BUSINESS STRATEGY VS. CORPORATE STRATEGY: A BRIEF EXPLAINER

When reviewing an organization’s strategy, there can be confusion between business strategy and corporate strategy. Though the pair have overlapping elements, these terms represent two distinct levels of strategy with key differences that business leaders need to understand.

Business strategy refers to the approaches, tactics and initiatives a specific business unit or division takes to achieve competitive advantage and success in a particular industry or market segment. For example, a company’s e-commerce business may have a growth-oriented business strategy focused on user acquisition through significant advertising spend. Or the consumer goods product line may have a more defensive strategy centered on cost efficiencies to preserve margins and balance sheet strength.

In contrast, corporate strategy is the broad strategic planning and decision making that occurs at the overall parent company level to manage the organization’s entire collection of business units and functional groups. Corporate strategists determine high-level resource allocations across the enterprise, make mergers and acquisition decisions, set organization-wide policies and performance targets, and guide macro-positioning relative to changing external landscapes. They examine interdependencies and synergies between business units while ensuring the sum is greater than the parts.

The main difference is corporate strategy takes an overarching, aerial view of the entire organization, while business strategy zones in on the competitive landscape of a specific product/market domain. For example, corporate strategy may dictate transferring cash from a steady low-growth business to fund an emerging high-growth business. Or corporate leadership could require all business units to contribute data to and draw insights from an enterprise data analytics platform.

While alignment between the two strategy levels is crucial, tension can also arise. Individual business heads may resist shrinking budgets or sharing sensitive customer data. Meaningful collaboration between corporate and business management is thus critical for executing coordinated moves that serve both levels’ interests. With healthy dialogue, corporate leaders can support each business’s Positioning while optimizing performance across the whole.

The levels involve different planning horizons as well—corporate strategy tends towards longer time frames with broader implications, while business strategy is more flexible and focused on near-term execution. Keeping these differences and synergies in mind will ensure strategy discourse occurs at the appropriate level.