The vignette about Nike illustrates the importance of corporate strategy to a firm’s survival
and success. Corporate strategy deals with three key issues facing the corporation as a whole:
1. The firm’s overall orientation toward growth, stability, or retrenchment (directional strategy)
2. The industries or markets in which the firm competes through its products and business
units (portfolio analysis)
3. The manner in which management coordinates activities and transfers resources and cultivates
capabilities among product lines and business units (parenting strategy)
Corporate strategy is primarily about the choice of direction for a firm as a whole and the management
of its business or product portfolio.3 This is true whether the firm is a small company
or a large multinational corporation (MNC). In a large multiple-business company, in particular,
corporate strategy is concerned with managing various product lines and business units for
maximum value. In thisinstance, corporate headquarters must play the role of the organizational
“parent,” in that it must deal with various product and business unit “children.” Even though
each product line or business unit has its own competitive or cooperative strategy that it uses to
obtain its own competitive advantage in the marketplace, the corporation must coordinate these
different business strategies so that the corporation as a whole succeeds as a “family.”4
Corporate strategy, therefore, includes decisions regarding the flow of financial and other
resources to and from a company’s product lines and business units. Through a series of coordinating
devices, a company transfers skills and capabilities developed in one unit to other
units that need such resources. In this way, it attempts to obtain synergy among numerous
product lines and business units so that the corporate whole is greater than the sum of its individual
business unit parts.5 All corporations, from the smallest company offering one product
in only one industry to the largest conglomerate operating in many industries with many products,
must at one time or another consider one or more of these issues.
To deal with each of the key issues, this chapter is organized into three parts that examine
corporate strategy in terms of directional strategy (orientation toward growth), portfolio
analysis (coordination of cash flow among units), and corporate parenting (the building of
corporate synergies through resource sharing and development)