M Rahman
Definition of corporate strategy
Corporate strategy is the direction a company takes with a view to achieving a long-term business success. According to Johnson, Scholes, and Whittington (2006) corporate level strategy is concerned with the overall scope of an organisation and how value will be added to the different parts (business units) of the organisation. Its purpose is to answer to the following questions:
What business are we in?
What business should we be in?
The answers to the above questions chart the course of business of the entire organisation (Plunkett & Attner, 1994)
Examples of corporate strategy
There are different types of corporate strategy which writers shed light on. For example, growth strategy, retrenchment strategy, and stability strategy have been much discussed in business and management literature.
Growth strategy
Organisations pursue growth strategies to expand their operations. For instance, by the end of 2015, budget supermarket Lidl announced it would open 40 to 50 more stores in the UK in 2016 with a £1.5billion expansion plan. Similarly, budget supermarket Aldi also announced opening of 80 new stores across UK in 2016. The German-owned supermarket plans to create 5,000 jobs in the country with the opening of new 80 stores.
Retrenchment strategy
When a company decides to reduce the size or scope of its operations chooses retrenchment strategies. Sometimes, companies decide to reduce the number of employees, and sometimes close down poor performing stores all together. For example, in January 2015, Tesco announced to close 43 of its unprofitable stores in the UK (Goodley, 2015). Retrenchment strategies may become absolutely necessary during recession.
Stability strategy
A stability strategy comes into play when a company decides neither to grow nor to reduce its operations. Rather, it would like to stay the same. A strategy of stability might be appropriate if an organisation needs time to recover after a period of sharp growth or retrenchment (Plunkett & Attner, 1994).
In a nutshell, a corporate strategy is concerned with overall direction of a company. It allows a company to make use of its multiple resources to achieve a single aim. It is actually about having ‘big picture’ view of a company.
The article publication date: 07 November 2016
Further Reading/References
Goodley, S. (2015) Tesco names 43 stores to close in turnaround plan, available from https://www.theguardian.com/business/2015/jan/28/tesco-names-43-stores-to-close (Accessed 05 June 2016)
Johnson, G., Scholes, K. and Whittington, R. (2006) Exploring Corporate Strategy: Text and Cases, 7th Edition, UK: Prentice Hall
Plunkett, W. & Attner, R. (1994) Introduction to Management, 5th edition, USA: International Thomson Publishing
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Author: M Rahman
M Rahman writes extensively online with an emphasis on business management and marketing. He is a graduate of both Leeds Metropolitan University and London South Bank University.
M Rahman