The “corporate” strategy (or group strategy) is the strategy of a multi-activity company. It is distinct from the so-called “business” strategy, which is that of a single activity company or a single activity within a group. It therefore applies to companies or groups operating simultaneously in several different strategic businesses (commonly called “strategic areas of activity” or more simply “activities”). It is of course mainly found in large groups, whatever their sector.
It should be noted that, unlike the target marketing segments within the same activity, which differ mainly in the types of customers but share all the resources of the activity, the strategic segments (or DAS) on which the group operates are supposed to be independent of each other in terms of R&D, products, factories, etc. They are therefore largely independent activities, even if it may be decided to pool certain common resources at central level. They are therefore largely independent activities, even if it may be decided to pool certain common resources at central level. It therefore happens that one of these activities is sold or acquired with all its components as part of a corporate strategy decision aimed at reallocating growth vectors and allowing reinvestment in an existing activity or in an acquisition more in line with the group’s strategic objectives.
What is corporate strategy?
Investing or divesting
Corporate strategy consists essentially of allocating resources between the various business lines and organising possible synergies between them in order to achieve overall objectives and financial balance. It is therefore mainly a matter of deciding to invest or divest in each of the activities.
The main strategic portfolio analysis models, such as the Boston Consulting Group model (with the so-called “cash cow”, “star”, “dilemma” and “deadweight” businesses), or those of McKinsey or Arthur D. Little, were initially designed to inform investment and divestment decisions in corporate strategy. Little. For more information, we refer to each of these strategic analysis models which take into account variables such as relative market share or competitive position, the degree of maturity of a business line or its growth rate and make it possible to formulate strategic recommendations for the entire strategic portfolio and for each business line according to its position in one or other of the matrices using these variables.
The nature of the decisions
The corporate strategy therefore consists essentially of:
- To define the visions, missions and values of the company or “group” as well as its overall positioning.
- To optimise the allocation of resources between the different ‘businesses’ or SBAs in the interests of growth, profitability (and share price if the group is listed on the stock exchange).
- To enter new SBAs or to exit them through acquisitions or disposals. If financial resources are sufficient (and if an interesting target business is for sale, which is not always the case), it will be much quicker to build or strengthen a strategic position through acquisition than through creation or internal growth.
- Take and execute “major decisions” on matters that may be of interest to several or all of the company’s or group’s businesses. These “heavy decisions” can only be reversed at the cost of “strategic reorientations”, which are sometimes painful and costly.
Corporate strategy in technology
The same principles can be found in the corporate strategies of most groups, regardless of their sector of activity.
In technology, the specificity of companies or groups in this area is essentially due to the technological nature of the activities sold or acquired, as well as the extreme attention paid to decisions concerning technologies and technological synergies between activities.
The main objective of corporate strategy decisions in technology is to allocate available or divested financial resources in the best possible way in order to build businesses that are strong enough to prevail over the competition today or tomorrow. Unlike the B2C world where market/brand logic frequently guides decisions, it is essentially market/technology logic that is at work in technology.
Depending on the internal organisation of a given group, all the functions may be decentralised in the activities or some may be centralised with a relay in each activity. For example, at the central level, there could be business intelligence, R&T, strategy, product and HR functions that coordinate each function and establish common rules, and the same functions replicated in each activity.
Corporate strategy: acquisitions and disposals
Acquisitions and disposals of activities are frequent in the framework of the corporate strategy of groups. As an example, we can cite some of them in 2022 in the particularly active IT sector
(source: https://storybee.fr/blog/donn%C3%A9es-plus-grosses-acquisitions-technologiques-2022)
- Google buys Siemplify for $500m
- Microsoft acquires Activision Blizzard for $68.7 billion
- Sony buys US game developer Bungie for $3.6bn
- Intel buys Tower Semiconductor for $5.4bn
- Apple acquires fintech startup Credit Kudos
- HP acquires Poly for $1.7 billion
- AMD acquires Pensando for $1.9 billion
- Broadcom acquires VMware for $61 billion
- Oracle acquires Cerner for $28 billion
- Amazon acquires One Medical for $3.9 billion
- SandboxAQ acquires Cryptosense
