Employing corporate development strategies alongside corporate strategy is essential for the successful operation of a business. Still, each profession comes with its unique set of challenges. As Business Leaders and decision-makers, it’s essential to understand how corporate development and strategy work together to ensure that your business reaches its optimal performance level as cost-effectively and efficiently as possible. In this blog post, we’ll explore the nuances between these two functions, provide an overview of their respective roles in your organization, discuss why they need to work in concert with one another, and share tips on how you can maximize the impact of both by leveraging them strategically.
Corporate development performs initiatives like new product development, business model innovation, and strategic partnerships to gain a competitive advantage and achieve business growth. It helps businesses increase the value they can provide to the target audience.
On the other hand, the corporate strategy function advises senior leadership on various strategic initiatives and things like financial modeling, resource allocation, and competitive positioning. Like an internal consulting group, it adds value by identifying barriers and developing an approach that allows you to achieve desired objectives.
Corporate development and corporate strategy serve different purposes. But in essence, they are complementary concepts that work together to help companies achieve their long-term goals and create value for their stakeholders. So, here is an article highlighting their core differences and how they can work together for maximum success.
What is corporate development?
Corporate development is a field within the giant umbrella of corporate strategy. It is concerned with the financial modeling of a company and the creation of synergies between different departments within an organization. Capital markets are also a key focus as corporate developers strive to gain a competitive advantage for their firms.
Typically, corporate development guides a company’s overall direction and business decisions through specific initiatives like mergers & acquisitions, divestitures, and investments.
It involves internal restructuring and leveraging external opportunities.
An example of internal restructuring could be combining two departments that can work together into one. Through this corporate restructuring, organizations foster a harmonious environment in the corporate entity, leading to more efficient use of resources and ultimately boosting revenues or lowering long-term costs.
An example of leveraging external opportunity could be an investment banking organization acquiring a smaller corporate finance organization or a start-up company.
Thus, corporate development is the how of a company’s business decisions. Corporate developers focus not only on the operational details of achieving the company goals but also on the sales aspect and ROI.>
What is a corporate strategy?
A corporate strategy is a long-term plan for the growth and development of a company. It sets out the company’s overall objectives and how they will be achieved. Corporate strategy has an internal strategy team that encompasses the company’s organizational structure, financial policy, and approach to risk management. The team is concerned with how individual business units thrive in delivering value to their customers in product/service/market segments.
The corporate strategy looks at the big picture and defines where the company wants to be. It should include short-term and long-term initiatives, each supporting the other. An excellent corporate strategist creates strategic plans, helps organizations achieve their business goals and targets, and improves financial viability.
“Corporate strategy portrays a general strategy in a company and focuses on its business portfolio to add more value. Its planning involves focusing on the organization’s structure and identifying the problems in different business areas. The responsibility for appropriate strategy formulation lies with the top-level managers of the company. They discuss, analyze and finalize strategies to move forward in the market.”
– Source – https://www.wallstreetmojo.com/corporate-strategy/#h-corporate-strategy-explained.
Most large companies have a vice president of corporate strategy, who is responsible for developing and overseeing the execution of the company’s strategy. Part of the corporate strategy process is due diligence when a company researches another company before acquiring or investing. Growth strategies are also crucial in corporate strategy, as companies must determine how to grow their business to remain competitive.
What does corporate development do?
Corporate development is the group within a company responsible for strategic decisions and executing transactions through sourcing, including mergers, acquisitions, divestitures, financings, and partnerships. The corporate development team works closely with the CEO and other members of the executive team to identify and explore new markets and pursue opportunities to create shareholder value.
Corporate development is focused on executing transactions that will improve the company’s competitive position and create shareholder value. That means identifying potential acquisition targets, negotiating deals, and managing post-acquisition integration. It also includes raising capital to finance these transactions and maintaining relationships with key stakeholders such as shareholders, lenders, and partners.
Excellent communication skills in corp dev are essential as you will interact with individuals across varied functions, all experts in their domain. The skill to effectively receive and interpret information or data will help you as a business strategist. You will work with different business units as a corp dev team.
In short, corporate development is responsible for making deals to help a company achieve its strategic objectives.
Difference between corporate development and corporate strategy
Corporate development and strategy are two terms often used interchangeably, but there is a big difference between the two. Corporate strategy is the overall game plan for the company, including the goals and objectives that guide decision-making. On the other hand, corporate development is responsible for executing that strategy through mergers and acquisitions, joint ventures, and partnerships.
While corporate strategy provides the overall direction for the company, corporate development ensures that this direction is translated into tangible actions that create shareholder value. One significant difference between the two functions is thus valuation: corporate strategy determines which businesses or products are worth pursuing. In contrast, corporate development uses valuation techniques to execute transactions at optimal prices.
One of the most important considerations for corporate strategists is understanding the business model and how it creates value. This means they need to have a strong understanding of the competitive landscape and what drives customer behavior. They also need to be able to identify new growth opportunities and develop a plan to seize them. Skills set for corporate strategists typically include financial analysis, forecasting, and market research.
In other words, corporate strategy is about setting the direction for the company, while corporate development is about achieving that vision through specific actions.
The relationship between corporate strategy and development can be summarized like this: corporate strategy defines where the company wants to go, and corporate development figures out how to get it there.
While both roles are essential for driving growth within a company, they require different skill sets and focus on various aspects of the business. Corporate strategists need to be able to see the big picture and identify growth opportunities. In contrast, corporate developers must be experts in valuation and negotiation to get the best deals for their companies.
How do corporate development and corporate strategy work together?
Corporate development and strategy functions work together to ensure a company can achieve its long-term goals. The corporate strategy sets the direction for the company. It outlines the overall plan for how the company will achieve its goals. Corporate development then works to implement the system, ensuring that the company has the resources and capabilities to execute the plan.
The two functions are closely linked, as the high-level decision made by the corporate strategy team is usually a relatively seamless handoff to corporate development. For example, suppose a company decides to enter a new market. In that case, it will be up to the corporate development team to find an acquisition target or joint venture partner. Similarly, suppose a company decides to divest itself of a business unit. In that case, it will be up to corporate development to find a buyer and negotiate the sale.
For both functions to be successful, there must be alignment between them. This means that the management team needs to have a shared understanding of the company’s overall strategy and how each function contributes to it. Additionally, metrics need to be in place so that progress toward strategic objectives can be tracked and monitored. By working together, corporate strategy and development can create shareholder value and help take the company forward.
The corporate strategy function is often housed within the larger company’s investment banking or private equity group. This is because these groups often have expertise in deal structuring and execution and access to capital. The corporate strategy team works with the management team to identify attractive opportunities and then with the investment bankers or private equity investors to execute those opportunities.
The two teams need to be closely aligned to ensure that the company is moving in the right direction and progressing toward its goals. Corporate strategy should be regularly revisited and updated to keep corporate development on track. Suppose there are changes in the market or within the company. In that case, the corporate strategy may need to be adjusted for corporate development to continue working towards achieving the company’s goals.
Corporate development and corporate strategy are two distinct but related management areas. Corporate development is focused on the activities that create value for the company over time, while corporate strategy outlines how to achieve those goals. Understanding their differences will enable you to manage your organization’s resources best, develop efficient processes and practices, and ensure long-term success.
With a deep understanding of both areas, businesses can reap the most benefit from each activity and create an environment where employees work together towards a common goal.
This article is a great resource for anyone looking to understand the nuances between corporate development and corporate strategy. With the help of Leadership Tribe’s agile training services, businesses can ensure their teams are well-equipped to maximize the impact of both roles and create an environment where employees work together towards a common goal. Leadership Tribe’s agile transformation provides interactive, hands-on workshops that equip teams with the skills and techniques needed to stay ahead of the competition.
If you’re interested in learning more about how Leadership Tribe’s agile training services can help your business thrive, please visit our contact us page to get in touch with our team. We look forward to hearing from you!