Levels of Strategy | Corporate Level Strategy

Levels of Strategy and Corporate Level Strategy

Strategy is a means of achieving long-term goals. It is a potential action of top-level management to address business issues. It requires a commitment of resources over a long period. It affects an organization’s long-term growth and development and has multifunctional or multidivisional consequences. It seeks to make an organization different from its competitors.

A multi-business organization formulates strategy in three levels. Levels of Strategy of Corporate Level StrategyThey are discussed below.
e Level Strategy

Corporate Level Strategy

A corporate-level strategy specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.5 It is the choice of direction for a firm as a whole. It is the uppermost level of strategy and is derived from the vision and mission statement.

In a multiple business company, corporate strategy is concerned with geographical coverage, diversity of products/ services or business units, and allocation of resources to different parts or units of the organization.

The corporate headquarters plays the role of the organizational parent and deals with its various products and business units as children. Corporate-level strategy coordinates these business units so that the company as a whole succeeds as a family.

The corporate-level strategy addresses the question of what business are we in. It attempts to obtain synergy among numerous product lines and business units so that the corporate whole is greater than the sum of its business unit parts. In this way, corporate-level strategy provides overall direction to the organization.

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From the above discussion, it may be concluded that corporate-level strategy is related to the overall scope and development of an organization. It always aims at adding value to different product lines and businesses.

Types of Corporate-Level Strategy

The different types of corporate-level strategies that organizations can pursue are mentioned below.

1.Stability strategy:

The strategy that aims to continue the current activities of an organization without any significant change in direction is called stability strategy. Efforts are made to maintain the existing products, markets, and activities. A stability strategy is appropriate for a successful company operating in a stable and predictable environment. It is also suitable for small firms with a particular market niche that is manageable in size. Stability strategy can be very useful in the short run but can be dangerous if followed for too long.

2.Expansion/Growth strategy:

The strategy that is designed to achieve growth in sales, assets, profits, or some combination is called expansion/growth strategy. Companies that aim to expand their business pursue this strategy. It enables companies to take advantage of the experience curve and reduce the per-unit cost of products sold, thereby increasing profits. Growth is a popular strategy because larger companies tend to survive longer than smaller ones due to the greater availability of financial resources, organizational routines, and external ties.

A company can grow internally by expanding its operations both domestically and globally, or it can grow externally through mergers, acquisitions, and strategic alliances.

3.Retrenchment strategy:

The strategy that aims to reduce the size or diversity of a company is called retrenchment strategy. It also involves a reduction in expenditure for financial stability. It is used to reduce the diversity or to cut the overall size of the operations of the company. Retrenchment strategy involves withdrawing from certain markets or the discontinuation of certain products or services.

A company may pursue a retrenchment strategy when it has a weak competitive position in some or the entire product lines resulting in poor performance, examples include sales being down and profits shrinking. Thus, if the environment is highly threatening, a retrenchment strategy is adopted.

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