Organizations need to define a strategy in order to achieve success. Defining a strategy is a critical factor for the future of a company. In fact, the right strategy will produce growth, profit, or any other objectives the executives have set. At the same time, an inappropriate strategy not only will fail to yield benefits, but also may result in disaster.
Today, companies are trying to do their best to meet the objectives they have set themselves. For this reason, I would like to talk about corporate strategy which represents the direction an organization would like to pursue with the objective to achieve long-term business success.
Corporate strategy focuses on determining which businesses the company should be in. Basically, corporate strategy is concerned with selection of businesses in which a company should compete and with development and coordination of that portfolio of businesses.
To develop a corporate strategy, it is important to establish the nature of the business and the purpose of the activities of the company. Corporate strategies change as the market or industry conditions change. The oversight of the entire business scope and operations of a company is helpful when assessing its competitive strengths and weaknesses. The corporate strategies can be defined as comprehensive plans that the organization should use to achieve long-term objectives.
Corporate Strategy is about 3 strategy:
- Expansion strategies
- Stability strategy
- Retrenchment strategy
The expansion strategies expand the organization’s performance. Companies measure their performance by product mix, profits, sales, market share, market coverage, or other market based and accounting variables.
Expansion Strategy is adopted by organizations which try to achieve a high growth regardless of past accomplishments. Basically, in this case a companies grows substantially by widening the scope of one of its business operations in the perspective of customer groups, customer functions and technology alternatives. These type of companies are willing to accept risks in order to grow.
Stability strategy is essentially the continuation of the existing strategy. This strategy is used in environments that are stable. For instance, a company may decide that the current rate of growth and profits satisfy their needs and they see no need to expand further.
In doing so, an organization tries to maintain its current position. At the same time it focuses only on the incremental improvement by simply changing one or more of its business operations in the perspective of customer groups, customer functions and technology alternatives.
Retrenchment strategy is the reduction in the scope of the organization’s activities. It is adopted when an organization wants to reduce one or more business operations with the view to cut expenses and reach to a more stable financial position.
Basically, in this case the organization tries to improve its performance by scaling down in the level of objectives (market and product). Companies implement the reduction by:
- selling assets linked to discontinued products/service line
- reducing the number of employees
- restructuring debt through bankruptcy actions
- liquidating the firm.
Keep in mind
Finally, we can summarize by saying that corporate strategies may require efforts to decrease the scope of the business operations (retrenchment strategies). In addition, it also requires efforts to expand the business operations (growth strategies); or maintain status quo (stability strategies). It is worth to remember that Organizations can use the strategy plans to achieve long-term objectives.