Learn the difference between corporate and business strategy, and how they work together to help you reach your goals.
Strategy formation, management and execution can happen at multiple levels of an organization. Even within small to medium sized businesses you can often expect there to be an overall company strategy with departmental strategies that sit underneath it, created and led by that functional lead and executed by the team members in that department. In larger organizations there is a further layer of strategy, namely corporate strategy. In large, diversified companies you can expect there to be a corporate strategy, separate business strategies, and then departmental or functional strategies beneath those.
As a business leader, I often get asked about the differences between business strategy and corporate strategy. There tends to be some confusion surrounding these two terms, since they both relate to strategic planning within an organization. However, business strategy and corporate strategy are distinct concepts that serve different purposes.
In this article, I’ll break down what each one means, how they differ, and why you need both business and corporate strategy alignment to achieve organizational success.
Defining Business Strategy and Corporate Strategy
First let’s start with some definitions so we’re on the same page
Business Strategy: A business strategy is a specific plan of action created by a department or business unit to help achieve the overall goals of the organization. It outlines the priorities, initiatives, resources, and measures for success that a department will focus on to drive results aligned with the corporate strategy.
Corporate Strategy: A corporate strategy refers to the overarching direction and goals for the entire organization. It defines where the organization wants to go and how it will get there. The corporate strategy sets the framework for decision-making across the business and guides how resources are allocated.
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Business strategy is department/unit-specific, corporate strategy is organization-wide.
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Business strategy supports corporate strategy execution, while corporate strategy drives the high-level goals.
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Business strategy focuses on tactical objectives, corporate strategy focuses on strategic direction.
Key Differences Between Business and Corporate Strategy
While business strategy and corporate strategy are related, there are some important distinctions between the two:
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Creation: Corporate strategy is devised by an organization’s top executives and leaders. Business strategy is created by department/unit managers.
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Scope: Corporate strategy encompasses the whole organization. Business strategy covers a specific department or business unit.
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Focus: Corporate strategy focuses on the long-term direction and vision. Business strategy focuses on shorter-term implementation.
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Time Horizon: Corporate strategy generally looks 3-5 years out. Business strategy looks 1-2 years out.
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Goals: Corporate strategy sets overarching goals for growth and value creation. Business strategy sets specific, measurable goals per business area.
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Audience: Corporate strategy guides executive decision-making. Business strategy guides managers and employees.
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Alignment: Business strategies must align with and support the corporate strategy.
Why You Need Both Business and Corporate Strategy
Some may wonder why both levels of strategy are necessary. Can’t you just have one high-level corporate strategy?
While corporate strategy sets the direction, it relies on business strategies to execute the specific plans for each department/unit that will drive results.
Think of it this way:
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The corporate strategy provides the destination and roadmap for the organization.
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The business strategies provide the vehicles that will get the organization to its destination.
The business strategies help break down high-level goals into actionable plans and activities that each department must accomplish for the corporate strategy to succeed.
Without properly aligned business and corporate strategies, organizations often struggle to execute on their strategic vision. Misalignment leads to wasted resources and duplicated efforts as departments work in silos rather than collaboratively towards shared goals.
Best Practices for Aligning Business and Corporate Strategy
Here are some tips to align business strategy with corporate strategy:
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Cascade goals – Make sure department goals clearly ladder up to corporate goals. Use similar terminology and structures.
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Coordinate planning – Involve key department leads in corporate strategy planning, and socialize corporate plans before setting business unit plans.
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Communicate – Continually communicate corporate priorities and changes to managers/employees so business plans can adjust accordingly.
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Collaborate – Encourage cross-departmental collaboration and knowledge sharing in developing business plans.
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Use strategy software – Use a centralized strategy management platform to coordinate and align business plans across the organization.
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Review regularly – Review business plans regularly to ensure they still align with corporate strategy and reset as needed.
Examples of Business Strategy vs. Corporate Strategy
Let’s look at some examples that illustrate the difference between business strategy and corporate strategy:
Example 1: Fictional Clothing Retail Company
Corporate Strategy Goal: Expand market share by acquiring smaller competitors.
Business Strategy Example (Marketing Dept): Develop and execute brand awareness campaigns in cities where competitors have major market presence.
Here the business strategy supports the corporate strategy goal by using marketing tactics to gain market share where targeted competitors currently dominate.
Example 2: Fictional Software Company
Corporate Strategy Goal: Transition product offerings to a subscription model to drive recurring revenue.
Business Strategy Example (Product Dept): Redesign product features and functionality to be compatible with modular, subscription-based model.
This business strategy helps enable the new subscription model by adjusting product design and capabilities.
Example 3: Fictional Nonprofit Organization
Corporate Strategy Goal: Help 100,000 low-income individuals across the state achieve financial stability.
Business Strategy Example (Program Dept): Enroll 45,000 eligible clients into our workforce development program that provides job skills training.
This business strategy executes on the corporate goal by defining how a specific department will serve a share of the individuals in need.
Key Takeaways on Business and Corporate Strategy
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Business strategy refers to a specific department’s objectives and plans to drive results. Corporate strategy sets high-level goals for the entire company.
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Business strategy should always align with and support the corporate strategy for the organization to be successful. Misalignment can hinder execution.
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While corporate strategy is handled by top executives, business strategy creation involves managers of specific units/departments.
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Corporate strategy guides executive decision-making and resource allocation. Business strategy provides the detailed roadmap for departments to follow.
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Organizations need both strong corporate strategy for the big picture and tightly aligned business strategies to accomplish strategic goals through daily operations.
Clearly understanding the difference between business strategy and corporate strategy is crucial for planning and executing successful strategic plans at any level of the organization. With alignment between clearly defined business strategies and corporate strategy, companies position themselves to achieve their vision.
What Are the Advantages of Having a Corporate Strategy?
One of the most significant advantages of having a central, corporate strategy in a diversified business, is that it enables the organization to spot and exploit synergies across the group that will improve the performance and efficiencies of the business units and ultimately drive growth for the whole company.
Who Is Responsible for Corporate Strategy?
Ultimately, the overall corporate strategy of a business organization falls to the CEO. The CEO will typically devise the strategy with the other c-suite senior leaders combined with input from the board of directors.
Some CEOs may choose to appoint a senior leader focused only on strategy – be that a Chief Strategy Officer, a VP of Strategy or a Director of Corporate Strategy, for example. You can find out more about the role and responsibilities of a CSO in our article What a Chief Strategy Officer Is and Why You Need One. But the corporate strategy for any organization is always formulated by the very highest level of leadership in the company.
Corporate vs. Business Strategy
What is the difference between corporate strategy and business strategy?
So, the corporate strategy focuses on where the organization competes, and the business level strategies focus on how that particular unit competes. What Is Corporate Strategy? At the top level of an organization, corporate strategies should set out a clear mission and vision for the entire company.
What is corporate strategy?
Corporate Strategy can be explained as the management plan formulated by the highest level of organization echelon, to direct and operate the entire business organization. It alludes to the master plan that leads the firm towards the success.
Does corporate strategy inform business strategies?
Corporate strategy informs business strategies. Ultimately, however, the success of the organization as a whole depends on the success of those business plans. If your business strategies are successful—and they are linked to your corporate strategy—then your corporate strategy will be successful, too.
What happens if a business strategy is not a corporate strategy?
Without a corporate strategy sitting above the various business strategies, the overall organization would fail to become greater than the sum of its parts. A corporate strategy typically looks longer term than a business strategy.
