Corporate Level Strategies

Corporate level strategies are the ‘big picture’ plans organisations employ to reach their
overarching objectives. These strategies usually span beyond one business unit or product line
and focus instead on overall company goals such as growth, stability, and profitability.
Examples of corporate level strategies include global expansion, diversification, mergers &
acquisitions, outsourcing and cost-cutting measures.

Corporate level strategy formulation may involve a range of decision-makers, from senior
executives to board members depending on the organisation’s size. Ultimately, it is up to senior
leadership teams to develop effective long-term plans for reaching organisational goals in order
to maximise value for stakeholders.

Characteristics of Corporate Level Strategies

Diversification

Diversification is an important and effective characteristic of corporate level strategies. It

involves a company expanding its business into new markets, products or services that are
unrelated to its current operations. The main objective of diversifying the company’s portfolio
is to reduce risks associated with over-reliance on one area and spread the risk across multiple
areas. This type of strategy allows companies to increase their revenues by tapping into new
sources of income while reducing any potential losses due to market instability or other factors.

Diversification also helps businesses become more competitive in existing markets by offering
different products or services that can be tailored to meet customer needs better than those
offered by competitors. Additionally, diversified companies may benefit from economies of
scale as they can combine resources for purchasing, production and marketing activities across
multiple industries. In summary, diversification is an essential element when considering
corporate level strategies and should be taken into account to maximise profits while
minimising risk.

Forward or backward integration

Forward or backward integration is a type of corporate level strategy that involves either
expanding business operations into a related industry or entering into an entirely new industry.
Forward integration occurs when a company takes ownership and control over suppliers in
its production process, while backward integration happens when it takes ownership and
control over distributors in its distribution process. This can benefit companies by providing
greater control over their supply chain, reducing costs and improving customer service levels.

Additionally, if done correctly, forward or backward integration can help firms to gain
competitive advantage through economies of scale and scope – for example gaining access to
cheaper resources or specialised knowledge from acquired companies. Ultimately, this
corporate-level strategy helps organisations build operational efficiencies that could increase
profitability.

Horizontal Integration

Horizontal integration is a type of corporate level strategy that involves merging or acquiring
companies in the same industry (e.g. two competing automobile manufacturers). By combining
operations with other firms in the same sector, businesses can diversify their product offerings
while simultaneously taking advantage of cost savings from centralising production activities
across multiple locations. The primary motivation behind horizontal integration is to increase
market share, reduce costs through economies of scale, and gain access to new markets and
customers.

Horizontal integration can also provide significant competitive advantages such as increased
bargaining power over suppliers, greater control over pricing due to increased market share,
more efficient use of resources and higher profits due to better economies of scale and scope.

Additionally, it allows for faster entry into new markets as one company can quickly acquire
an established presence in those areas by purchasing another business already operating there.
However, this strategy is not without its risks since it requires large amounts of capital
investment and could lead to anti-trust issues if competitors are consolidated too much within
an industry.

Market Penetration

Market penetration is one of the four primary characteristics of corporate-level strategies. It

involves increasing sales and market share for existing products or services within an
organisation’s current target markets. This strategy can be used when a company has identified
a segment in which it desires to gain more presence but does not require any new product
development or diversification into new segments. The goal is to understand customer needs
better and increase overall market share by making more of its products available at
competitive prices.

Companies must focus on their strengths, such as research and development, product
innovation, marketing campaigns and distribution networks, to implement this strategy. They
should also analyse competitor pricing structures to determine how they can make the most
efficient use of resources to maximise acquisition opportunities and minimise costs associated
with penetrating the desired market segment.
Businesses should strive to develop relationships with potential customers through online
channels like social media or direct outreach programs that build brand recognition while
tapping into existing customer bases as well as reaching out to prospects who may be interested
in their offerings.

Liquidation

Liquidation, as a type of corporate level strategy, is the process of selling off or closing down
all of a company’s assets in order to pay creditors and dissolve the business. This strategy is
usually employed when a company has run out of options for salvaging its financial situation;
it allows them to recoup some cash from its investments rather than just letting those assets
languish. Liquidation also helps protect shareholders’ interests by allowing them to receive at
least some compensation for their investment.

The primary disadvantage of liquidating a business is that it often results in job loss, which can
be very difficult financially and emotionally for employees. Many companies will try other
strategies before opting for liquidation, such as downsizing, restructuring debt obligations and
finding new sources of financing prior to taking this drastic step.

The specifics involved in any given liquidation depend on the legal structure under which the
company operates (corporations have different rules than partnerships) and local laws
governing insolvency proceedings. Businesses must understand these regulations to make an
informed decision about whether or not this option makes sense for their particular
circumstances.

Concentration

Concentration is one of the characteristics of corporate level strategies. It refers to a company’s

decision to focus its efforts and resources on specific areas or markets to maximise profit
potential. Companies may choose to concentrate their efforts on certain product lines,
geographical locations, customer segments or even industry sectors. This type of strategy
allows them to gain an edge over competitors by focusing on areas where they can achieve
greater economies of scale and cost efficiencies, as well as stronger market share and better
brand recognition.

Concentrating corporate-level strategies can help organisations stay ahead by leveraging

existing strengths and taking advantage of opportunities presented when competition is low. y
concentrating on these areas, companies are able to increase their return on investment while
reducing risk by limiting exposure to other markets that may be more volatile. Additionally,
this type of strategy also provides an opportunity for growth through increased investments
into the chosen area or market segment since it already has a strong foothold within its core
industry sector.

Framework of Corporate Level Strategies

The corporate-level strategy framework comprises four distinct elements: vision and mission,
objectives and goals, core competencies, and strategic positioning.

Vision and Mission: These two fundamental components of the strategy provide the overall
direction for an organisation. The vision defines what a company wants to become in the future,
while the mission outlines how it will achieve its desired end state.
Objectives and Goals: Corporate-level objectives are typically based on long-term plans
involving multiple organisational departments or functions. Goals set specific targets for each
objective that can be objectively measured by management or other stakeholders to track
progress over time.

Analysis of Internal Resources: Corporate strategies must consider an organisation’s existing

resources, skills and capabilities to identify competitive advantages or areas of weakness
relative to competitors. This includes performing a SWOT analysis (strengths, weaknesses,
opportunities & threats) to assess internal assets and limitations comprehensively.

Analysing External Environment: Organisational performance is affected by changes in

market conditions, technology advances, industry trends etc., so companies must remain aware
of external influences on their operations. Environmental scanning involves monitoring both
macro-level variables like economic stability/growth rates & micro-level factors such as
customer purchasing habits/preferences.

Core Competencies: Core competencies are unique capabilities or strengths that give a
company a competitive advantage in its industry or market segment(s). Identifying these
capabilities allows companies to focus resources on areas where they have particular strengths,
which can help them gain a foothold in new markets or products more quickly than their
competitors can do with similar offerings.

Strategic Positioning: This component involves analysing the current environment, assessing
potential threats from competitors, identifying opportunities available to the firm, and
determining entry barriers into new markets/products and exit strategies if needed. All are
designed around creating sustainable competitive advantages against rivals through the
differentiation of products/services offered alongside cost leadership techniques when
necessary.

Formulating Strategies: Once a firm has assessed its own strengths/weaknesses and identified
external environment opportunities/threats, executives must decide how best to position itself
relative to competition by selecting appropriate business-level strategies.

Evaluate Impact: The impact of each strategic decision should be monitored using
quantitative measures such as return investment ROI) financial ratios e g efficiency, liquidity
etc. While these metrics provide useful information, they do not paint the full picture since
long-term success depends on qualitative elements, reputation, innovative products etc.

Types of Corporate Level Strategies

Stability Strategy

A stability strategy is a type of corporate level strategy which involves maintaining the status
quo and keeping operations within existing parameters. This strategy is often adopted when an
organisation has identified its core competencies and wishes to focus on them in order to
increase profits or minimise risk. The stability strategy focuses on preserving the current state
of business and avoiding any major changes. It also entails protecting established processes,
ways of doing things and customer relationships while still striving for growth within existing
boundaries.

The primary objective of this approach is to ensure that market share remains steady through
effective marketing efforts targeted at existing customers while concentrating resources on
strengthening the company’s competitive advantages over those held by competitors. Stability
strategies may be deployed when conditions remain relatively stable but can easily become
outdated should external factors suddenly disrupt the marketplace and significantly change
customer demands or preferences.

Expansion Strategy

Expansion Strategy as a type of corporate level strategy is an important part of the overall
corporate strategy. It involves deciding how to expand the company’s business operations and
activities to achieve its long-term goals. Expansion strategies can include both internal and
external growth, such as mergers, acquisitions, joint ventures and strategic alliances. It could
also involve new product launches or services, entering new markets or expanding existing
ones.

When considering whether to pursue a particular expansion strategy for their organisation,
companies must consider factors like operational capabilities, quality assurance objectives and
financial resources available before taking any action. Additionally, they need to evaluate risks
associated with each option, such as market saturation in certain areas or competition from
other players within the industry. Furthermore, they should ensure that all stakeholders are
considered when formulating these plans so that any decisions made have unanimous approval
across all sectors of the business, including shareholders and employees.

This type of corporate level strategy is extremely beneficial for businesses that wish to stay
competitive while also achieving their desired results in terms of growth targets set out by
management teams. Moreover, it allows organisations to capitalise on opportunities that may
have otherwise been overlooked without appropriate planning, thus maximising potential
profits over time due to increased efficiency levels achieved through careful analysis
beforehand.

Retrenchment Strategy

Retrenchment strategy, also known as downsizing or rightsizing, is a type of corporate level

strategy. It involves reducing the size and scope of an organisation’s operations to save costs
and improve efficiency. Retrenchment strategies involve cutting staff and resources while
streamlining processes to maximise profits without sacrificing product quality or customer
satisfaction. This type of corporate level strategy is often employed when businesses are facing
financial difficulty due to economic recession, change in market conditions, competition or
mismanagement.

Retrenchment can be seen as a defensive measure used by companies that have identified areas
where they could make cost savings but do not want to compromise on quality standards or
customer service levels. Such measures usually include decreasing staff numbers through
redundancy programs, closing unprofitable business units and outsourcing certain services
such as IT support or accounting functions.

In addition to these measures, companies may look at restructuring their product range so that
only profitable items are kept and non-essential ones removed from production in order to
reduce overhead costs associated with them. Focusing solely on core activities or exiting
markets that no longer offer growth potential form part of retrenchment strategies employed
by organisations today to reduce operating costs and improve profitability overall.

Combination Strategy

A combination strategy is a type of corporate level strategy that involves the simultaneous
implementation of two or more different strategies. Companies often use this type of strategy to
increase their market share, reach new markets and customers, and gain competitive
advantages. It enables businesses to expand their operations while protecting their current
marketplace positions.

The main benefits associated with implementing this type of strategy are increased revenues,
improved efficiency, better customer service levels and greater profitability. Combination
strategies can involve:

• The utilisation of a variety of approaches, such as diversifying into new products or

services.
• Integrating production processes between organisations.
• Targeting specific niche markets.
• Utilising cost-effective technologies.
• Entering international markets.
• Gaining access to key resources and personnel through strategic alliances, joint
ventures or mergers/acquisitions.
• Forming strategic partnerships with other firms in related industries.
• Investing heavily in research and development projects to enhance existing products or
create entirely new ones.

For a combination strategy to be successful, it must focus on the activities that will create value
for stakeholders such as customers, employees, shareholders and suppliers. Additionally, it
must adequately address any potential risks associated with its implementation before taking
action since failure to do so may result in financial losses for an organisation instead of success.

Corporate Restructuring
Corporate restructuring is the process of reorganizing a company's management, finances, and
operations to improve the efficiency and effectiveness of the company. Changes in this area
can help a company increase productivity, improve the quality of products and services, and
reduce costs. They can also help a company better serve the needs of its customers and
shareholders. Restructuring businesses may also result in the closure of underperforming or
unprofitable business units.
For some ventures, a company restructure may be a final effort to retain solvency when a firm
is in financial trouble and has to restructure its debts with its creditors. To keep the business
afloat, the procedure entails reorganizing the company's debt and selling off non-essential
assets.
Companies can either have their restructuring done informally (outside the court system) or
through one of the various legal corporate restructuring strategies, depending on the severity
of their condition.
In the following cases, corporate restructuring is used:
Organizational Strategy
Some divisions and subsidiaries that do not fit with the company's primary strategy are
eliminated by the troubled company's management in an effort to boost performance.
Strategically, the division or subsidiaries may not fit in with the company's long-term goals.
Such assets will be sold to possible purchasers so that the company may focus on its primary
strategy.
Economic Loss
The venture may not generate enough revenue to pay the company's capital expenditures,
resulting in an economic loss. Management's erroneous decision to start the division or the
reduction in profitability of the endeavour may be the cause of bad performance. This might
be due to changes in client requirements or rising prices.
Reverse Synergy
As the name implies, reverse synergy postulates that the value of a single unit may be greater
than the combined value. This is a frequent motive for the corporation to sell up its assets. The
concerned company may determine that selling a division to a third party is better than keeping
it in-house since it would bring in more money.
Cash Flow
Getting rid of an unprofitable project might bring in a significant amount of money for the
organization. Selling an asset can be a way to raise cash and decrease debt for a company that
is having difficulty securing financing.
Why Is Restructuring Important?
Restructuring company organization and financial assets through inorganic growth strategies
include mergers, amalgamations, and acquisitions, which can be a lifesaver for businesses on
the brink of collapse. Creating synergy is the common objective of these company restructuring
strategies. The value of the combined firms is larger than the sum of their parts because of this
synergy effect. For the most part, synergy might take the shape of higher revenues or lower
costs. An individual company's competitive position and its contribution to corporate
objectives are the primary goals of corporate restructuring.
Companies expect to get the following advantages through various corporate restructuring
strategies:
Market Share — Mergers provide for a larger share of the combined market for the merged
firm. Increasing your market share is as simple as offering your customers more of what they
want and need. One way to achieve this result is through a horizontal merger.
However, while companies attempt to become the dominating player or the market leader in
their specific industry through mergers and acquisitions, they may be subject to the
Competition Act of 2002, which regulates this type of potential monopoly.
Reduced Competition — Company restructuring strategies resulting in a horizontal merger
also have the added benefit of reducing competition.
Scale in Growth — Mergers and acquisitions allow companies to increase in size and become
a more dominant force in the marketplace than their rivals. If you want to build a business by
organic means, you'll have to wait for a long time. However, acquisitions and mergers (i.e.,
inorganic expansion) may accomplish this in rapid succession.
Scale in Cost — It is possible to reduce the cost per unit of production by merging two or more
businesses. The fixed cost per unit decreases when the total output of a product rises.
Tax Advantages — Companies often utilize mergers and acquisitions for tax reasons,
particularly in cases where a profit-and-loss firm merges with another. The set-off and carry-
forward provisions of Section 72A of the Income Tax Act, 1961, provide a significant tax
benefit.
Technology Adoption — Companies must pay attention to new technological breakthroughs
and how they might be applied to the commercial world. Enterprises can gain a competitive
advantage by acquiring smaller firms that have unique technology.
Brand Adoption — Brand loyalty is a huge driving factor in sales, and many companies will
opt to buy a well-known brand rather than start from scratch in order to reap the benefits.
Diversification — Some companies hope to expand their offerings via the joining of
businesses engaged in unconnected fields. It aids in the smoothing of the company's business
cycles, hence lowering risk by having a large number of enterprises.
Saving an Insolvent Company — The Insolvency and Bankruptcy Code, 2016 has opened up
a new channel for the purchase of a company that is in the process of going bankrupt.
Types of Corporate Restructuring
Typically, there are two types of corporate restructuring, and the cause for restructuring will
influence both the kind of restructuring and the corporate restructuring strategy:
Financial Restructuring
This form of restructuring a business may be necessary if the company's total sales see a
significant decline owing to the current economic climate. The business entity has the option
to adjust its equity structure, debt service schedule, equity holdings, and cross-holding pattern
in this location. All of this is being done to keep the market and the company's profits strong.
Debt/Equity Swap
Restructuring a company's finances can be accomplished by using a debt-for-equity swap. An
equity stake, such as stock in the firm, is exchanged to cancel a company's debt to a lender
under a debt/equity swap arrangement. A renegotiation of debt is another way to look at it.
Companies implementing a debt/equity swap are typically in rocky financial waters, such as
cash flow issues or company losses.
A lender may be ready to exchange a debt obligation for an equity holding in a firm if it is
evident to the lender that the company would be unable to repay its current debt in a reasonable
length of time.
However, this type of corporate restructuring would only happen if the lender feels that the
debt cancellation would allow the firm to stay viable.

Debt Loading
The company can also borrow money to pay for the buyout, which would put more debt on the
books. Leveraged buyouts are another name for this approach to increasing debt. One founder
can buy out the other founders' shares by using a tactic known as "debt loading." Cash flow is
used to pay down debt by repurchasing and retiring shares. Of course, taking on more debt
comes with its own set of challenges.
Organizational Restructuring
Changes in a company's organizational structure, such as decreasing its hierarchy level,
revamping job roles, shrinking the workforce, and modifying reporting connections, are all
examples of operational restructuring. Reduce costs and pay off debt through a reorganization
like this to keep the company's operations going.

Corporate Portfolio Restructuring

A portfolio restructuring approach that involves divesting assets is known as a divestiture
strategy. Divisions and subsidiaries that are no longer profitable or that no longer suit a firm's
overall strategy are sold or spun off. Restructuring a company's portfolio helps it to refocus on
its main business and obtain much-needed financing. With the money it earns from these deals,
it may invest in its leading company. It also may invest in other companies that fit in with its
strategy and help it achieve a positive net income.
5 Corporate Restructuring Strategies to Consider
The ideal way to restructure a corporation depends on its specific conditions and attributes, as
well as the purpose for the reorganization. The following are five company reorganization
strategies used to create profitability:
1. Mergers and Acquisitions (M&A)
A merger is when another firm takes over an existing company, or a new company is formed
by merging two or more existing companies. Though firms in financial trouble commonly
employ M&A transactions, there's generally a potential for business synergies that may be
generated by uniting the two businesses rather than a result of financial insolvency.
2. Reverse Merger
Reverse mergers allow private firms to become publicly traded without the necessity for an
initial public offering (IPO). In a reverse merger, a private firm acquires a controlling stake in
a publicly-traded company and gains control of the board of directors as a result.
3. Divestiture
Divestiture is the act or process of transferring ownership of a company's non-core assets to
another party. With the sale of one or more of a company's subsidiaries, divisions, or other
business units, a company undergoes a significant reorganization.
There are times when it's best for an organization to sell off an unprofitable company line rather
than continue to invest in it. In order to avoid bankruptcy, decrease debt, and maintain a low
debt-to-equity ratio, companies may use a divestment plan.
4. Joint Venture
A joint venture is the creation of a new firm between two or more companies. Each of the
participating firms agrees to provide specific resources and to split the costs, earnings, and
control of the new company formed as a result of the collaboration.
5. Strategic Partnership
With the strategic alliance, businesses may work together while maintaining their own
identities in order to generate commercial synergies.

Concepts in Synergies:

Synergy is the concept that the combined value and performance of two companies will
be greater than the sum of the separate individual parts. Synergy is a term that is most
commonly used in the context of mergers and acquisitions (M&A). Synergy, or the
potential financial benefit achieved through the combining of companies, is often
a driving force behind a merger.

Understanding Synergy
Mergers and acquisitions (M&A) are made with the goal of improving the company's financial
performance for the shareholders. Two businesses can merge to form one company that is
capable of producing more revenue than either could have been able to independently, or to
create one company that is able to eliminate or streamline redundant processes, resulting in
significant cost reduction.

Because of this principle, the potential synergy is examined during the M&A process. If two
companies can merge to create greater efficiency or scale, the result is what is sometimes
referred to as a synergy merge.

Types of Synergy
In addition to merging with another company, a company may also attempt to create synergy
by combining products or markets. For example, a retail business that sells clothes may decide
to cross-sell products by offering accessories, such as jewellery or belts, to increase revenue.
A company can also achieve synergy by setting up cross-disciplinary workgroups, in which
each member of the team brings with them a unique skill set or experience. For example, a
product development team may consist of marketers, analysts, and research and
development (R&D) experts.

This team formation could result in increased capacity and workflow and, ultimately, a better
product than all the team members could produce if they work separately.

Special Considerations
Synergy is reflected on a company's balance sheet through its goodwill account. Goodwill is
an intangible asset that represents the portion of the business value that cannot be attributed
to other business assets. Examples of goodwill include a company's brand recognition,
proprietary or intellectual property, and good customer relationships.

Synergies may not necessarily have a monetary value but could reduce the costs of sales and
increase profit margin or future growth. In order for synergy to have an effect on the value, it
must produce higher cash flows from existing assets, higher expected growth rates, longer
growth periods, or lower cost of capital.