determine how to allocate these resources to the various businesses or business units to make the whole greater than the sum of the parts. Key factors related to the allocation of resources are:
#2 Organizational DesignOrganizational design involves ensuring the firm has the necessary corporate structure and related systems in place to create the maximum amount of value. Factors that leaders must consider are the role of the corporate head office (centralized vs decentralized approach) and the reporting structure of individuals and business units – vertical hierarchy, matrix reporting, etc. Key factors related to organizational design are:
#3 Portfolio ManagementPortfolio management looks at the way business units complement each other, their correlations, and decides where the firm will “play” (i.e. what businesses it will or won’t enter). Corporate Strategy related to portfolio management includes:
#4 Strategic TradeoffsOne of the most challenging aspects of corporate strategy is balancing the tradeoffs between risk and return across the firm. It’s important to have a holistic view of all the businesses combined and ensure that the desired levels of risk management and return generation are being pursued. Below are the main factors to consider for strategic tradeoffs:
Learn more in CFI’s Corporate & Business Strategy Course. SummaryCorporate Strategy is different than business strategy, as it focuses on how to manage resources, risk, and return across a firm, as opposed to looking at competitive advantages. Leaders responsible for strategic decision making have to consider many factors, including allocation of resources, organizational design, portfolio management, and strategic tradeoffs. By optimizing all of the above factors, a leader can hopefully create a portfolio of businesses that is worth more than just the sum of the parts. For more reading on strategy, check out the Harvard Business Review resources. Additional ResourcesThank you for reading CFI’s introductory guide to corporate strategy. To keep learning and advancing your career as a financial analyst, these additional CFI resources and guides will be a big help:
Which of the following is a type of corporate level strategy?Types of Corporate Level Strategy – 5 Main Strategies: Stability Strategy, Expansion Strategy, Retrenchment Strategy, Defensive Strategy, Growth Strategy and a Few Others.
What are the 4 types of business strategies?What are the Types of Business Strategy?. Organizational (Corporate) Strategy.. Business (Competitive) Strategy.. Functional Strategy.. Operating Strategy.. What are the 3 types of strategies in strategic management?What Are the Three Types of Strategy- And How You Can Apply Them!. Business strategy.. Operational strategy.. Transformational strategy.. What is business unit level strategy?What is a business-level strategy? A business-level strategy is an innovative way for a company to showcase its unique assets, increase its competitive edge and help the individual components of its company function as one whole unit.
|