Question

Explain the difference between a firm's corporate strategy and business strategy? Why do firms need to look at both aspects.

Answer 1

A firm’s corporate strategy includes the markets in which it will compete, who are the competitors and the various factors that may influence competition. While the firm’s corporate strategy is viewed in terms of domain selection, firm’s business strategy is viewed in terms of domain navigation. Business strategy focuses on how the company will compete against the rival firms and create value for customers. The firms can create value by adopting different strategies including cost reduction. A business identifies and develops competitive advantage as a part of the business strategy.

Firms need to look at both aspects because both the strategies work together and can influence each other while trying to make the organization successful. When the corporate strategy determines which market the firm should enter, the business strategy should be able to help the firm to make advantage in the selected market. When a firm plans for diversification, it should consider both the strategies and decide on diversifying. There are chances of business loss if the firm does not consider both the strategies while taking important decisions.