Value creation at the corporate level

Strategic decisions are usually categorized into business versus corporate strategy based on the specific level at which they take place within the firm. Business strategy decisions are concerned with how the firm competes within a particular industry or product market. In the previous chapter we discussed the main strategic issues at the business level and how the firm deals with a particular set of customers, resources, and competitors. In the following three chapters, we will turn to corporate strategy, including key questions about diversification, internationalization, and the broader social strategy and responsibility of the corporation. This chapter focuses on the industrial scope of the firm and issues like diversification, vertical integration, mergers and acquisitions, and alliances.

The distinction between business and corporate strategy is really a matter of analytical convenience. Strategic decisions at both levels are necessarily connected and they cannot be fully separated. The corporation is indeed an aggregate of lower level organizational units with potential presence in different industries, geographical markets, and even social activities, which constitute the boundaries of the firm. Corporate decisions can only create value through its effect on how the firm deals with resources, customers, and competitors at the business level. Corporate level management affects the competitiveness of its business units, but there cannot be corporate strategy without business units. Similarly, even the simplest firm comprised of only one business unit will have some corporate strategy issues to deal with, such as its degree of vertical integration.