A corporate strategy refers to a company’s plan on how it is going to grow for instance which sectors to operate in and which one to exit depending on how they are performing. A corporate strategy gives a clear guideline on where the company wants to invest and which areas to compete in. A corporate also gives clear guideline on how headquarters manages the different businesses.
Wesfarmers has chosen a diversification corporate strategy. Wesfarmers operates in many industries such as in retailing through Cole supermarket, hardware stores, office supply among other range of businesses. This means that Wesfarmers has more than one business line and incase one performs poorly, the losses experienced can be offset by profits from another line of business. Diversification has helped; Wesfarmers grow and as such has been able to heavily invest in other sectors such as supermarket. For example, when Wesfarmers acquired Cole, it was not performing well and was lagging behind Woolworths. However, Wesfarmers had funds to channel to Cole. The money used to revamp Cole such as hiring a new team was generated from other businesses. Therefore, through diversification Wesfarmers was able to take a stronghold in the Supermarket Industry and be the leader it is today in the Australian supermarket industry. Wesfarmers has used this strategy to grow and become a recognizable brand in Australia. Diversification has enabled the company to reach consumers in different areas and continued to build consumer confidence in Wesfarmers’ products and services. Wesfarmers has also continued to enter new area of businesses as it keeps on growing. Some new businesses are linked to existing ones while others are totally new. Through its diversification strategy, Wesfarmers is able to invest in areas that are performing better and have higher returns. Similarly, it can close the businesses that are underperforming for prolonged periods. All these ensure higher returns for Wesfarmers.A corporate strategy