Understanding the Differences: Corporate Strategy vs Business Strategy
As businesses grow and mature, they often require different strategic approaches to achieve their goals. These approaches are known as corporate strategy and business strategy. However, many people use these terms interchangeably, which can create confusion. So, let’s dive deep into understanding the differences between corporate strategy and business strategy.
What is Corporate Strategy?
Corporate strategy refers to the overall plan of action adopted by a company to achieve long-term goals. Corporate strategy is developed by corporate management and it involves multiple businesses and divisions. It outlines the company’s vision, mission, and objectives, and it is concerned mainly with resource allocation, risk management, and portfolio management.
A company’s corporate strategy determines how it will allocate its resources among various business units to achieve a competitive advantage. It can include diversification, acquisitions, alliances, and joint ventures. Corporate strategy is often about making strategic choices about which businesses to keep and which to divest.
What is Business Strategy?
Business strategy is all about how a particular business unit will compete in the market. It is developed by business managers and focuses on the market positioning of a single business unit or product. It outlines the business’s vision, mission, and goals, as well as the plan by which it will achieve them.
Business strategy is focused on creating a competitive advantage within a specific business unit. This involves determining which products or services to offer, which markets to target, and how to differentiate the product or service from competitors.
The Main Differences
One key difference between corporate strategy and business strategy is their scope. Corporate strategy is concerned with the company as a whole, whereas business strategy is focused on a specific business unit. Another key difference is that corporate strategy is concerned with portfolio management, while business strategy is concerned with market positioning.
Corporate strategy is about determining the various businesses or units that a company wants to operate in and how to allocate resources amongst them. Business strategy is about positioning a specific product or service in a particular market.
Examples
Let’s consider the example of Nestle as a company. The Corporate Strategy of Nestle is to be the world’s leading nutrition, health, and wellness company. To achieve this, Nestle focuses on maximizing the value of its existing business units and also expands through mergers and acquisitions.
Now, let’s consider the example of Nestle’s business strategy for their successful Nescafe brand, which is the company’s most extensive brand. Nescafe’s business strategy focuses on dominating the instant coffee market by creating new products and introducing Nescafe in different markets.
Conclusion
In conclusion, corporate strategy and business strategy are two important concepts that play a critical role in helping a company achieve its long-term goals. Corporate strategy focuses on the company as a whole, while business strategy is concerned with a single business unit or product. A good understanding of both these concepts is important to develop effective strategies for companies of all sizes.
