Introduction to Corporate Strategy

 This article is based on Johnson and Scholes

‘Exploring Corporate Strategy’

At the end of this article you should be able to understand:

  • What is corporate strategy?
  • Definition and Scope of CS
  • Characteristics and consequences of strategic decisions
  • Levels of strategy
  • Vocabulary

 1. Definition

(Corporate) Strategy is the direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a changing environment and to fulfil stakeholders’ expectation. (Gary Johnson and Kevan Scholes, 2002)

2. Characteristics of Strategic Decisions

Johnson & Scholes, 2002 identifies a number of characteristics of strategic decisions. We have enumerated them in a summarised form here.

3. Long-term Direction

Strategy is likely to be concerned with long-term direction of an organization. For example, a merger of two companies is a strategic decision as it focuses on the long-term objectives rather than any short term gains.

4. Achieving Advantage

Strategic decisions are taken to achieve an organizational advantage over the competition. To achieve a competitive advantage, strategic decisions are made to search for effective positioning against the competitors.

5. Scope of Organizational Activities

It is a fundamental characteristic of a strategic decision. It defines the scope of  activities and defines organizational boundaries. This may include decisions like where should the corporation focus on. Should it focus on one area of activities or several areas? Also should the organization expand into other geographical areas or not?

6. Resources and Environment

It is matching of the resources and activities of an organization to the environment. It is also known as searching for strategic fit. It means to develop strategies, identify opportunities in the business environment, adapting resources and competences.

7. Stretching or Leveraging

Stretch is exploring, creating and availing new opportunities by leveraging the resources and competences to provide competitive advantage.

8. Resource Changes and Operational Issues

New structures, management controls, human resources policies etc are the areas that need to be reviewed while taking strategic decisions.

9. Expectations of Stakeholders

Strategy is a reflection of the attitude and beliefs of its stakeholders. The beliefs, values and expectations of both internal and external stakeholders have a direct influence on the strategic development of an organization.

Consequences of Strategic Decisions

  • Complex in nature
  • Uncertainty
  • Requires an integrated approach
  • Manage relationship and network outside the organisation
  • Involves change in organization.

Levels of Strategy

1. Corporate Level Strategy

This is the level of strategy which is concerned with the overall purpose and scope of an organization and how value will be added to the overall organization.

2. Business Unit Strategy

A business unit strategy is competing successfully in a particular market. Strategic business units are separated as they distinct and different external markets for goods and services.

3. Operational Strategies

These are the corporate strategies which are concerned with the operating part of the organization. These are decisions which formulate how the various parts of an organization can effectively deliver the corporate level and business unit level strategies.

The Terminology

  • Here are some of the common terms used in corporate strategy
  • Mission: Overall purpose
  • Vision: Also called strategic intent. Aspiration
  • Goal: General statement of aim
  • Objective: Precise statement of the aim
  • Unique resources and core competences
  • Strategies: long –term direction
  • Control: Assessing effectiveness and modifying strategies.

This article is based on Johnson and Scholes Book titles “Exploring Corporate Strategy”. For more details on the book, click here.

 

 

 

 

Send to Kindle
Back to Top