Master Strategy of Firm | Strategic Management

A master strategy of a firm consists of two inseparable parts: Business strategy and Corporate strategy. Each complements the other.

Let us consider the following quotes:

The strategic aim of a business (is) to earn a return on capital [1], and if in any particular case the return in the long run is not satisfactory, then the deficiency should be corrected or the activity abandoned for a more favourable one’ [2] —of Alfred P. Sloan; and

‘Strategy is when you are out of ammunition [1], but keep right on firing so that the enemy won’t know’ [2].

The part marked [1] in the above quotes represents the business strategy for a firm and the part [2], the corporate strategy of a firm.

Typically, both business strategy and corporate strategy coincide at a zone or stage in a strategic decision-making framework illustrated below:

Business Strategy:

Once a firm has decided to be active in a particular business area, it must then determine how to compete in that field. Decisions of this sort involve business strategies.

A firm’s decision to extend its product/service line is a business strategy since it enables the firm to compete more effectively in its chosen business. To illustrate further, gaining ‘market share’ as one of the sources of competitive advantage is a strategy at the business level.

Corporate Strategy:

On the other hand, corporate strategy defines the nature and range of businesses a firm intends to operate, for example, a tobacco company’s move from cigarettes to beer and then soft drinks are examples of corporate strategy decisions.

So are the electrical company’s entry and subsequent exit from the computer business. To illustrate further, adopting ‘synergy’ as one of the key sources of competitive advantage is a strategy at the corporate level.

At the most basic level, corporate strategy deals with the question, “what businesses should we be in?” whereas business strategy addresses the question, “How should we compete in this business?”

In addition to what has been sketched out in the strategic decision-making model, there are the elements of change, growth, and adaptation in the life of a firm. Master strat­egy is a firm’s basic plan for dealing with these factors.

Master strategy sets broad goals of a firm. One firm may decide to seek pre-eminence, in a narrow speciality while another undertakes to be a leader in several ‘niches’ or perhaps in all phases of its industry.

While pursuing either of them, a firm has to redefine its ‘scope’ in terms of desired role in society and redesign its ‘activities’ in respect of:

1. Services to be offered to customers.

2. Operations to be performed by it.

3. Relations to be developed and maintained with suppliers of necessary resources.

4. Product-market opportunities.

To achieve the above, managers of a firm have to decide:

(i) What to do first,

(ii) How many activities can be done concurrently, 

(iii) How fast to move,

(iv) What risks to run, and

(v) What to postpone.

These questions of sequence and timing must resolved to make the master strategy operational.

Master strategy involves deliberately relating to a firm’s efforts to its particular future environment. Because of this dynamic aspect, frequent reappraisal of master strategy is essential.

But such reappraisal should not call for sharp reversals in strategy as a master strategy requires several years to execute. Even though drastic modification of a firm’s master strategy may not be necessary, frequent incremental changes will certainly be necessary to keep abreast of the times.

Master strategy is the pivotal planning instrument for large and small enterprises alike.