Breaking Down the Confusion: Corporate Strategy vs Business Strategy and When to Use Each

Corporate strategy and business strategy are two important concepts that are often confused with each other. While they are similar in some ways, they differ in terms of scope, focus, and application. In this article, we will break down the confusion surrounding the two and explore when to use each.

First, let’s define what we mean by corporate strategy and business strategy. Corporate strategy refers to the overall plan and direction of an entire organization, more specifically, how it creates value for its stakeholders. It involves making decisions at the highest level such as which industries or markets to enter, how to allocate resources, and how to manage different business units. On the other hand, business strategy focuses on the individual business unit or product level. It is concerned with how to compete in a specific market or industry and achieve a sustainable competitive advantage.

A good way to differentiate between the two is to think of a company as a tree. The trunk represents the overall corporate strategy, while the branches are the different business units or products. Corporate strategy outlines the vision and mission of the company and sets the overarching goals and objectives. Business strategy, on the other hand, focuses on how to achieve those goals for a particular product or service.

Now that we have a basic understanding of the two, let’s explore when to use each. Corporate strategy is typically used when a company is seeking to expand to new markets or industries, restructure its operations, or address major challenges or opportunities. For instance, when Apple decided to diversify its product portfolio beyond just computers and introduce the iPod, iPhone, and iPad, it was a shift in the company’s overall corporate strategy.

Business strategy, on the other hand, is used when a company is seeking to compete in a specific market or industry. This involves analyzing the competition, identifying the target market, developing a unique value proposition, and executing effective marketing and sales tactics. For example, when Coca Cola launched Diet Coke and Coca Cola Zero, it was a result of a business level strategy to target health-conscious consumers and expand their product offerings.

It’s important to note that corporate and business strategies are interconnected and mutually reinforcing. Corporate strategy provides the overarching direction and resources needed for business level success, while business level strategies feed into and help shape corporate strategy.

To illustrate this, let’s take a look at Amazon. The company’s overall corporate strategy is to be the world’s most customer-centric company. Its business level strategies include offering a wide range of products and services, focusing on logistics and supply chain management, and leveraging technology to enhance the customer experience. These business level strategies support the corporate strategy by strengthening the customer value proposition and creating long-term competitive advantages.

In conclusion, while corporate strategy and business strategy are different, they are both critical for a company’s long-term success. Corporate strategy provides the overarching direction and resources needed for a company to create value for its stakeholders, while business strategy focuses on how to compete in specific markets or industries. Used together effectively, they ensure a company can adapt to changing market conditions, capitalize on new opportunities, and achieve sustainable growth.