- Strategic decisions that affect the whole organization are referred to as corporate-level strategies. It covers human resource management, financial management, merger and acquisition decisions, etc. The strategy guides business operations.
Corporate-level strategy is critically important for several reasons, including:
- As the company’s future is planned and opportunities in the marketplace are exploited, corporate-level strategy is important.
- It assures efficient and effective customer service at the business.
- A firm’s productivity increases if its corporate strategy is implemented correctly.
- Additionally, it is responsible for ensuring that the company is efficient and profitable.
The three reasons firms choose to diversify their operations are:
- Value creation: By improving economies of scale, market power, and financial efficiency, value creation helps to improve strategic competitiveness. Shared knowledge across businesses can reduce competition and reduce costs. Diversification and corporate restructuring can help achieve these goals.
- Value neutral: Diversification is a value-neutral strategy for firms, which may be used to achieve better performance when the government or another institution makes incentives available, such as taking advantage of a specific law or eliminating uncertain future cash flows.
- Value reduction: The firm diversifies to reduce managerial risks and increase compensation for executives. The strategy and competitive behavior of a firm may not benefit from diversification. Diversification may even deteriorate a company’s strategy or competitive behavior.
