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Purpose: The objective of this paper is to introduce and explain the concept and levels of corporate strategy and management strategy.
Design/ methodology/ approach: The paper explored the theory and literature related to corporate strategy.
Findings: The study found that the corporate strategy differentiates between enterprise, business, functional and operational strategy. Corporate communication strategy is seen to be the outcome a strategic thinking process.
Originality/ value: The value of this paper lies in its comprehensive elaboration of corporate strategy.
Key words: corporate strategy, corporate identity and corporate strategy, levels of strategic management, concept of corporate strategy, corporate communication strategy
Paper type: Conceptual paper
Introduction to Corporate Strategy
Corporate strategy usually classify under the process of strategic management. The procedure of operating strategic management is a deliberate process of build up strategies that will access achiever within the organization. Corporate strategy commonly starts at the administrative level before trickling down to the management level where strategies are implemented on the functional level.
Definition of Corporate Strategy
Corporate strategy is the way of an organization takes with the goal of gaining business achiever in the long term. Current approaches have focused on the need for organizations to alter to and expect changes in the business environment, for example, a flexible strategy. Development of a corporate strategy includes determine the objective and scope of the organization's actions and the nature of the business it is in, taking the surroundings in which it functioning, its arrangement in the marketplace, and the competition it faces into consideration; most of the times disintegrated through a SWOT analysis.
SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is the commonest practical analytical tool for strategic planning, which is actually used by executives and consultants. The SWOT analysis is most commonly used to determine an organization's current positioning within its industry. This corporate strategy tool is used to examine the organization's internal strengths and weaknesses as well as its external opportunities and threats. Once this information has been obtained, leaders can determine specific strategies to make use of the organization's strengths, fortify its weaknesses, take advantage of opportunities and combat threats.C:\Users\Li Ann Teoh\Desktop\Documents\UPM\Notes\KOC 3301 Pengenalan Komunikasi Korporat\Assignment\320px-SWOT_en.svg.png
Corporate strategy generally begins with a mission statement, which is a clear and concise statement of the organization's purpose, why it does, what it does and how this is done. The mission statement provides employees at all levels with a clear purpose for what they do. The mission of the organization is an abstract statement which must be translated into concrete policies and procedures as a result of the strategic management process. When implementing effective corporate strategy, the mission statement of an organization will be the basis of all decisions.
Strategy as the Major Concept
The economic historian Chandler first articulated the notion of strategy in scholarly circles as 'the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary to carry out these goals'. The management philosopher Drucker sees strategy as an indication of the organization's positioning for the future, the what rather than the how. It is more important to do the right thing (improving effectiveness) than to do things right (improving efficiency). A strategy is seen by Grunig and Repper as an approach, design, scheme or system that directs the course of action in a specific situation it is the means to achieve the ends. Strategy is the thought process, the logic behind the actions. Chaffee clusters strategy definitions in the literature into three groups:
Linear strategy focuses on planning, and consists of 'integrated decisions, actions, or plans that will set and achieve viable organizational goals'.
Adaptive strategy is concerned with the 'development of a viable match between the opportunities and risks present in the external surround and the organization's capableness and resources for exploiting these opportunities'. The environment is seen to consist of trends, events, competitors and stakeholders to which the organization must adapt.
Interpretive strategy, which views the organization as a 'collection of cooperative agreements entered into by individuals with free will. The organization's existence relies on its ability to attract enough individuals to co-operate in mutually beneficial exchange'. The focus here is on desired relationships, symbolic actions and communication. Interpretive strategy corresponds to the "stakeholder approach" to strategic management.
Various authors see strategy as a pattern, namely:
A pattern in the organization's crucial decisions and actions, consisting of a few key areas or things by which the organization seeks to distinguish itself
A pattern in a stream of actions, this pattern being the result of strategic decisions made by the organization
A pattern of major objectives, aims, essential policies and outlines for reaching those goals - stated in a such way as to ascertain what business the company is in or is to be in and the form of company it is or is to be.
(Benita Steyn, 2003)
Concept of Corporate Strategy
At the corporate level, the portfolio of businesses that should form the organization's overall profile is defined (e.g.: decisions are taken on combination and attainments, strategic alignments, joint ventures), tactics for diversification and growth are decided upon, and corporate resources and capableness arranged. Corporate strategy can best be identified as the accountability of the board and top management for the organization's financial performance. Strategies at this level therefore tend to be financially oriented and shareholders are regarded as the primary stakeholders. The focus of corporate strategy is on the macro environment, especially its economic and technological components.
(Benita Steyn, 2003)
Corporate strategy is also the form of decisions in a company that sets and brings out its aims, purposes, or goals, cause the principal policies and draw a plan for achieving those targets, and ascertain the class of business of the company is to pursue, the form of economic and human organisation it is or plans to be, and the nature of economic and noneconomic contribution it plans to do to its shareholders, employees, customers, and communities. In an organisation of any size or diversity, "corporate strategy" usually applies to the whole enterprise. Corporate strategy defines the business in which a company will compete, preferably in a way that focuses resources to convert distinctive competence into competitive advantage.
The strategic decision contributing to this pattern is one that is effective over long periods of time, affects the company in many different ways, and focuses and commits a significant portion of its resources to the expected outcomes. The pattern resulting from a series of such decisions will probably define the central character and image of a company, the individually it has for its members and various publics, and the position it will occupy in its industry and markets. It will permit the specification of particular objectives to be attained through a timed sequence of investment and implementation decisions and will govern directly the deployment or redeployment of resources to make these decisions effective.
Some aspects of such a patten of decision may be in an established corporation unchanging over long periods of time, like a commitment to quality, or high technology, or certain raw materials, or good labour relations. Other aspects of a strategy must change as or before the world changes, such as product line, manufacturing process, or merchandising and styling practices. The basic determinants of company character, if purposefully institutionalised, are likely to persist through and shape the nature of substantial changes in product-market choices and allocation of resources.
It would be possible to extend the definition of strategy for a given company to separate a central character and the core of its special accomplishment from the manifestations of such characteristics in changing product lines, markets, and policies designed to make activities profitable.
(Nicolai J. Foss, 2003)
The Concept of Corporate Communication Strategy
Corporate communication strategy is conceptualised as a functional strategy, giving focus, centering and direction to the corporate communication function. It appear as a background for the communication outline developed to implement the strategy, it make the corporate communication function related in the strategic management procedure by giving the link between key strategic issues face up to the organisation and communication plans. Corporate communication strategy is seem to be the outcome of a strategic thoughtful process by senior communicators and good managers taking strategic decisions with regard to the classification and administration of, and communication with, strategic stakeholders.
(Benita Steyn, 2003)
Interface between Corporate Identity and Corporate Strategy
Corporate level marketing involves corporate level issues such as corporate identity, branding, communications and strategy. One of the themes generated by the early works on corporate level marketing was the relationship between identity and strategy. It has been suggested that research on the interface between corporate identity and strategy should be a significant point of departure for theoretical and empirical development of corporate level marketing.
(Balmer and Greyser, 2003).
Corporate identity is a principal construct of corporate level marketing. It occupies a pivotal position in the network of various constructs of corporate level marketing, e.g. corporate image/reputation, corporate communications, corporate brand. Therefore investigating the various interfaces between corporate identity and its related constructs has been a mainstream research theme in the field of corporate level marketing. On the other hand, corporate strategy has also been highlighted as another important construct that has to been examined in relation to corporate identity (e.g. Marwick and Fill, 1997; van Riel and Balmer, 1997; Balmer and Soeneon, 1999; Balmer and Greyser, 2002). Nevertheless extant literature suggests two views on the link between corporate identity and strategy. The first view can be named as instrumental approach, which means that strategic management provides a strategic context for corporate identity management (e.g. Marwick and Fill, 1997, and Stuart, 1999). The second view can be named as ideological approach, which means that corporate identity, encapsulating company's value and vision & mission, provides a normative guidance and reference point for a company's strategic exercise (e.g. Balmer and Greyser, 2002, and Bouchikhi and Kimberly, 2003). Both corporate identity and strategy are equally important for corporate level marketing, and the major task is to what extent corporate identity and strategy are coupled or dissonant.
In the past, corporate identity research has focussed to the potential unsuitable match between identity and image, identity and communication, identity and culture, but less of attention has been put on the potential breakdown of the link between identity and strategy. This study suggests that identity and strategy do not match always as conventionally expected. Therefore, companies should focus more on the negative impact of their market strategies, such as market choices and variation, on identity and image. Corporate identity renders sense of being and meanings to organizations. Therefore anything undermining an organization's identity could lead to catastrophic result.
On the other hand, perceived identity/strategy dissonance also represents opportunities and challenges for companies. For example an emerging issue is how a company deals with identity and strategy dissonance, should it arises. This study found that managers used three different cognitive defensive mechanisms to respond to such dissonance, i.e. attributing, self-legitimating, and identity adjustment. Such mechanisms are internal for the individual managers' sensemaking. But how the company can substantively manage this dissonance? Potentially there are three approaches to this. First, the company can maintain and continue its current strategy, and change its identity accordingly. Second, the company could maintain and continue its current identity, and change its strategy accordingly. Finally both identity and strategy could be changed. No matter what approaches the company takes, the objective should be narrowing the gap between identity and strategy.
On the other hand, perfect fit between identity and strategy is not always most
desirable. Under certain situations, some gap between identity and strategy acts as the engine for organizational change. For example, for the purpose of organizational change, many organizations start to chart a vision of what the organization aspire to
be, even though such prospective identity does not exactly fit what the organization is
doing. On the other hand, to enable an organization to become certain type of organization, some organizations undertake strategic initiatives to bring substantive
changes to the organization before that type of identity is claimed. The suggestion is
that the identity-strategy gap should be big enough to enable the occurrence of organizational change and small enough to maintain consistence and credibility. The present study also directs our attention to the issue of corporate communications. Corporate communications, according to Van Riel (1995), consists of three types of communications, i.e. marketing communication, organizational communication, and management communications. The perceived identity-strategy dissonance found from the present study poses challenges and opportunities for all aspects of corporate communications.
First, in terms of marketing communication, whether companies should
communicate such internal perception of identity/strategy dissonance to the external
stakeholders, especially customers, is a key question. How companies explain the
identity/strategy dissonance is a critical issue, because it would affect organizational
legitimacy and credibility in the marketplace. Customers might or might not be able to
identify the identity/strategy dissonance themselves, because they, unlike senior
managers, have less contact with both identity and strategy of the company. However
it does not mean customers would always see the fit between identity and strategy.
Even though customers are less advantaged in terms of accessing information on a
company's identity and strategy, they can develop their perceptions based on a
company's market activities, performance, and communications. Therefore, they are
still likely to identify the dissonance, although their perceived dissonance might not be
exactly the same as perceived by senior managers. Thus should companies proactively
communicate and explain such dissonance to their customers? In terms of organizational communication, the same logic for customers applies to organizational employees. The uniqueness for employees is that they tend to have more psychological bond (e.g. organizational identification and commitment) with their work organizations, thus perceived identity/strategy dissonance tends to have more emotional significance for employees. This poses significant extra challenges for senior management's decision on whether and how to communicate identity/strategy dissonance to them.
Management communication refers to the communication and coordination among managers. Managers differ in terms of the degree of their perception of the dissonance between identity and strategy. They might also disagree on the significance and implications of such dissonance. Therefore the challenge for management communication is how to align different managers' perceptions and opinions. Poor alignment might lead to managerial conflicts and inter-functional lack of coordination, which in turn could undermine the company's overall strategic competence, focus, alignment and implementation. Moreover dealing with managerial perception of identity and strategy also has political implications. For example, identity/strategy dissonance could be taken advantage of by some managers by proposing new strategies or identities that meet their own agenda.
The present study directs us to applying managerial psychology to corporate level marketing. Corporate level marketing deals with issues such as corporate identity and corporate strategy. How senior managers make sense of both corporate identity and corporate strategy and their relationship is of particular significance to advancing knowledge on corporate identity-strategy interface. The managerial cognitive approach to corporate identity-strategy interface suggests that corporate identity and strategy are dynamically related. Two propositions can be derived from the present study. First, managers tend to make sense of either corporate identity or strategy by making reference to each other. Second, managers tend to believe the state of identity/strategy discrepancy as undesirable, and if such discrepancy happens they tend to rectify it by cognitive defensive mechanisms such as attribution, justification, and rationalisation.
(Hong Wei-He, 2008)
The Levels of Strategic Management
The levels of strategy typically refer to the content of strategies, ie the substantive issues tackled in strategy formulation the specific means by which corporate,
business, or functional goals are to be achieved. Strategy development takes place at different organisational levels and different stakeholders are addressed by different levels of strategy.
According to Ansoff, as well as Schendel and Hofer, the broadest stage of strategy is known as 'societal-role' or 'enterprise' strategy, also visualised as the strategy level where the political legitimacy of the organisation is addressed. Bowman calls this level 'institutional' strategy which involves 'the issues of how a corporation fits itself into the social environment and the body politic'. Even it is not always formally declared in organisations, but enterprise strategy however exists and keys out the level of strategic thinking is necessary for organisations to be fully responsive to nowaday's complex and dynamic social environment. At this overarching strategy level, the basic questions to be addressed are 'what is the role of the organisation in society; what principles or values do the organisation represent; what obligations are there to society at large; what are the implications thereof for the current business and allocation of resources'. The point of enterprise-level strategy is that an organisation needs to address these questions intentionally, specifically and cohesively. Enterprise strategy affects the organisation's relationships with its surroundings- particularly with its
stakeholders. It should therefore also address questions such as 'how is the organisation perceived by their stakeholders' and 'what are stakeholder values and expectations'. This last question is the critical link between ethics and strategy. According to Hosmer, enterprise strategy denotes the combining of ethical and strategic thinking of the organisation and provides the organisation's best possible reason for the actions it takes. Freeman agrees in stating that enterprise strategy represents the social and moral/ethical component of strategic management. It can therefore be said that enterprise strategy focuses on the achievement of non-financial goals, such as enhancing the organisation's image/reputation and fulfilling its social responsibilities. This is important because corporate survival depends in part on some 'fit' between the values of the organisation and its managers, the expectations of its shareholders and the societal issues that will ascertain the ability of the organisation to sell its products. Enterprise strategy manifests itself, for example, in how an organisation responds when faced with public crises. Whether it responds to stakeholders in a positive, constructive and sensitive way reveals the presence or absence of soundly developed enterprise-level strategy. Mission/ vision statement and codes of conduct/ ethics are also indications of enterprise-level strategy, as are committees on social audits, corporate philanthropy, ethics and public issues. An enterprise strategy can also express a desire to maximise stockholder value, satisfy stakeholder interests; and to increase social harmony or the common good. At the enterprise level, strategies should to a large extent be stakeholder oriented. In the opinion of the author, important stakeholders at this level are for instance: the media; activist groups in the environment; the government; communities; and society at large. At the enterprise or institutional level, the organisation's reputation should be managed, its values be determined and sound corporate governance principles be adopted. This will ultimately lead to the organisation being trusted by its stakeholders as well as being regarded as legitimate and socially responsible by society at large.
Functional strategy contains the details of how the functional areas such as marketing, operations, finance, etc should work together to achieve higher-level strategies it is most closely associated with strategy implementation. Functional strategy includes what should be done in every of the key functional area, the specific emphasis is placed given on them and the resources assigned to them. Every functional area makes its own uncommon contribution to strategy formulation at different stage. For instance, in many organizations the marketing function is seen to have the greatest degree of contact with the outward environment, gathering information on strategic stakeholders such as customers. Marketing strategy evolves from the cumulative pattern of decisions by employees who interact with customers and perform marketing activities. It is oriented towards exchange relationships with stakeholders in the task environment - also taking the social, technological, regulatory and ecological components of the macro environment into consideration. Functional strategy should be oriented towards supporting the enterprise, corporate and business level strategies. Each functional area has its own primary stakeholders: marketing focuses on exchange relationships with customers; human resources on relations with employees, labor unions and regulators; and corporate communication on communal relationships with employees, the media, government and communities.
At the operational level, strategies are translated into action. Key operating managers or project leaders establish short term objectives and implementation strategies that contribute to business and corporate-level goals. Operational strategies are needed to manage operating units in a cost-effective manner. At the functional as well as the operating level, the major emphasis is on maximizing the productivity of resources by capitalizing on any possible synergies and distinctive competencies that the organization may possess.
Business-unit strategy pertains to an organization's approach in competing in its chosen market/product/industry segment. It usually covers a single product or a group of relevant products. In developing business strategy, statements of direction generated at the corporate level are translated into concrete objectives/strategies for individual business divisions. At the business-unit level, strategies are often marketing oriented, focusing on the task as well as the macro environment (especially its economic, technological and regulatory components). The focus is on the support of the organization's financial goals and objectives. Primary at this level are customers, as well as other stakeholders in the value chain, e.g. suppliers, distributors, regulators and employees.
(Benita Steyn, 2003)
Marketing strategy planning has been under extensive review on both sides of the Atlantic. Some have concluded that marketing has diminished as a general management orientation, and that marketing has taken on a very functional, narrow specialist role; not the broad, conceptual, business philosophy role predicted by the marketing concept. The strategic role of marketing is changing. Day and Wensley note that, during the 1960s, marketing had a great influence on strategic planning, but this influence eroded during the 1970s. During the 1980s, the primary role of marketing has been to provide tactical support in the operational environment.
Others reach contrasting conclusions. Webster in an article about marketing issues for the 1980s, concludes that chief executives of major US corporations see marketing, and the development of marketing strategy, as one of the most essential planning functions. They also asserted that marketing only takes partial corporate responsibilty for performance (sales and market share), and Webster concluded that the marketing concept is still not extensively implemented throughout major American corporations.