What is a Corporate Strategy? (With Types and Examples)

By Indeed Editorial Team

Published 21 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

A corporate strategy is a valuable tool for expanding and defining the values of a company. Companies use corporate strategies to create and identify long-term goals aimed toward improvement and success. Understanding what a corporate strategy is can help you increase a company's overall profits and financial stability. In this article, we explain what corporate strategies are, explore types and components, describe how to evaluate a strategy and provide examples.

What is a corporate strategy?

A corporate strategy is a long-term plan that outlines clear goals for a company. While the objective of each goal may differ, the ultimate purpose of a corporate plan is to improve the company. A company's corporate plan may be to focus on sales, growth or leadership. For example, a business might implement a corporate plan to expand its sales to different markets or consumers. It may also use corporate planning to prioritise resources. Another purpose of corporate planning is to create company value and to motivate employees to work toward that value or set of goals.

Types of strategies for achieving business goals

Here are some types of corporate strategies you can implement:

Growth

A growth strategy is a plan a company develops to encourage growth in one or more areas of the business. Some growth strategies focus on organisational growth, while others focus on specific areas of business like sales, revenue, markets or product offerings. Companies use one of two strategies to accomplish growth. Concentration is when a company places an emphasis on strengthening what it already offers. Alternatively, companies can diversify, which means they enter a new market besides their existing one.

Stability

A stability strategy is one that focuses on maintaining a presence in the current market or industry a company is in because they're already experiencing success. This strategy involves maintaining the organisation's current processes and operations to encourage continued success. Stability strategies typically involve focusing on an aspect of business the organisation already does well, such as maintaining high customer satisfaction rates. For example, they might start a customer appreciation marketing campaign to promote repeat purchases and keep customers happy.

Retrenchment

Retrenchment is a strategy that involves changing a company's operations to improve its performance, such as switching to a different business model. This allows organisations to eliminate, minimise or place a greater emphasis on areas of the business that aren't performing as expected. Companies can implement a retrenchment strategy in many ways, including:

downsizing
leaving markets
removing product offerings
outsourcing
selling assets

Reinvention

A reinvention strategy involves recreating a part of the business that has become outdated, unnecessary or no longer useful. Companies that offer products or services that have become redundant because of emerging technologies, social changes that make certain terms or concepts outdated or demand for environmentally friendly materials. Reinvention allows companies to redesign products or services by changing them to offer customers updated features.

Key strategy components

Here are several key components of a corporate strategy:

Portfolio management

Portfolio management analyses the different components of a business to see if they work well together. A corporate plan uses portfolio management to decide which areas of the company to work on or invest in to achieve security and growth. Professionals may use their portfolio evaluations when:

deciding on a market
using vertical integration
investing in new opportunities
diversifying the company
analysing competition

Objectives

To create and implement a strategy, employees typically set objectives. A strategy is a plan, goal or course for the company to follow. The plan consists of tasks that describe the company's mission. Objectives allow a company to record and measure its progress because employees can track whether they've completed a goal.

Resources

Resources refer to the people, materials and capital that run the company. A key component of corporate planning is to allocate resources to best support the company's development. To do this, a manager may assign resources to different areas of the business. For example, if a project manager wants to start a large product launch, they might allocate team members from a different department to work on the launch.

Design

The design of a strategy ensures that the employees organise the structure of the company in a way that maximises efficiency. This can refer to distributing power within a company, such as determining the hierarchy of the company or how the company makes decisions. An example of this could be deciding how much freedom or authority a certain department receives.

How to evaluate a strategy

Here are five steps you can take to evaluate a corporate plan:

1. Check for consistency

Consistency is a critical part of a strategy because it ensures the components of the plan work together. You might think of a business strategy as a machine with many gears, which all work together to ensure the intended output. Similarly, the features of a strategy complement each other to allow the entire plan to function. You can check your strategy for consistency by evaluating each step to determine if one leads to the next. If not, you can adjust the steps so they lead smoothly from one to the other.

2. Evaluate resources

To put a strategy in place, it's important to have the right resources. Resources are the labour and materials required to implement a strategy, such as employees, production equipment, technology and facilities. Evaluating your resources can help you determine if you have what your strategy requires and if the organisation is making the most of the resources it has. If not, you might consider adjusting your strategy to reflect more efficient use of resources.

3. Analyse the involved risk

Business decisions, like developing and implementing new strategies often involve taking risks. Sometimes, these risks can lead to positive changes and organisational growth, but it's important to assess the risks involved before finalising a plan. To determine whether the potential benefits of your strategy outweigh the risk, first consider what the organisation might be willing to risk considering the circumstances. Major financial risks may be worth it in some cases, while companies may find it safer to decrease the potential for loss when implementing high-risk strategies.

4. Examine the timeline

Having a timeline for your strategy is essential because it can help you ensure you implement each phase at the right time. You might set short-term and long-term goals to help you achieve specific objectives at certain times, measure your progress at regular intervals and adjust your plan to accommodate changes. You can also evaluate your deadlines to determine if they're reasonable and change them to avoid workflow disruptions as needed. If you're developing a strategy for a client, it's important to keep them informed of your progress and ensure the timeline fits their specifications.

5. Assess how the plan works

The last step is to evaluate how the plan functions. This involves performing a high-level evaluation of each part to make sure the strategy is logical and achievable for you and your team to maintain. It's important to examine the plan at multiple points throughout its implementation so you can monitor the measurable aspects of the plan, such as sales rates, page views, approval rates or changes in revenue. Maintaining an inefficient plan can lead to unsuccessful strategy implementation, but you can help prevent this by making sure your strategy works effectively and making changes as needed to improve it.

Strategy examples

Here are examples of using the growth strategy and stability strategy:

Growth strategy example

Mike's car dealership is a successful company, and he wants to further expand his company through the growth strategy. First, he implements vertical integration, which means he controls the supply chain for his company's production. To do this, Mike purchases a plant that produces car parts and a plant that produces car accessories. Next, Mike diversifies his car dealership by producing other vehicles, like buses and motorbikes. By implementing these steps, Mike grows his company through ownership and increased sales.

Stability strategy example

Luciana works for a mobile phone business that's currently thriving. Sales are growing steadily, and the cost of production is low. Due to this success, Luciana wants to incorporate the stability strategy. She plans to follow the same process she has employed without diversifying or changing the business. Instead, Luciana wants to invest in the business process model to continue to expand the organisation at a consistent pace.