Corporate Strategy

What is Corporate Strategy?

Michael Porter, indicates that an effective strategy should display these characteristics:

· Unique competitive position for the company.

· Activities tailored to strategy.

· Clear trade-offs and choices vis-à-vis competitors.

· Competitive advantage arising from fit across activities.

· Sustainability coming from the activity system, not the parts.

· Operational effectiveness as a given.

Organizational Change

In recent decades massive changes were made in the size and structure of many business firms.

Ø Vertical Disaggregation

Ø Internal Redesign.

Ø New Organization Forms

Components of Strategy

Recognizing that there are several definitions of corporate strategy, we utilize this definition:

Corporate strategy is the way a company creates value through the configuration and coordination of its multimarket activities.

Deciding Corporate Vision. Management’s vision defines what the corporation is and what it does and provides important guidelines for managing and improving the corporation.

The vision statement sets several important guidelines for business operations:

1. The reason for the company’s existence and its responsibilities to stockholders, employees, society, and other stakeholders.

2. The firm’s customers and the needs (benefits) that are to be met by the firm’s goods or services (areas of product and market involvement).

3. The extent of specialization within each product-market area and the geographical scope of operations.

1. The amount and types of product-market diversification desired by management.

2. The stage(s) in the value-added chain where the business competes from raw materials to the end user.

3. Management’s performance expectations for the company.

4. Other general guidelines for overall business strategy, such as technologies to be used and the role of research and development in the corporation.

Objectives. Objectives need to be set so that the performance of the enterprise can be gauged.

Capabilities. As we discussed in Chapter 1, it is important to place a company ‘s strategic focus on its distinctive capabilities.

Business Composition. Defining the composition of the business provides direction for both corporate and marketing strategy design.

Structure, System, and Processes. This aspect of strategy considers how the organization controls and coordinates the activities of its various business units and staff functions.

Corporate Competitive Advantage. This part of corporate strategy looks at whether the strategy components create value through multimarket activity.