We’re going to look at the difference between corporate and business strategy. The two terms are often used interchangeably, but they do have some significant differences – understanding those differences is important as it determines where and how you’re going to compete.
A business strategy is about defining the decisions that a company needs to make in order to gain or maintain competitive advantage. A business strategy asks questions like:
Let’s think about an example and pretend that I own a small coffee shop. I’ve analysed the market and have concluded that I can’t compete on price – the larger players like Starbucks have far better economies of scale and competing on price would cause my company more harm than good. So, I choose a product differentiation strategy in order to build competitive advantage against the Starbucks store in the same town as I operate. The answers to the first question might look a little like this:
Here, we’ve answered the question ‘how are we going to compete?’. Which is the core purpose of the business strategy.
A corporate strategy defines where a business is going to compete. Where doesn’t just define the geographic markets that the business aims to enter, but it also defines the industry (or industries), the price point (premium or budget) and more. A corporate strategy asks questions like:
Let’s think about our small coffee shop again. We’re in year 2, the business is going really well & we’re looking to expand. So we might answer some of the corporate strategy questions like below:
With each of these answers, we’ve built a picture of where we are going to compete.