Types of Corporate Strategies

From the viewpoint of organizational framework, the type of corporate strategies can be categorized according to a certain scale of business hierarchy level. Starting from top to bottom, the highest level is the corporate strategy whereas the middle one is the business strategy, and after that is the functional level of strategy. In many corporate situations, diversification strategy is one of the corporate strategies taken by a company in managing its wider business enhancement.

Actually, the typical business diversification strategy normally occurs when a company is in an attempt of creating such market expansions or product distinctions. With that being said, it is not only to reach business expansions but to drive a company in demonstrating a new business model which can thrive successfully in the foreseeable future. Therefore, such a decisive act of diversifying a company’s business portfolio can be due to several reasons behind. And of course, the most prevalent justification to address these concerns is to reach a company's success.

Anyway, here are some of the behind motives associated for a company to whether or not decide executing a diversification strategy:

1. Increase Value

Through a diversification strategy, a company in general can escalate the value of its competency. Without having the need to for example build a new subsidiary company, this type of corporate level strategy can accommodate new ideas under a company’s existing business sector so the future cost will be likely not to be too high.

2. Neutral value

At some point, a company usually decides to diversify its existing business due to the uncertainty of its cash flows in the future. Hence, one of the key benefits of performing a business diversification is that it can literally help a company to generate more revenue and possibly some future tax incentives.

3. Devaluation

Diversification may help a company to reduce any of its managerial risks. And of course, not all companies out there can diversify their business portfolios successfully. Well, such cases as failing to execute an effective business diversification normally happens because the strategy chosen is not appropriately carried out and has placed a huge burden on a company instead. For this reason, any company that seeks to implement a business diversification strategy in the nearly future has to be stable and well-running at least with its equity reserved. When the main core of a company’s business for example is not financially stable, then it will be very unlikely for a company to support and diversify its existing business portfolios forward.

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