Breaking down corporate strategy

by Francesco Pecoraro

Organizations need to define a corporate strategy in order to achieve success. Defining a strategy is a critical factor for the future of a company. The right strategy will produce growth, profit, or any other objectives the executives have set. At the same time, an inappropriate strategy will not only fail to yield benefits but also may result in disaster.

Companies are trying to do their best to meet the objectives they have set themselves. For this reason, interest in project portfolio management has increased during the last few years. It has happened because organizations increasingly need efficient strategy processes to address the challenges in their changing environment. Organizations increasingly need to innovate in order to survive. Project portfolio management allows the coordination of one or more portfolios to achieve the organization’s strategic objectives.

Corporate strategy

Corporate strategy represents the direction an organization would like to take in pursuing an objective or when achieving long-term business success.

Corporate strategy focuses on determining which niche(s) the company should be in, the selection of businesses in which it should compete, as well as the development and coordination of that portfolio of businesses.

To develop a corporate strategy, it is important to establish the nature of the business and the purpose of the activities of the company. Corporate strategies change as the market or industry conditions change. The oversight of the entire business scope and operations of a company is helpful when assessing its competitive strengths and weaknesses. Corporate strategies can be defined as comprehensive plans that the organization should use to achieve long-term objectives.

Corporate strategy is about three strategies:

  1. Expansion strategies
  2. Stability strategy
  3. Retrenchment strategy

Expansion strategies

Expansion strategies expand the organization’s performance. Companies measure their performance by product mix, profits, sales, market share, market coverage, or other market-based and accounting variables.

Expansion strategies are adopted by organizations that try to achieve high growth regardless of past accomplishments. In this case, a company grows substantially by widening the scope of one of its business operations from the perspective of customer groups, customer functions, and technology alternatives. These types of companies are willing to accept risks in order to grow.

Stability strategy

Stability strategy is the continuation of the existing strategy. This strategy is used in environments that are stable. For instance, a company may decide that the current rate of growth and profits satisfy their needs, and they see no need to expand further.

In doing so, an organization tries to maintain its current position. At the same time, it focuses only on incremental improvement by simply changing one or more of its business operations from the perspective of customer groups, customer functions, and technology alternatives.

Retrenchment strategy

Retrenchment strategy is a reduction in the scope of the organization’s activities. It is adopted when an organization wants to reduce one or more business operations with the goal of cutting expenses and reaching a more stable financial position.

In this case, the organization tries to improve its performance by scaling down the level of objectives (market and products). Companies implement the reduction by:

  1. Selling assets linked to discontinued products/service lines.
  2. Reducing the number of employees.
  3. Restructuring debt through bankruptcy actions.
  4. Liquidating the firm.

Implementing the strategy

To implement the company’s strategy, it is important to have a strategy process in place. A strategy is important because it helps determine the goals, missions/objectives, and policies needed.

Companies create a plan of action that helps achieve a particular goal. This plan is often defined as a strategy. Luckily, organizations have learned to define their position in the market, analyze their competitive environments, and acquire a competitive and corporate advantage. They also understand the threats to sustaining that advantage.

Strategic transformation cannot be accomplished without involving senior management in project management.

The business can become complex, but by understanding the order of strategies and problems, solutions can more easily be identified. Project portfolio management allows organizations to achieve strategic objectives. The leading firms in their industries are those who have taken advantage of the changing environment (globalization, technological change, and so on). These firms compete differently and, most importantly, are innovative in their business model.



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