Setting the right business strategies can be daunting, especially to small business owners, because these strategies determine your company’s success.
It’s challenging to get familiar with different levels and types of strategies, as well as how to tie them together.
When planning, the first level of strategy you need to think about is corporate level strategy. It’ll affect all other decisions of your business, so it’s best you understand what it is and how it works.
In this post, we’ll talk about what corporate-level strategy is, its position among different levels of business strategies, its characteristics and benefits, and some examples to help you understand it further.
3 levels of business strategy
Before diving deep into the corporate-level strategy, let’s go through 3 levels of business strategies because they are related to each other.
Corporate level strategy
Corporate level strategy is the foundation of your business. It defines the purpose of your company and affects all the other strategies of your business.
The most common types of corporate-level strategies include:
For example, if your corporate-level strategy is to enter a new market, you’re planning for growth. All the other strategies and actions of your business then have to serve this big strategy.
Business level strategy
Business level strategy determines the competitive advantage that enables your business to outperform competitors.
Strategies at this level are more focused and specific than corporate-level strategies.
These strategies provide answers to how you can achieve what you want to achieve—whether through product development, competitive price, or customer intimacy.
2 common types of business-level strategy include:
- Cost Leadership
Let’s continue with the above example. If your corporate-level strategy is entering a new market, then your business-level strategies may include:
- Expand brand exposure to new customer segments
- Increase marketing budget
- Introduce a new product feature that matches the new market demands
Functional level strategy
Functional level strategy consists of more specific strategies, goals, and actions for different teams/departments of your business. It determines the day-to-day operations of your company.
Coming back to the entering-a-new-market example, your functional-level strategies can be:
- Marketing: Plan and implement a social media marketing campaign targeting the new customer segments
- R&D: Research and develop a new product feature that appeals to new target customers
Characteristics of corporate level strategy
Corporate-level strategies are set by the highest-level people in a business. Then, business-level and functional-level strategies are planned accordingly.
Business owners, founders, board members, managers, and executives should work closely with employees and middle management to make sure the overall strategies aren’t too far-fetched and unrealistic.
Corporate-level strategies are broad enough to affect all the other areas of your business. They can be scaling up, expanding to a new market, or cutting costs to maintain the stability of your company.
These strategies help everyone in your business strive for the same goals and move forward in the same direction.
Corporate level strategies are often set for the long term. They may take a long time and resources to implement.
These strategies are complicated because they tie together all the smaller strategies, goals, and actions of your business.
Because corporate-level strategies are broad, they can’t be certain. They are affected by different aspects, including the performance of each department in your company, the market, your competitors, etc.
The changes in the market demands and every industry require your strategies to be flexible enough so that your company can adapt to different circumstances.
This means you can change your corporate-level strategies, as long as they’re appropriate, instead of thinking of them as something so concrete and set-in-stone.
Benefits of corporate level strategy
Setting and implementing corporate-level strategies seem to be difficult because they are broad and affect everything you do.
But your business needs them to develop in the right direction. What other benefits can you get from setting a corporate-level strategy?
Increases efficiency in business operations
Corporate-level strategy paves the way for other smaller strategies to be planned and carried out.
Having a general strategy in mind, you can create specific roadmaps and tactics to achieve your business goals.
Plus, every department knows what outcomes they’re striving for and steps they can take to reach those outcomes.
Increases the flexibility of your business
If you don’t have any plans and goals in place, everything will be done intuitively and hectically. Having clear strategies allows your business to be well-prepared for future changes. You can always adjust your strategies to keep up with the market demands and industry changes.
While setting a corporate-level strategy, you’ll find out more about market changes, your products/services, your customer segments, etc.
Knowing about these aspects and make changes related to them will give you powerful insights into increasing your market share and finally achieve it.
When you’re actively trying to increase your market share and business efficiency, you’re also working towards increasing your profitability.
You might not see positive outcomes right away, but as long as you set the right goals and take action persistently, you’ll see the results eventually.
A corporate-level strategy is the purpose and foundation of your business operations. It helps you focus on the right aspect and stay durable in any competitive industry you’re in.
With a set of goals, plans, and tactics in place, you can easily make adjustments and adapt well to unexpected circumstances.
Types of corporate level strategy
Corporate-level strategies often belong to these 4 main types: expansion (growth), stability, retrenchment, and combination. Let’s quickly go through each of them.
The expansion strategy is helpful if you’re planning to reach new customers, expand your workforce, and introduce new products/services.
Different types of expansion strategies include:
This strategy is suitable for businesses struggling in their current markets and with their current products. To widen exposure, reach new customers, and meet growth targets, they can enter new markets or add new products:
- Enter a new market with new products/services related to what you’re offering (concentric diversification)
- Add new products/services that are unrelated to what you’re offering (horizontal diversification),
- Enter a new market with products/services unrelated to what you’re offering (conglomerate diversification).
Focus on participation in a certain market in order to compete successfully in that market.
Forward or backward integration
Forward integration: You go forward in the supply chain and take the role of distributors—storing and distributing products to retailers or users.
Backward integration: You go backward in the supply chain and take the role of suppliers—producing the components of your main products, etc. For example, a restaurant grows its own ingredients.
This strategy is used when your business merges with another company in the same vertical.
In a stability strategy, businesses maintain the size and level of their current business activities. This strategy is often used when:
- the industry is slowing down
- waiting for growth opportunities
- not wanting to take risks
- testing the waters before deciding on a specific strategy
- wanting to maintain the relationships between your company and your existing customers.
3 common types of stability strategy include:
Increase profits by cutting costs and expenses, adjusting pricing, selling stocks and bonds, etc.
Maintain what you’re doing, but still prepare for growth or retrenchement.
Test the waters to see which strategy fits—expansion or retrenchment.
The retrenchment strategy helps you maintain your business’ cash flow and stay in business, especially in times of crisis. Below are 3 types of retrenchment strategies:
In this strategy, businesses sell assets that perform poorly—whether it’s a business unit, or a part of the business—to raise capital for the main products/services.
Businesses often use this strategy when they need to finance future purchases and investments, or to get out of industries that aren’t suitable for them.
This strategy requires your company to improve existing products by improving the quality control and testing processes. Or you need to eliminate the weaknesses that are holding your business back.
This strategy is the last resort—closing your business. And we all don’t want this to happen.
This strategy is a combination of the 3 strategies above. It’s used when you want to maintain your company’s presence and performance, while grabbing growth opportunities.
Corporate level strategy can be broad and overarching, making it sound subtle and complicated to business owners.
We hope this post will help you understand what this level of strategy is about and start creating smart strategies for your business.
Read more about the next level of strategy—business-level strategy.