Corporate strategy generally speaking is an approach to the strategic

decision making by looking across companies entire business portfolio. It

also determines how the available resources are allocated to various
business units or verticals of the entity to create most value for all
stakeholders. Corporate strategy is concerned with strategic decision making
for an individual business.

Goals of the Dissertation

This paper intends to study the effects of corporate strategy on the

performance of a diversified company engaged in manufacturing and
services businesses. The company generates almost 60% of their revenue
from services business. Efforts have been made to analyse how did the
company managed its portfolio of services, profitability of business units and
increase in turnover, which are the key performance indicators. Also, it would
be analyzed the linkage between corporate and the strategic business units,
focus on capabilities and resources such as the company’s ability to get into
new service businesses by delivering value to a set of new customers vis-a-
vis adding value to stakeholders.

Components of corporate strategy

There are several important components of corporate strategy. The main
tasks of corporate strategy are as under:

1. Allocation of resources
2. Organizational design
3. Portfolio management
4. Strategic tradeoff
This can be graphically represented as below:-

Before proceeding it would be appropriate to highlight in brief the

components and its importance.

1. Allocation of Resources

The allocation of resources at a Company focuses mostly on two resources:

people and capital. In an effort to maximize the value of the entire entity,
leaders must determine how to allocate these resources to the various
businesses or business units to make the whole greater than the sum of the
parts.
Key factors related to the allocation of resources are:
  People
o Identifying core competencies and ensuring they are well
distributed across the Company.
o Moving leaders to the places they are needed most and add the
most value (changes over time based on priorities)
o Ensuring an appropriate supply of talent is available to all
businesses

 Capital
o Allocating capital across businesses so it earns the highest risk-
adjusted return
o Analyzing external opportunities (mergers and acquisitions) and
allocating capital between internal (projects) and external
opportunities

2. Organizational Design
Organizational design involves ensuring the firm has the necessary
corporate structure and related systems in place to create the maximum
amount of value. Factors that leaders must consider are, the role of the
corporate head office (centralized vs decentralized approach and the
reporting structure of individuals and business units (vertical hierarchy,
matrix reporting, etc.)

Key factors related to the allocation of resources are:

 Head office (centralized vs decentralized)

o Determining how much autonomy to give business units
o Deciding whether decisions are made top-down or bottom-up
o Influence on the strategy of business units

 Organizational structure (reporting)

o Determine how large initiatives and commitments will be divided
into smaller projects
 o Integrating business units and business functions such that there
are no redundancies
o Allowing for the balance between risk and return to exist by
separating responsibilities
o Developing centers of excellence
o Determining the appropriate delegation of authority
o Setting governance structures
o Setting reporting structures (military / top-down, matrix
reporting)

3. Portfolio Management
Portfolio management looks at the way business units complement each
other, their correlations, and decides where the firm will “play” (i.e. what
businesses it will or won’t enter).

Corporate Strategy related to portfolio management includes:

 Deciding what new business to be in or to get out of existing one.
 Determining the extent of vertical integration the Company should
have
 Managing risk through diversification and reducing the correlation of
results across businesses
 Creating strategic options by seeding new opportunities that could be
heavily invested in if appropriate
 Monitor the competitive landscape and ensure the portfolio is well
balanced relative to trends in the market

4. Strategic Tradeoffs
One of the most challenging aspects of corporate strategy is balancing
the tradeoffs between risk and return across the Company. It’s
important to have a holistic view of all the businesses combined and
ensure that the desired levels are risk management and return
generation are being pursued.

Below are the main factors to consider for strategic tradeoffs:

 Managing risk
o Firm-wide risk is largely depending on the strategies it chooses
to pursue
 o True product differentiation, for example, is a very high-risk
strategy that could result in a market leadership position, or total
ruin
o It’s important to be fully aware of strategies and associated risks
across the firm
o Some areas might require true differentiation (or cost leadership)
but other areas might be better suited to copycat strategies
already being practiced by competitors that rely on incremental
improvements
o The degree of autonomy business units have is important in
managing this risk

 Generating returns
o Higher risk strategies create the possibility of higher rates of
return. The examples above of true product differentiation or
cost leadership could provide the most return in the long run if
they are well executed
o Swinging for the fences will lead to more home runs and more
strikeouts so it’s important to have the appropriate number of
options in the portfolio. These options can later turn into big bets
as the strategy develops

 Incentives
o Incentive structures will play a big role in how much risk and how
much return managers seek
o It may be necessary to separate the responsibilities of risk
management and return generation so that each can be pursued
to the desired level
o It may further help to manage multiple overlapping timelines,
ranging from short-term risk/return to long-term risk/return and
ensuring there is appropriate dispersion

Corporate strategy wrap-up

Corporate Strategy is different than business strategy as it focuses on how
to manage resources, risk, and return across a firm, as opposed to looking
at competitive advantages.
Leaders responsible for strategic decision making have to consider many
factors, including allocation of resources, organizational design, portfolio
management, and strategic tradeoffs.
By optimizing all of the above factors, a leader can hopefully create a
portfolio of businesses that is worth more than just the sum of the parts.

Assessing the Logic Corporate Strategy

Corporate strategy is the set of choices diversified companies use to create
and capture value across the parts of the business. The choices are largely
driven by how business units work with one another and how they use
corporate resources and capabilities. The questions in this chart can help
crystallize the underlying logic that drives corporate strategy. Then calculate
the average for the linkage between corporate and business units and the
average for questions on business units’ dependence on one another. These
averages will help to plot where the organization falls on the matrix in
“Strategies by Quadrant.” Use the boxes as guidance for what form the
strategy should take in each quadrant.
Attempt is being made to do an Analysis through a set of questions
and rank them on scale from 1 to 5 in the manner as under:

i. Strongly Disagree 1
ii. Disagree 2
iii. Neutral 3
iv. Agree 4
v. Strongly Agree 5

The average Would be taken out for the linkage between

corporate and business units and the average on business units’
dependence on one another Attempt will also be made to
determine the position in the quadrant where this company falls
into the logics of corporate strategy quadrant as discussed
above..
CORPORATE-BUSINESS
UNIT LINKAGE: UNITS’
DEPENDENCE ON Strongly Strongly
Disagree Neutral Agree
CORPORATE disagree agree
RESOURCES AND
CAPABILITIES

Corporate brands, 1 2 3 4 5
technology, and other
resources allow our
units to charge a price
premium relative to
competitors.

Corporate economies of 1 2 3 4 5
scale, bulk purchasing,
operational expertise,
or other factors give
our business units a
significant cost
advantage relative to
competitors.

Corporate resources or 1 2 3 4 5
capabilities are hard to
imitate and protect us
from rivals and new
entrants.

Switching from 1 2 3 4 5
corporate services (for
example, legal, human
resources, or
accounting) to outside
vendors would
dramatically hurt the
performance of
business units.

Our business units 1 2 3 4 5

could not compete as
CORPORATE-BUSINESS
UNIT LINKAGE: UNITS’
DEPENDENCE ON Strongly Strongly
Disagree Neutral Agree
CORPORATE disagree agree
RESOURCES AND
CAPABILITIES

stand-alone businesses
without corporate
support.

Average score:

The Company under consideration is a major player in Container Freight

Movement business. This is being represented graphically as under :

Handling and movement Storage and clearance of

of containerized cargo cargo

Liasoning with port

Tie-ups with shipping
authorities and other
lines
govt./ non- govt. entities

Skilled ground workforce