(Newscko) ─ Corporate strategy is the most vital part of an organization’s overarching strategy that defines its goals and direction. Without a clearly defined strategy, companies struggle to achieve their objective while chasing an unguided vision. The success of an organization in this competitive era depends on how robust its strategy is. As the founder of the modern strategy field Michael Porter rightly said—“Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.” Innovative leaders are aware of all the abstract ideas that shape the competitive advantage of an organization. A corporate strategy provides a logical mapping and execution plan to these ideas and achieves value for all stakeholders—shareholders, customers, partners, and the community. Further, it facilitates effective decision-making hinging upon the company’s resources and business expectations. Before we delve deeper into the importance of defining a sound strategy, let’s briefly touch upon its meaning and relevance in a corporate firm.
What is Corporate Strategy?
Corporate strategy hierarchically sits at the top level of an organizational strategy pyramid and provides a plan and framework to achieve specific goals and objectives. It acts as a guide, compass, or a guided path to define what to achieve and when. For context, other strategy levels include business strategy and functional strategy—as illustrated in the figure below.
A strategy dictates company choices like profitability, growth, existence, products or services, customer segments, operating geographies, industry niches, and preparedness for unprecedented times. For example, the corporate strategy of Telstra, the largest telecom provider in Australia, focuses on simplifying their products and services, improve customer experience, simplify operations and reduce costs.
Importance of Corporate Strategy
Now that we understand the fundamental concept of corporate strategy, let’s look into the benefits and advantages of defining a sound strategy. While a small and medium business may live with a lean form, an enterprise focusing on growth and transformation would need an exhaustive strategy. Irrespective of its size, scale, or industry, strategy defines the strategic direction and acts as a guide or compass to develop, realize, and evolve its goals. Below mentioned are top reasons to build one:
1. enVisioning
Every company has a vision and mission statement mentioned on its website or corporate brochure. However, many fail to understand that a vision statement not only entails your long-term goals or objectives but also enables your purpose or reason for your ‘very existence.’ A strategy facilitates setting high-level organizational direction, typically over the next 3-5 years. enVisioning a purpose-led objective goes a long way to create a resilient, adaptable, and growth-focused leader in your industry.
2. Framework
A corporation operates in a complex environment with multiple moving parts influenced by competitive, technological, social, political, and environmental forces. In such a dynamic environment and during the ebbs and flow of business, an effective strategy helps keep the organization steady, focussed, and navigate through the turbulent times. It provides a strategic framework to operate, striking the right balance between growth and optimization. Business is not static, and a well-laid strategy provides a solid foundation while transforming and evolving in the face of disruption.
3. Resources
Fundamentally, a firm has two forms of resources—people and money. Since the industrial revolution era, companies have always been striving to allocate human and capital resources efficiently. A strategy provides a tool to allocate these resources based on the best available opportunities and business needs. A company leverages its strategic framework to invest or divest within its
- People like upskilling, hiring, and redundancy;
- Business units like expansion and divestiture; or
- External partners like mergers and acquisitions.
Desirability, future potential, core competency, and competitive edge too influence resource utilization.
4. Decision-Making
No matter how big or established a company is, there will always be a trade-off between ROI and risks for any opportunity. The right strategic mix provides a foundation for rational decision-making to achieve high profitability, maintain sustainability, managing risks, and deliver to stakeholder expectations.
Wrap-Up!
With value-creation sitting at the heart of a Corporate Strategy, it helps an organization in strategic decision making to:
- Chase new opportunities effectively,
- Allocate its resources optimally, and
- Navigate operational complexities seamlessly.
How critical a role do you believe your corporate strategy plays in the success of your organization? Share your thoughts and tell us how different it is from your competitors?