Annals of the „Constantin Brancusi” University of Târgu Jiu, Economy Series, Issue 5/2022

CORPORATE STRATEGY: AN OVERVIEW

ANDRIȘAN GABRIELA NICOLETA

MODREANU ANDRA
PHD STUDENT, THE BUCHAREST UNIVERSITY OF ECONOMIC STUDIES,
e-mail: [email protected]

Abstract
The available academic literature on corporate strategy is extensive, with a century of history to back it up.
When one chooses to delve deeper into the meaning of this term, it becomes clear that corporate strategies have
evolved spectacularly as the economic context has expanded. Corporations have always been profit-driven, viewing
their various business ventures as distinct opportunities for growth and expansion in their respective industries. One
can see a clear shift over time from top-down communication, which only allowed employees to execute their tasks as
assigned by upper management, to a bottom-up style, which allows the voice of lower-level staff to be heard in order to
create a more cohesive strategic outcome. The ultimate goal is thus set on a more secure path that aligns all of the
tactics used by the corporation's various departments and businesses. The article proposes a conceptual framework for
examining how corporate strategies have been perceived over the last century. As a result of the existing literature
review, a synthesis of the most prevalent characteristics and components associated with them was derived, leaving
room for further analysis in future research. The results show that corporate strategy represents a broad topic that can
be explored in a variety of ways.

Keywords: corporate strategy, strategy, corporation, strategy framework.

Classification JEL : M1, M19

1. Introduction and context of the study

Since its emergence in the business domain, strategy has constituted a challenging subject
for numerous researchers and practitioners. The ever-changing technologies and the full of risks
and uncertainty global business world (Toma and Marinescu, 2013; Toma and Marinescu, 2015)
require corporations all over the world to think and act strategically (Toma, 2013; Toma et al.,
2016a; Toma et al., 2016b). Facing the challenges of the current Fourth Industrial Revolution, a
period of disruptive innovation and rapid expansion of artificial intelligence and green technologies
(Tohănean and Toma, 2018; Tohănean et al., 2018; Toma and Tohănean, 2018; Toma and
Tohănean, 2019), they have to design and implement successful corporate and business strategies.
Also, their top management has to apply different knowledge from disciplines (e.g., strategic
management, quality management, human resource management, leadership, marketing).
Consequently, specific techniques and methods have been used in the activity and processes of the
vast majority of business organizations such as balanced scorecard, Six Sigma, or marketing mix
(Toma, 2008; Toma and Naruo, 2009; Toma et al., 2010; Săseanu et al., 2014; Grădinaru et al.,
2016; Grădinaru and Toma, 2017; Catană and Toma, 2021).
Corporate strategy was conceived in the context of a new reality characterized by optimism
and economic success. This emerged as a result of a long period of stagnation that lasted nearly half
of the twentieth century. Numerous improvements and additions pursued in the 1980s saw
corporate planning grow and develop into a concept of strategic management, dubbed the second
wave strategy. Nowadays, corporations cannot afford to be complacent in light of the magnitude of
change wrought by technological advancements, societal norms, as well as environmental risks.

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Generating the means to adapt and flourish will necessitate a paradigm shift in thinking, an
adjustment in perspective, and a rethinking of how strategy is practiced. The future strategy
practitioner's tools and conceptual frameworks are described and introduced in the context of the
so- called “Third Wave Strategy”. Its operation necessitates the application of numerous
characteristics, including critical thinking, and a recognition for both human and organizational
behavior (Hunter, 2021).
The aim of this paper is to explore various definitions of corporate strategy in order to form
a better understanding of the term. This is accomplished through quantitative research, which
entails an examination of the available academic literature in order to gain a better understanding of
the various possible definitions. This will provide the authors with a better understanding of the
term corporate strategy and enable them to draw their own conclusions about what it signifies.

2. Literature review

Military art and science represented the main source of inspiration for the business strategy
domain (Toma and Grădinaru, 2015). Corporate strategy's objective is to empower and organize
communication and integration among the different businesses of the corporation. Vertical
alignment is recommended for managing and controlling shared company resources among
businesses. Horizontal alignment is critical at the lower levels of the corporation because the
advantages of horizontal alignment are recognized in operational processes through collaboration
between units and functions (Wadström, 2019).
The majority of previous research on corporate parent–business relationships has
concentrated on the expansive impact of corporate and business unit effects. Corporate effects are a
broad concept that encompasses corporate strategy, structure, controls, and compensation. What
has been overlooked in the study of corporate effects seems to be the potential of counterbalancing,
neutralizing, or negating effects at the corporate level between them. The broad definitions of
corporate effects frequently omit the fact that different constituents of corporate effects may act in
opposition to each other and that their disparity may have a muffling effect on the corporate aspect
of the research (Seifzadeh and Rowe, 2019).
Corporate strategy consists of four components: growth strategy, parenting strategy,
resource allocation strategy, and financial strategy. Corporate growth strategy focuses on the
investment strategy component with the greatest potential for long-term value creation. The term
"parenting strategy" refers to the contribution of the organizational parent to the achievement of the
company's goals. The resource allocation strategy of the corporate parent is a critical value lever.
This strategy puts the investment and growth strategies into action by allocating financial and non-
financial resources, such as talent, in the most efficient way possible. The financial strategy is a
final component of corporate strategy. It entails developing a financial policy that is consistent with
the intended investment portfolio and conversion path (Pidun, 2019).
Corporate strategies can establish an innovative environment, a competitive culture, a
customer-focused culture, or a combination of these. Each of these cultural constructs is impacted
by a learning-culture. In these configurations, strategy will take precedence over culture. The
product-and technology-driven innovation culture persists. The strategies are both internal and
external in nature. Competitive cultures are pre-empted by industry rivals. The strategies are geared
toward the outside world. Customer-centric culture is market-driven. The strategies are geared
toward the outside world. Such cultures can be implanted in a business through strategies. These
objectives typically result in the formulation of strategies that result in new and improved value
propositions, more effective and efficient tactics, and increased customer satisfaction and market
positioning. Installed cultures are embedded in the organization and are accommodating of
corporate strategies. Evolved cultures may be impeding the firm's evolving vision and mission,
particularly novel synthetic strategies intended to provide the firm with the impetus required to

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generate competitive advantage and improving profitability and growth, or simply to survive. When
a significant shift in strategic direction occurs, the widespread organizational culture must be
dismantled. This is particularly true in the case of a company undergoing a strategic repositioning.
Turnaround strategies will not endure in a business-as-usual cultural context, whether centralized or
decentralized, hierarchical or nonhierarchical. (Amarjit, 2019)
One might observe a false equivalence of business and corporate strategies. As such, it is
critical to distinguish them clearly. When discussing business strategy, one might define it as a
company's current positional awareness as well as the creation of customer value. On the other
hand, corporate strategy establishes the company's future growth. A corporation's constructive
strategy enables it to address the following challenges: diversification, integration, and acquisition
of new businesses. (Aliekperov, 2021) As such, some may believe that the objective of corporate
strategy would be to achieve maximum net present value for each of the corporation's businesses
independently. This is inaccurate, as it obfuscates possible connections between businesses that are
part of a corporation. Historically, corporate advantage has been defined as performing greater than
the majority of its parts. Thus, corporate advantage occurs if the accumulation of businesses owned
jointly is more beneficial than the summation of individual companies owned separately. The
objective of optimizing corporate advantage may not coincide with the objective of maximizing
every individual company's competitive advantage. To maximize a business's competitive
advantage, it should outperform its competitors in driving a wedge among their buyers'
Willingness-to-Pay and their suppliers' Willingness-to-Sell. However, some companies may
sacrifice this in order to improve this same competitive advantage of certain other businesses in the
portfolio. Such a portfolio may have had an optimal number of winners and losers if the winners
earn more than what the losers end up losing (Puranam and Vanneste,2016).
According to the research literature, one can identify two broad processes through which
companies create value: optimized resource governance and market influence. There are numerous
ways for firms to undertake these two advantages, but after examining relevant literature, it is
possible to further identify four other sources of value that are especially relevant towards how
corporate actions affect interfirm network connections. These are, exploration, which refers to
acquiring novel assets, exploitation, which refers to more proficiently utilizing available resources,
power, which refers to enhancing market influence through exclusive ownership of resources, and
status, which refers to being a preferential seller in an industry. These four types are not exhaustive
of the advantage’s companies seek through corporate strategy, and neither are they
interdependently exclusive, however they are consistent with the corporate strategy literature's
central notions of effective resource and synergy. The first two factors, which are based on
concepts of resources and competencies, enable firms to manage assets wisely. Frequently,
businesses must pursue novel or innovative strategies. Due to the fact that companies typically lack
the expertise, technology, or assets important to accomplish those novel courses of action, they
leverage corporate strategies such as acquisitions as well as alliances to expand their reach and
acquire new resources. At other times, companies must concentrate on what they already possess
and optimize their use of available assets in order to be more efficient. This can be achieved in part
by divesting unneeded resources through divestitures and alliance terminations, which are regularly
described in terms of core and non-core businesses. The other two factors are based on market
influence concepts. There are two distinct but related methods for acquiring such influence. One is
to boost revenue through the acquisition of monopoly-like power, which occurs when firms employ
corporate strategy to maximize exclusive control of limited resources in interplay with other actors.
Obtaining direct power over scarce resources gives you leverage in the marketplace over suppliers
and buyers or rival actors. Another strategy for gaining market influence is to elevate the firm's
status to the point where it becomes the buyer's preferred seller. Status is distinct from power in that
it is not centered on obtaining influence over competitors but on transmitting messages to persuade
customers that the focal company is preferable to competitors. Status is particularly valuable in

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uncertain times because it acts as a signal of quality, relieving buyers of the need to assess real
quality (Hernandez and Menon, 2021).

3. Research Methodology

This article employs a quantitative study that implicated the catalogue and analysis of
secondary data on the evolution of various corporate strategy definitions, which could then be used
to apprise the study's configuration. The authors then performed a literature review and discussed
the findings in the following section, allowing them to reach a conclusion based on this.

4. Discussion

As the literature review indicates, the concept of corporate strategy lacks a precise
definition. However, the authors observe an evolutionary aspect that allows for the inclusion of new
elements that are considered at the corporate level in order to accomplish the overall end goal. Top
management has expanded its strategic framework to incorporate a bottom-up communication
approach in order to align all business ventures along the same strategic path. This is critical
because aligning the corporation's network of businesses lays out a clear path for implementing the
best course of action in terms of implementing the appropriate corporate strategy. As illustrated in
the figure below, a corporation's strategic path can take numerous directions. Due to the network's
multiple businesses, it is even possible for these various strategies to be implemented concurrently
by different branches of the corporations, thus overlapping to form the overall corporate strategy.
As can be seen in the literature review above, there are four main possible strategic paths that a
business can engage in. The authors have used these concepts in order to better illustrate in the
figure bellow how the strategic paths taken by different companies within the business network can
overlap.

Exploration

Status Power

Exploitation

Figure nr. 1 – Different paths of Corporate Strategy

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Using the analysis presented above, the authors can attempt to develop their own definition
for the concept of corporate strategy. This can be defined as the collection of strategies
implemented within a business network in order to maximize profitability and market presence.

5. Conclusions

The purpose of this paper was to cross reference various definitions on corporate strategy in
order to gain a better understanding of what the term means in today's business environment. The
authors used a quantitative research approach to accomplish this aim. The results indicate that
corporate strategy represents a broad topic that can be explored and analyzed in various ways, as
such, the authors have attempted to form their own definition for the purpose of ilustrateing the
importance of this term. In addition to this, the results also facilitate future researches to expand
on the various approaches encountered in the specialized literature.

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