What should we understand by Corporate Strategy?

Corporate strategy should be understood as the actions that an organization must undertake to face its long-term development and guarantee its continuity in the global market.

Basically it includes all those movements that the company makes in the areas of:

  • Integration: with other activities/companies, taking advantage of the synergies between the two.
  • Strategic alliances: in order to take advantage of and incorporate the competitive advantages of cooperation between different companies.
  • Diversification: by entering into different businesses/markets, creating new business opportunities or reducing risks.
    Traditionally, corporate strategy has been related to large companies, which certainly have had it, allowing them to maintain, divest or acquire businesses and increase their presence in traditional markets or enter new ones.

Corporate strategies have been related in these cases to acquisitions or sales of business areas, complemented by a strategy of adequate financing for growth or possible business restructuring and even changes in the ownership and capital of the companies.

Small and medium-sized companies do not usually have a corporate strategy defining their growth model, how to carry it out and how to finance it.

Quite possibly this is one of the reasons why Spanish companies in general are small and therefore more vulnerable in circumstances of great uncertainty such as the current ones.

This circumstance is particularly delicate for family businesses where, in addition to the business challenges, they face the challenge of succession and business continuity.

Development models have traditionally been linked to organic growth and intrapreneurship without considering other corporate strategies such as corporate operations.

Nor have these types of companies, especially family businesses, been very proactive in analyzing financing formulas or seeking potential partners with whom to share the project by opening up the shareholding, which has traditionally given them a lot of vertigo as it forces them to operate in a more participative and open way.

The uncertainty scenarios in which we currently find ourselves are an opportunity to establish a corporate strategy that allows us to analyze the scenarios for growth and sustainability in the medium and long term, including the challenge of continuity and succession of the family business.

The conclusion of this reflection should position the company in the appropriate plane seeing the corporate operations: purchase, sale, merger, integration as a specific management area of the administrative bodies and the management of the companies.

In our case and as professionals in the field of M&A, we see that reflection on growth models and their financing is not a widespread practice in the environment of small and medium-sized companies. Therefore, at IMAP Albia Capital we would like to recommend that companies, regardless of their size, reflect on their corporate strategy. How far they want to go, how they are going to execute it, if they go alone or accompanied ….

Likewise, and given the great abundance of family businesses with the challenge of succession , they can decide on how to approach it, if they are willing to make the effort and lead it or if it should be someone else who leads it.

The worst thing is that the opportunities are not taken advantage of and that the business opportunities are taken advantage of by competitors, contributing to the economic decapitalization of the country.

 

Feb 21, 2023

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