Question

1. Discuss differences between Corporate Strategy and Business Strategy

2. Reasons for diversification and challenges of diversification

Answer 1

Answer: (1) The business strategy of a company deals with how a company will compete at the marketplace while the corporate strategy decides the businesses lines in which the company will operate. For example corporate strategy decides whether a company will enter Airlines business or fashion retailing while the business strategy will develop strategies for operating in the selected business line. The corporate strategy is long term in nature while the business strategy is mainly short to medium term. The corporate strategy is aligned with the overall goals and objectives of the company while business strategies mainly focus on the tactics for achieving short and medium term goals that support the overall goals.

( 2) The reasons for diversification are as follows

1. To overcome the saturation in one market

2. Improve product mix of the company

3. To reduce the risk associated with operating in a single market

4. To gain economies of scale

5. Cross selling

The challenges for diversification are

1. It requires more resources

2. It requires developing competency in multiple fields

3. It is complex in nature and increases load

4. It dilutes the focus of the company

5. At times it results in poor quality