Question

1. Discuss differences between Corporate Strategy and Business Strategy

2. Reasons for diversification and challenges of diversification

Answer 1

Corporate strategy is a strategy of a business group as a whole, which might comprise of a number of different business units in different fields. The corporate strategy might address the questions like shareholding pattern of different businesses of a gorup, formulating business specific challenges and their overall effect on the group strategy, investment and divestment strategies, corporate governance related decisions, CSR decisions and stakeholder management decisions, expansion and business diversification decisions among others. The main feature of Corporate strategy is that it deals with broad issues which affect the group as a whole. On the other hand, business level strategies deal with specfic business and includes issues like competitive advantage, customer communication, new product introduction, diversification, Custoemr relationship management, building a good public image etc. The business strategy is limited to the specific business only.

Reasons for diversification can be to grab a new business opportunity which holds great promise, putting the spare capacity to use, utilising subject matter expertise in a new area of interest, expolring new markets, moving from high risk area to new low risk ones,to create complementing products to the existing ones, to generate more revenue streams, creating a paradigm shift to the new age businesses to appeal a new customer segments and ensuring business continuity among others.

Challenges in diversification include risks which can be related to competing with new set of competitors, financial risks ( as a huge money is needed to diversify), lack of competency and risk of moving away from core competency in a new field, which might affect the competititve position in existing businesses, risk of being in an unknown level playing field, where many others have proved themselves, cultural and political risks ( in some cases where diversification involves entering in a new, unknown market).