• Ozzie Paez

Corporate Strategy vs. Business Strategy


Professor Robert Grant succinctly differentiates corporate from business strategy: “Corporate strategy is concerned with where a firm competes, business strategy is concerned with how a firm competes within a particular area of business[1].” Corporate strategy focuses portfolios of businesses or business units. It plays an important role in mergers, acquisitions and divestitures.

Corporate strategies have been closely connected to conglomerates. Companies like GE, J&J, United Technologies, Honeywell, 3M and Dow Chemicals operate multiple business units that compete in different markets. These giants need strategies to help them guide and restructure their portfolio of businesses. They also need individual business strategies for their businesses and operating units.

The digital revolution is affecting traditional SMB business structures and markets. Many SMBs are becoming de facto corporations when new businesses emerge within their business. For example, consider an agricultural company that gathers data on soil quality, weather, irrigation, transportation, storage, distribution, etc. That data may suddenly become valuable assets that others want to access. The business then creates a unit to market to market and sell it. The new business is fundamentally different business from raising crops. It will require different skill sets, investments, marketing and management methods. The original agricultural company has become one of two in a corporate portfolio.

3-D printing is similarly creating related, but distinct businesses opportunities. For example, a traditional manufacturing company with new 3-D printing capabilities may decide to sell modeling and prototyping services. The new services will compete in a different market segment. The company is now a corporation with two business units. It will require new skill sets, investments, business structures and business strategy. A corporate strategy will take both units into account in deciding where to compete and how best to manage its portfolio.

Digital technologies are turning some SMBs into evolve into multi-unit corporations. In this context, corporate strategy is moving out of the exclusive domain of large conglomerates. It's one more way in which digital is revolutionizing the business landscape.

References

[1]Robert M. Grant, Contemporary Strategy Analysis, 5th edition, p. 296, 2013, Wiley & Sons, Ltd.

#Strategy #CorporateStrategy #BusinessPortfolio #Conglomerate