Every functioning organization relies on policies to guide its decision-making process and procedures. These plans are commonly referred to as a business strategy or a corporate strategy. While the terms are often used interchangeably, the two concepts are best used in concert to help provide corporate governance at different levels of the business.
Read on to learn more about the key differences between a business strategy and corporate strategy, and discover how board management software enhances governance for corporations, nonprofits, and more.
What is a Business Strategy?
Scope
A business strategy is a plan created by a company to gain a competitive advantage over its peers in the industry. Business strategies tend to have a much narrower scope than a corporate strategy, honing in on a single business unit, department, or product line.
A business strategy focuses more on the short- and medium-term future of the organization. This is necessary because companies need to be ready to adapt their business strategies on the fly in order to respond to evolving market trends or the maneuvers of competitors.
Key Questions
Business strategies often fail if the leadership team lacks clarity regarding their goals for the organization. It’s much harder to create a sensible strategic plan or an annual operating plan without clearly defined goals. Here are some questions all stakeholders should consider before creating their business strategy:
- Who is the target customer? Having a clear conception of your audience is the most basic requirement for a successful business strategy. This will help you deploy resources in a more efficient manner and better position your product/service in the marketplace.
- What are the strategic choices we can make for positioning and differentiation? Every organization needs to understand its greatest strengths. The ability to demonstrate a distinct value proposition is important to attract customers and give employees a stronger sense of their purpose.
- How do we compete in a particular market? The business strategy that works in one community may not work with a different demographic. Those in charge of executing the strategy need to research their target demographics and tailor decisions to their needs.
- What are the potential roadblocks for your strategy? Make a note of the potential threats or disruptions to your business and explore ways to protect the organization from possible consequences.
- Are there systems in place to ensure success? The supporting business systems need to be streamlined enough to achieve your strategic ambitions.
Components
Business strategies will vary between organizations of different sizes and industries, but most include the following elements:
- Clearly Defined Objectives: The business strategy needs to establish attainable goals with tangible key performance indicators (KPIs) to provide a direction for your actions.
- Tactics: The operational details of the business strategy should be described in precise detail to clarify the roles of each team member.
- Resource Allocation: This should describe how the organization’s resources will be utilized and where additional resources could be deployed if needed.
- Market Positioning: Market positioning is the ability to present your organization’s brand or product in a certain way to influence customer perception.
- Competitive Advantage: Your business strategy should explain how your business distinguishes itself from peers with better services, more affordable prices, or other qualities.
- Customer Segmentation: Customer segmentation is the process of classifying your customer base into separate groups so you can market to them most effectively.
- Operational Effectiveness: After plans are put in place, management must evaluate the strategy to gauge its effectiveness and make necessary adjustments.
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What is a Corporate Strategy?
Scope
Corporate strategy refers to the overarching plan an organization follows to achieve its long-term objectives and maintain a competitive advantage in its industry. As a result, corporate strategies encompass the entire organization (including all business units and product lines) and have a much larger scope than business strategies.
In line with this top-down approach, the corporate strategy is heavily informed by the vision of the parent company, provided your organization has one. C-suite executives such as the managing director often provide oversight for the strategy and report on its status to board members and other stakeholders.
Key Questions
Many of the same questions you should ask yourself when crafting a business strategy are also pertinent to your corporate strategy, but there are a couple of others you should also consider, such as:
- What are the long-term goals of the organization?
- How can the organization work toward those goals while serving stakeholder interests?
- What businesses should we be in?
- How do we create value across different business units?
- How do you train and develop your team?
- How do you measure progress?
How management answers those questions impacts the type of corporate strategy best suited for your business. Corporate strategies mostly fall into four groups: growth, stability, retrenchment, and reinvention.
Components
The key pieces of most corporate strategies are:
- Portfolio Management: A key aspect of corporate strategy requires maintaining balance between each business unit. To do this, the organization must exercise portfolio management to ensure all units complement each other.
- Resource Allocation: Organizations need to identify which opportunities are worth pursuing with the most resources. Executives need to consider all factors and choose the path that represents the best value for the business.
- Growth Strategy: All businesses seek to grow over time. Your corporate strategy helps to outline your growth plans while overcoming potential challenges.
- Risk Management: Risk plays a part in every decision and investment. The corporate strategy is part of the assessment process so stakeholders remain comfortable with their general direction.
OnBoard Powers Effective Boards
To be successful in a competitive industry, organizations must invest significant resources into developing their business and corporate strategies.
OnBoard’s board management software provides key tools for corporations, banks, schools, and nonprofits to enhance governance.
Features such as an agenda builder, meeting analytics, board assessments, and a secure messaging system help board members collaborate and acquire necessary information, hold each other accountable, and provide risk management to the entire organization.
Download our Free Board Meeting Minutes Template to learn more about OnBoard today.
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About The Author
- Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.
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