What is Corporate Development? (Types and Strategies)
By Indeed Editorial Team
Updated August 15, 2022 | Published November 5, 2021
Updated August 15, 2022
Published November 5, 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
At various stages of an organization's growth, it may require restructuring or an amendment of its overall strategy. To do this, companies require dedicated teams of professionals with sufficient expertise and skills. Understanding what corporate development is can help you participate in corporate strategy at your workplace. In this article, we discuss what company development involves, identify the different types, outline its benefits, highlight its structures, explore common strategies to use, and examine metrics to measure their effectiveness.
What is corporate development?
Corporate development involves the overall development of corporate strategies such as corporate growth strategies, strategic partnerships, and overall business development. Beyond just developing strategies, company development involves implementing them by identifying opportunities, developing plans to leverage them, and overseeing the execution of those plans. While specific roles vary according to the organization, company development aims to create and implement strategies to make it more competitive.
Company development usually looks both inward and outward. When looking inward, the company development team aims to optimize the organization's internal structures to improve efficiency. This may include evaluating the company's leadership, product development, pricing, and marketing. Similarly, the company development team also considers external factors that affect the company's profitability. This usually involves creating innovative plans to help companies use opportunities for investments, deals, and strategic partnerships that can benefit the company.
Types of company development
Here's a list of the types of company development:
In management restructuring, the company development team aims to optimize the organization's leadership. The team may have this goal from the onset or discover leadership challenges while investigating other aspects of the organization. Management restructuring aims to create a more effective management team. This is important because the organization's leadership is a major determinant of its success. The company development team may reduce the management team to eliminate redundant positions or increase the management team to cater to gaps in leadership. They may also replace individual management employees who recorded low performances.
Companies also use company development teams when they want to expand their operations. This can include venturing into a new market, expanding market share in a previous market, or significantly upgrading the company's goods and services offerings. During this critical growth stage, companies require company development teams to develop and implement the strategy for their expansion. Naturally, such company development teams require members who specialize in marketing, business development, and law. While working on corporate growth, company development teams concern themselves with marketing, pricing, market trends, market research, and expansion feasibility.
This refers to situations where the company requires certain expertise or skills that aren't available in-house. In such cases, the company may request the assistance of a company development team of specialists. Depending on the nature of the organization and task, these specialists may have advanced degrees or certifications in relevant areas. Their purpose is to support the company's in-house team in attaining its goals. This type of company development is common in large companies. Companies also hire these specialist teams for financial matters due to the increasing complexity of financial strategy.
Benefits of company development
Here are some of the benefits of company development:
Greater customer satisfaction
Company development aims to make a company more competitive and profitable. To do that, the company development team modifies a range of factors that directly and indirectly affect customers. For example, company development teams modify variables like pricing, marketing, and product development to make a company more attractive. Certain partnerships and alliances help the organization serve its customers better. This can be due to access to more resources, better innovation, and greater availability of goods and services.
As leadership is one of the most critical factors in an organization, it often falls under the scope of company development. Company development teams usually analyze the organization's leadership structure to identify and resolve issues. For example, they may solve common problems like communication gaps, insufficient management staff, and lack of leadership skills. Company development teams may recommend solutions like leadership training and hiring more management staff to solve these issues. This often leads to better leadership, which can improve the organization's overall performance.
Company development teams are responsible for identifying viable external opportunities for companies. They do this by understanding the company's needs, monitoring relevant commercial activities, and identifying opportunities for potential growth. As a result, organizations that invest in company development tend to make more informed investment decisions. These smarter investment decisions promote profitability and sustainability.
Lower employee turnover
Effective corporate development teams evaluate all factors that impact a company's profitability. These factors also include variables like leadership, work processes, work environment, and training opportunities, which affect employees directly. When company development teams implement their recommendations, it often translates to better working conditions for employees. This can reduce employee turnover rate and improve morale and overall productivity.
Related: How to Motivate Employees
Company development teams usually focus on the organization's finances to maximize its profits. To achieve that goal, they may evaluate the organization's finances to identify potential issues. Company development teams usually modify work and production processes to increase efficiency. This can help the organization reduce its overall cost.
Structure of company development
Here's a list of the different structures which company development can use:
Under this model, the company development team is a central body in the organization. Usually, they comprise executives or high-level employees who give direct recommendations to executives. This model allows the company development team have access to all the information it needs. Similarly, it makes it easier for the team to oversee the implementation of its plans. As their plans involve various departments, centralized company development teams do a lot of collaboration.
Under this model, the organization hires company development teams as the need arises. The company's management may form the company development team with employees from various departments. The team's composition varies according to the nature of the project. Company development teams usually include employees from core departments like legal, financial, and business development.
This model incorporates aspects of the centralized and decentralized models. It utilizes a core company development team, but it has little staffing and resources. The department acquires expertise and resources from other departments based on its needs at the moment.
Essential strategies for company development
Here are some of the strategies company development teams typically use:
Mergers and acquisitions
Mergers and acquisitions are two popular ways through which large companies take control of small companies. This is usually to gain access to skills, resources, cash flow, or market share. Relevant company development teams require expertise in corporate valuation, risk management, negotiation, and integration for mergers and acquisitions.
Stable partnerships allow companies to save costs and access more resources. It also typically portrays a good brand image for the company. Company development teams often search for profitable partnerships to aid their organization.
Alliances are loose or formal agreements between corporations to share resources, assets, or expertise. This strategy is particularly useful for multinational companies entering a new market. With a good alliance, a company can learn relevant business practices and reduce the cost of entering a new market.
Criteria for evaluating company development's effectiveness
Here are some criteria you can consider when evaluating the effectiveness of a company development team:
Return on investment (ROI): This is the amount of money a company gains after spending on a project or transaction. Organizations with effective company development teams typically have high ROIs.
Net present value (NPV): This is the value of an organization's cash inflow relative to its outflow. Like ROI, companies with high NPVs typically have good company development teams.
Internal Rate of Return (IRR): This is metric organizations use to determine how profitable their investments are. Effective company development teams typically have IRRs that are much higher than the organization's required rate.
Strategic factor analysis: A strategic factor analysis evaluates critical internal and external factors to determine a company's efficiency. Companies with good company development teams are likely to record higher overall scores.
Synergy capture: A company has captured synergy if it performs better after acquiring or merging with a new company. A positive synergetic effect is usually the product of an efficient company development team.
Accretion or dilution analysis: Companies use dilution analysis to determine if a merger or acquisition can translate to an increase in the shareholders' earnings per share.
Customer retention: A major part of company development is improving business processes to guarantee a better customer experience. Companies with good company development teams are likely to experience greater customer loyalty.
Employee turnover: A good company development team creates a working environment that can help employees perform better. A low employee turnover rate is usually a sign that the company development team is efficient.
Related: What Is Corporate Culture?
Explore more articles
- What Does a Midwife Do? (With Definition and Skills)
- What Is a Chief Accounting Officer? (With How-to Become One)
- How to Become a Python Developer (With Essential Skills)
- What Does a Resource Manager Do? (And How to Become One)
- What Is a Financial Educator? (With Duties and Skills)
- 10 Jobs with Cats (Including Salaries and Primary Duties)
- What Does a Human Rights Officer Do? (With List of FAQs)
- An Overview of Technologist vs. Engineer (With Skills)
- Learn About 13 Software Companies in Calgary, Canada
- What Is a Strategic Partnership Manager? (With Skills)
- The Job of a Translator (With Roles and Responsibilities)
- What Does an Information Architect Do? (With Daily Duties)