Firm value creation and levels of strategy

Abstract

PurposeThe paper aims to address the following questions: “How is value created within a firm?” and “Is the distinction between competitive and corporate strategy helpful in considering the processes of value creation?”Design/methodology/approachThe paper distinguishes five value‐creating activities within the firm. Three are involved in the process of current value creation, one is directed at the maintenance of the firm and the other activity is concerned with the creation of future value. These processes of value creation are then explored from the perspective of corporate and business levels of strategy by considering whether these activities can be tightly or loosely coupled.FindingsThe paper argues that decisions regarding loosely or tightly coupled value‐creating activities should belong to the realm of corporate strategy and that this “corporatising” choice involves trade‐offs in terms of responsiveness and cost.Practical implicationsThe arguments in this paper can be used by managers to help them think through the consequences of any corporate level strategy decisions they may envisage taking.Originality/valueThis paper addresses traditional strategic management questions by building on a range of literatures, and proposes an original and meaningful way of examining the role of corporate and competitive strategy.