From Competitive Advantage to Corporate Strategy

Abstract

Corporate strategy, the overall plan for a diversified company, is both the darling and the stepchild of contemporary management practice the darling because CEOs have been obsessed with diversification since the early 1960s, the stepchild because almost no consensus exists about what corporate strategy is, much less about how a company should formulate it. A diversified company has two levels of strategy: business unit (or competitive) strategy and corporate (or company wide) strategy.Competitive strategy concerns how to create competitive advantage in each of the businesses in which a company competes.Corporate strategy concerns two different questions: what businesses the corporation should be in and how the corporate office should manage the array of business units.Corporate strategy is what makes the corporate whole add up to more than the sum of its business unit parts. The track record of corporate strategies has been dismal. I studied the diversification records of 33 large, prestigious U. S. companies over the 1950-1986 period and found that most of them had divested many more acquisitions than they had kept. The corporate strategies of most companies have dissipated instead of created shareholder value. ABSTRACT FROM AUTHOR Copyright of McKinsey Quarterly is the property of McKinsey & Company, Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts)