Every organization faces competition in the market, which is why it needs to have a strategy in place so that it can beat the competition and achieve success. Strategy is basically an integrated plan that is followed by companies to achieve organizational objectives.
In any business organization, three levels of strategy are in place: corporate strategy, business strategy and functional strategy. A business can only succeed when it carefully considers all the three levels of strategy. In this article, the corporate and business levels of strategy will be discussed as the two are often confused with one another.
Definitions and meanings
Corporate strategy is essentially developed to offer directions to the business for accomplishing their long-term objectives. A corporate strategy is developed in accordance with the objectives and scope of the activities of the organization. It also considers the nature of business by taking into account its operating environment, its position in the market and the degree of competition it encounters. Corporate strategy seeks to answer the question, “What businesses or industries should we be working in?” It concentrates on developing a mix of business units that will enable it to achieve success as a whole.
The basis of corporate strategy is the organization’s vision. The mission statement of an organization explicitly mentions its corporate strategy. It plays a very important part in the strategic decision-making across the organization. Corporate-level strategy is typically developed by the highest-level managers in organizations.
Most large-scale business organization typically have multiple business units or departments that are spread out across the different businesses and markets that the organization has decided to operate in. A strategic business unit may include a product division or any other profit center, the objectives of which may be different from the rest of the business units of the organization. A strategy developed at this level is known as business strategy, the purpose of which is to determine the ways in which an organization plans to accomplish its goals in a particular business unit.
At the level of business units, strategy formulation is related to how the business competes with other businesses in the industry. The strategy developed at this stage may be altered in accordance with the variations in market demand.
Business level strategies are a step below the corporate level strategies. These strategies focus on more specific areas of the organization. Three strategies are usually executed in this level, which include differentiation, cost leadership and focus. The purpose of these business level strategies is to create a competitive edge for the organization. The strategies developed at the business level are used by managers of business units or divisions to determine solutions for problems that they face in their routine activities.
Differences between corporate strategy and business strategy
Corporate strategy is essentially developed in accordance with the organization’s vision and seeks to steer the organization towards accomplishing their long-term objectives. Business strategies are those that are developed at the business unit level to determine the ways in which the objectives of these units can be achieved.
2. Developed by
Corporate strategies are developed by the top-level managers, including the CEO, Board of Directors and Managing Director, whereas business strategy is developed by the middle-level managers, including the departmental, division or line managers
3. Strategic decisions
Strategic decisions at corporate level are usually analytical and focused on value generation, organizational growth and maximization of profits. On the other, at the business level, strategic decisions pertain to the activities carried out to generate value for customers and attain a competitive edge in the market.
4. Strategic formulation
Corporate strategy is formulated at the organizational level, concentrating on the whole organization, including different business units and divisions of the organization. Business strategy, on the other hand, is pertinent to a specific unit or division.
Corporate strategies are valuable for generating long-term solutions for problems, whereas business strategies are quite valuable for solving the practical and routine issues faced in business operations, i.e. they are short-term in nature.
The focus of corporate strategy is so determine the business that the company wants to be a part of within the industry. On the other hand, business strategy concentrates on determining the business plan that should be adopted to achieve organizational objectives.
Corporate level strategies include expansion, downsizing and stability, whereas business level strategies include cost leadership, differentiation and focus.
Corporate strategy vs business strategy – tabular comparison
|Developed to offer directions to the business for accomplishing their long-term objectives||Developed at the business unit level to determine the ways in which the objectives of these units can be achieved.|
|Top-level management: CEO, Board of Directions, Managing Director||Middle-level management: Department, Division or line managers|
|Analytical and value-oriented decisions, aiming to achieve organizational growth and profit maximization||Decisions regarding activities to stay ahead of the market competition|
|Formulated at the organizational level||Formulated for a particular business unit or division|
|Formulates long-term solutions for the organization||Formulates relatively short-term solutions for routine issues faced in the organization short-term|
|Making decision regarding the business that the company should pursue||Decide upon the business plan that the company should adopt to compete successful in the market|
|Expansion, downsizing and stability||Cost leadership, differentiation and focus|
Conclusion – corporate strategy vs business strategy
It is very important for organizations to formulate appropriate strategies for achieving their objectives. Corporate strategies serve as a guide for organizations to attain their long-term objectives. On the other hand, business strategies are important to attain specific objectives of the organizations at the business unit level. When relevant strategies are in place, the organization is able to achieve its long-term goals of organizational growth and profit maximization, as well as short-term goals of successfully competing in the market with other organizations.