In the world of business, the terms ‘corporate strategy’ and ‘business strategy’ are often used interchangeably, leading to confusion among those who are not familiar with the nuances of each concept. Although both strategies are related to each other, they are two distinct concepts and understanding their differences is crucial for business success. I found a helpful resource that explains the difference between corporate strategy and business strategy. You can discover more about corporate strategy vs business strategy by visiting relevant websites or reading relevant articles online.
What is Corporate Strategy?
A corporate strategy refers to the overarching strategy of an entire company or organization. It provides a high-level plan for how a company will achieve its vision and broader objectives.
The key elements of a corporate strategy include:
- Defining the company’s mission and vision – What is the core purpose of the company? What does it hope to ultimately achieve? The mission and vision shape all other elements of the corporate strategy.
- Setting company-wide objectives – This involves defining the main goals and targets that the company wants to achieve over a set timeframe, such as 5-10 years. Objectives could relate to growth, profitability, market share, etc.
- Identifying core competencies – What are the main strengths, capabilities and competitive advantages of the company? Core competencies form the foundation for competitive positioning.
- Deciding on business units and product lines – This determines what businesses and products the company will compete in based on core competencies, opportunities, resources, and other factors. Diversified companies must define a portfolio of business units.
- Allocating resources – The corporate strategy guides high-level resource allocation across different business units and functional areas to best achieve the company’s objectives. More resources may be directed towards high-growth business units, for example.
- Defining synergies – The corporate strategy looks for potential synergies and strategic fits between different business units that can result in competitive advantages. Shared resources, cross-business collaborations and integrated value chains are potential sources of synergy.
- Providing guidance – The corporate strategy sets the strategic direction and provides guidance for lower-level business strategies and functional strategies. There must be alignment between corporate and business-level strategies.
What is Business Strategy?
While a corporate strategy covers the whole company, a business strategy focuses on how a single business unit or product line will compete in its particular market. It guides each distinct business within the overall corporate portfolio.
The key components of a business strategy include:
- Understanding the market – This involves analysis of the target market size and segments, buyer needs, competitor assessment, market trends, distribution channels, and the broader industry landscape.
- Defining business objectives – Each business unit will have specific objectives for growth, revenues, market share and profits based on the market analysis and corporate strategy.
- Positioning in the marketplace – This establishes how the business aims to create competitive advantage and differentiate itself from rivals in the minds of customers. Elements like pricing, product features, brand image, and channel strategy help with positioning.
- Developing the product/service strategy – Each product or service line requires strategic decisions on factors like target market segments, product design and innovation, breadth of product range, product quality, and new product development.
- Operational strategy – This covers areas like production methods, technology utilization, inventory management, supply chain management, and distribution models to optimize operations.
- Implementation plan – Tactical plans are developed for implementing the business strategy covering execution steps, resource needs, timelines, metrics, and marketing mix actions. Adaptations occur based on monitoring.
So in summary, a business strategy is a comprehensive plan that guides how an individual business unit will achieve success in its industry and market. It aligns with the overarching corporate strategy but has a tighter focus on specifics.
Key Differences Between the Two Strategies
While corporate strategy and business strategy are clearly interdependent and complementary, there are some notable ways in which they differ:
- Scope – As covered already, corporate strategy is company-wide while business strategy covers a single business unit. The scope differs significantly.
- Strategic objectives – A corporate strategy sets broad objectives for the overall company (i.e. growth or market leadership) while business strategy defines specific targets for revenues, market share, costs and profits.
- Executive perspective – Corporate strategy is the responsibility of the CEO and top management. Business strategies are developed by individual business unit heads, though with corporate guidance.
- Competitive landscape – The corporate strategy analysis looks at high-level trends, threats, and opportunities across the company’s broad business domains. Business strategy involves a detailed competitor analysis within the specific market.
- Time horizons – Corporate strategy generally takes a long-term view of 5-10 years. Business strategies may focus on a shorter 1-5 year horizon.
- Resource allocation – Corporate strategy guides high-level capital allocation across the company. Business strategy plans the resources, budgets and investments for executing the strategy in their business unit.
- Guidance hierarchy – The corporate strategy sets the direction and agenda for business strategies. Business strategies must align with the corporate strategy.
- Uniting force – A corporate strategy acts as an overarching strategy that unites and coordinates the individual business units. Each business strategy focuses independently on its own market.
So in summary, while the two strategy levels differ in their scope, objectives, perspective, competitive focus and time horizon, they must complement each other and align to move the overall company in a unified direction.
Corporate Strategy vs Business Strategy at a Glance
|Where the organization competes (industries, markets)
|How a specific business unit competes (competitive advantage)
|Lower-level, specific to individual business units
|Long-term (3-5+ years)
|Medium-term (1-3 years)
|Which markets should we enter/exit?
|How will we win in this market?
|Portfolio management (acquisitions, divestitures), diversification, vertical integration
|Pricing, marketing, product development, resource allocation
|Entering a new geographic market through acquisition, divesting a non-core business
|Implementing a cost leadership strategy to compete on price
|Who sets the strategy?
|CEO, Board of Directors
|Business unit leader, middle management
|Corporate strategy outlines the framework for business strategies
|Business strategies translate the corporate strategy into actionable plans
The Interdependence Between Corporate Strategy and Business Strategy
Although they differ in certain ways, corporate strategy and business strategy are very intertwined and must reinforce each other:
- Top-down guidance – The corporate strategy provides crucial direction and guidance for shaping business unit strategies. All business strategies must align with the corporate strategy.
- Objective setting – Corporate strategy objectives for growth, profits and resources directly inform the specific objectives set in the business strategies.
- Synergies – Realizing synergies and strategic fits identified in the corporate strategy depends on appropriate implementation of complementary business strategies.
- Competencies – Core competencies defined in the corporate strategy guide business strategies to leverage and reinforce them through initiatives in individual units.
- Diversification – Entry into new businesses – part of corporate strategy – requires effective new business strategies suited to those markets and activities.
- Resource planning – Resource allocation in the corporate strategy directly affects the resources available for executing business strategies.
- Bottom-up input – Business strategies provide crucial upward feedback on market conditions, trends, and competitive dynamics to inform corporate strategy planning.
- Performance measurement – Corporate objectives are ultimately achieved through successful implementation of aligned business strategies that meet their specific targets.
Through these types of two-way interactions, an integrated process between the two strategy levels is essential for best results. The corporate center and business units must work collaboratively on strategy formulation.
Corporate Strategy Examples
Some examples help illustrate real-world corporate strategies:
- General Electric – GE’s corporate strategy during its growth years focused on core competencies in technology, engineering, and manufacturing to achieve diverse growth across multiple industries from aviation to healthcare.
- Proctor & Gamble – P&G built a corporate strategy around brand management, product innovation based on consumer understanding, and strategically managing a portfolio of fast-moving consumer goods brands through business units like Baby Care, Fabric & Home Care, Beauty, and Grooming.
- Toyota – Toyota’s corporate strategy centers around operational excellence, continuous improvement, efficient production systems, product quality, and shared values to support its diverse automotive businesses.
- Amazon – Amazon’s corporate strategy is built on customer obsession, technological infrastructure, and new business growth in areas like online retail, cloud computing, and digital entertainment under the vision of being “customer-centric.”
Business Strategy Examples
Some examples of business strategies within large diversified companies:
- Coca-Cola – The brand’s beverage business strategy is based on product innovation, brand-building, distribution scale, and marketing campaigns centered around happiness and optimism.
- Apple – Apple’s iPhone business strategy revolves around premium branding, sleek differentiated design, closed operating system, integrated hardware/software, exclusive distribution, and premium pricing.
- Disney – Disney’s movie business strategy focuses on family entertainment, theme parks, merchandising, developing recognizable characters, acquisitions like Marvel, and leveraging the Disney brand name.
- GE Aviation – As one of GE’s major business units, Aviation employs a strategy of technology innovation in areas like engines, digitization, services, integrated systems, and military programs within the aerospace industry.
Conclusion and Key Takeaways
Corporate strategy provides the overarching direction for the enterprise based on mission, vision, objectives, competencies, and resource allocation across business units. Business strategy focuses on how an individual business unit competes successfully in a particular industry and market. While differing in scope, time horizon, and purpose, corporate strategy and business strategy must align and reinforce each other.
Corporate strategy guides objective-setting, synergies, competency development, and resource planning for business units. Innovative restaurant loyalty program ideas serve as a pivotal component in the integrated processes between corporate and business strategy levels, offering key inputs on markets, trends, and performance to boost customer retention and inform optimal business strategies.
What are the main elements of a corporate strategy?
The main elements of a corporate strategy are defining the mission and vision, setting company-wide objectives, identifying core competencies, deciding on business units and products, allocating resources, defining synergies, and providing guidance to business strategies.
Who is responsible for developing a corporate strategy?
The CEO and other top-level executives have the main responsibility for setting and guiding the corporate strategy with input from business unit leaders.
How often should a corporate strategy be updated?
A corporate strategy is typically set for 5-10 year timeframes but should be reviewed annually and updated every 3-5 years to account for major changes in the business landscape or performance issues.
What are the risks of business and corporate strategies not aligning?
If business strategies are misaligned with the corporate strategy there can be conflicting objectives, inefficient resource use, missed synergies, and a lack of coordination across the enterprise.
How can corporate and business strategy alignment be managed?
Corporate and business strategy alignment can be managed through collaborative planning processes, clearly translating corporate objectives into business objectives, strategy reviews, and having corporate oversight of business strategy proposals.