The objective of strategy in companies is to ensure their survival and economic prosperity in the future. To do this, the company needs to obtain returns above its cost of capital, which is not easy in a very competitive business environment like the current one. The strategy has two aspects that must be combined, the business strategy and the corporate strategy. In this article we will see their definitions and the differences between both types of strategy with several examples of each type.
Definition of business strategy and corporate strategy
Business strategy and corporate strategy can be defined as follows:
Corporate strategy: It is the one that defines the scope of the company in regards to the industries in which it competes. Corporate strategy decisions include investments in diversification, vertical integration, acquisitions or divestitures.
Business strategy: It is the one that is concerned with the way in which a company competes within a sector or industry. It is also known as a competitive strategy.
Difference between business and corporate strategy
The clearest way to differentiate between business strategy and corporate strategy is through questions that every business must answer. The strategy of a company answers the following question:
How is the company going to make money?
The strategy is in turn divided into business and corporate strategy, which are those that answer the following questions.
In which business sectors is the company going to compete?
How should the company compete within each business sector?
Examples of business strategy and corporate strategy
To better understand the difference between business strategy and corporate strategy, I leave you 3 examples that will surely make everything clear:
- Corporate strategy: Air passenger transport
- Business strategy: Low cost
- Corporate Strategy: High-end Motor Vehicles
- Business strategy: Differentiation
- Corporate Strategy: Latest Fashion Clothes
- Business strategy: Latest trends at a good price