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CORPORATE STRATEGY
ASSIGNMENT
Direction: Write about what you learn today (in the second class)
Answer:
Corporate strategy is a choice of direction an organization/firm adopts in order to achieve
the company objectives. According to the first material in the first class, developing corporate
strategy is necessary to create the blueprint of the entire company in middle and long-term. The
company or holding company can determine the overall direction in terms of 4 levels of strategy
as follows:
Table 1. The Direction of Overall Direction in 4 Levels of Strategy
No
Level
1
2
Corporate level
Business level
3
Functional level
4
Operational level
Description
The strategy for entire company including several business unit
The strategy for each unit business of a holding company
The specific strategy inside the unit business such as
manufacturing, finance, marketing, research and development,
and human resources
The strategy in the specific division. Example: strategy in
manufacturing division, how to make it efficient, effective, and
reach the target production.
By defining the 4 levels of strategy, the owner can know to what extent the company will
grow, how fast the growth, and when the right timing to execute the strategy. The blueprint can
be used as a basic direction for the company growth as a whole. Then, the corporate strategy
which include vision, mission, and value can provide the direction for the CEO in each business
unit to keep focused on where the organization is going and what it is trying to achieve. It called
Corporate Strategic Thinking (CST). CST makes the CEO can define the core value of the
organization and guide them to make decision.
There are different key points when we want to set up the corporate strategy and compare
to business strategy. The corporate strategy is more focused on how does the parent company
add value to the subsidiaries and how does being in one business can help the holding company
compete in the other businesses. It means the corporate strategy is a wide strategy to create the
benefit for each business unit. The decision made by looking which advantage that business unit
can receive. On the other hand, business strategy is more focused on creating business
competitive advantage. The strategy attempt to answer the question about how should the
company compete in the competitive market?. It means the business strategy is need specific
strategy that relevant enough to win the customers heart.
Identifying the business strategy can be arranged by implementing Porter’s Five Forces
Analysis as follows:
1. Cost Leadership, means the company compete as a cheaper price than the competitors.
2. Differentiation, means the company create the different value, feature, component for their
product than the competitors. It can be said that the company providing the premium price
for the premium specification
3. Focused Cost Leadership, means that the company wants to win the specific target
customer (niche market) and become the cheaper.
4. Focused Differentiation, means that the company wants to win the specific target customer
(niche market) and become different.
5. Integrated Cost Leadership/Differentiation, means that the company provide best price
and differentiation to compete in the market.
These strategy is refer to the resources in the organization, which strategy that appropriate to
the company is based on their resources allocation.
After determining the corporate strategy, the holding company can decide which level of
activity that they want to conduct in the business. There are 4 levels of activities as follows:
Table 2. The 4 Corporate Levels of Activities
Example
Level Activities
Description
There is no change in the firms current
activities
The Stability Strategy
Example: Toyota brand as a market leader
in automotive business in Asia just wait
and see about the timing to respond the
market changes.
The company is expand the business
activities
The Expansion Strategy
Example: Singer brand receive less
demand on sewing machine, then they
expand the business by creating other
kitchen appliances
The company wants to reduce the firm’s
level of activities. It means the company
must choose turnaround, divestment, or
liquidation.
The Retrenchment
Strategy
Combination Strategy
Example: Nokia brand lost dominant
global market leadership in mobile phone
by fail to respond to smartphone
technology changes. So they have to
turnaround.
The company used the combination of
strategies above.
Description in Table. 2. above shows that there are the level activities that can be used for
the company when the must respond to the market changes. The leader or CEO must be aware of
it due to the market are now very fast moving. The rapid growth of technology also drives the
company increase the awareness of the changes. Thus, it is necessary for the CEO to understand
the corporate level of activities in order to make the right decision to overcome the uncertainty in
the market.