Definition: Corporate development refers to the strategic decisions of a firm that strives to achieve organizational excellence or restructure its business. What is the definition of corporate
development?Corporate development is mostly encountered in innovative companies that seek to deliver the best products and services to their customers while sustaining a competitive advantage. In the context of business development, companies strive to achieve excellence through the implementation of sophisticated strategies that can help a company outperform its peers as
well as its own past performance. Often, large corporations or well-established firms view firm development through the prism of a buyout. Smaller firms with the knowledge and the ability to improve the current state of business often become targets of acquisition by larger companies that invest in business development through M and A. Depending on the goal of firm development, companies implement the appropriate strategies. Let’s look at an example. Company A is a leader is
the pharmaceutical sector, providing customers with a range of medicines, medical supplements, and medical treatment devices. Lately, the company has sought to introduce a new medicine for the treatment of cardiovascular diseases. To that end, the company’s strategic advisor and his team met with the general manager to determine the strategic objectives and the course of action. Given that the goal is product innovation, the strategies that the company should implement in the context of
business development should be the following: The company will seek to strengthen the relationships with its existing customer base, seeking to enter the market with the new medicine and achieve firm development. Define Corporate Development: Business development means improving company operations, culture, and employee
structure.
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For firms wanting to scale and flourish in their market, corporate expansion is a normal and desirable process. Every company needs a long-term corporate strategy development for successful growth. If you want to
work in corporate development, you need to learn more about how it works. Corporate Development (Corp Dev) is the department within a company that is in charge of making strategic decisions to grow and restructure the company’s business, build strategic partnerships, and/or achieve organizational excellence. Corp Dev’s mission is to generate opportunities for the firm by actions such as mergers and acquisitions (M&A), divestitures, and deals that capitalize on the value of the company’s business platform. Why Corporate Development?A corporation requires corporate development to develop and implement creative strategies that will allow it to capitalize on its competitive advantage and, as a result:
Internal vs. External ConcentrationIn certain ways, corporate development is an important inward-looking job for a company. It is necessary to close gaps in the organization’s geographical reach and product portfolio. Corporate development, on the other hand, is a critical outward-facing activity for any firm. This is because organizations are dynamic entities with valuable assets that can be monetized. They are also grown through various combinations of transactions and partnerships. As a result, the corporate development department must innovate and generate a diverse set of business partners and transaction options. Corporate Development Structure#1. Centralized ModelCorporate development is typically a centralized role since it provides the Corp Dev team with a bird’s-eye view of the business. Thus it allows them to identify possibilities and dangers. This enables the organization to capitalize on being the first to market in the event of an opportunity. Also, it allows them to take pre-emptive action in the event of a threat. A framework like this also enables the corporate development team to negotiate deals with other businesses that fit nicely into the company’s portfolio. A centralized Corp Dev department does not indicate that the department operates in complete isolation from the rest of the company’s operating groups. For example, after purchasing a company, the corporate development team assists in integrating the purchase into the company by working with support functions and business lines within the company as well as vendors outside the company. #2 Hybrid ModelThe corporate development department is lean under this organizational style, with only a few Corp Dev experts. When analyzing potential alliances and strategic deals, this small team relies on a network of external and internal resources for subject matter expertise. #3 Decentralized ModelA decentralized Corp Dev organizational paradigm denotes the absence of a central corporate development department. Instead, a corporate development team is formed on an as-needed or ad hoc basis. They can get members from diverse internal departments. The knowledge necessary for the individual business development project determines the exact membership of the team. If the project was a divestiture, for example, the Corp Dev team will have a lot of experts from the corporate finance and legal departments. The centralized form of corporate development is the most common, whereas the decentralized approach is the least popular. A Corporate Development Team’s Job DescriptionCorporate development groups are in charge of a wide range of functions. The scope of those functions varies greatly from firm to organization. Many people believe that Corp Dev is just concerned with mergers and acquisitions (M&A), yet – especially at major firms. However, Corp Dev is usually involved in a variety of other projects than M&A. The following are some of the most popular Corp Dev responsibilities:
Implementing Corporate Development StrategyThe following tactics are widely employed to attain corporate development goals: #1. Acquisitions and mergersLarge organizations frequently acquire/purchase smaller firms that have expertise, knowledge, clients, sales, profitability, and/or cash flow that can benefit the acquiring company greatly. In other circumstances, a company may acquire a company that it believes has potential. Subsequently, they then remodel its business model to steer it in a new, presumably successful direction. Corporate development experts must be knowledgeable in the corporate appraisal, risk management, financial modeling, negotiating, and integration to carry out such acquisitions. Corporate development teams:
Corp Dev teams frequently form a Transition Services Agreement (TSA) between the buyer and seller to ensure effective integrations. A TSA describes the kind and duration of the seller’s continued provision of services to the purchased business. This adds value to the buyer by giving them time to integrate the newly purchased business. It also benefits the seller by allowing them to reduce stranded expenses and rearrange their processes (especially if only a part of their business has been acquired by the buyer). #2. Long-term CollaborationsA corporation gains a competitive advantage by establishing a reputation in the marketplace as a “partner” of choice. This is because solid partnerships made of multiple firms provide economies of scale to all parties. Furthermore, to avoid a pricing war/race to the bottom with a possible competitor, businesses frequently seek to form alliances with them. In addition, building partnerships requires far less capital than acquiring a company. Given the desire for innovative partnership formation, knowing how to form long-term alliances with other businesses provides a competitive advantage. #3. Carve-outs & DivestituresCompanies face both internal and external pressure to ensure that their portfolios are employing money efficiently. As a result, divestitures and carve-outs have become a more prominent corporate development strategy. Offloading assets in a structured manner, based on regular portfolio reviews, can result in a significant return for the organization. This is yet another Corp Dev duty that necessitates considerable financial modeling, Excel abilities, and a firm grasp of business valuation procedures. #4. Strategic AlliancesStrategic alliances allow the organizations involved to better manage risk, harness key expertise and assets and accelerate entrance into new markets. They are particularly prudent vehicles for entering emerging markets such as India, China, and Brazil because they assist the company entering the new country informing the necessary business relationships and learning the relevant business practices more quickly than would otherwise be possible. Furthermore, strategic alliances frequently result in more efficient capital utilization because the cost of the investment is shared and the risk is distributed among the partners based on their skillset/asset contribution. #5. Innovative Transactions to Increase Shareholder ValueActivist shareholders and hedge funds frequently put a firm under external pressure by expressing their preferences and views on the company’s performance and strategic direction. The demands made by such investors operate as incentives for the corporate development team to create new types of deals to maximize shareholder value. Metrics for Evaluating an Organization’s Corporate Development EffectivenessThe following are the most common metrics for assessing the performance of a company’s corporate development department:
ConclusionA good corporate development strategy begins with you deciding where you want your company to be in a decade. By completing the simple activity indicated above, you offer yourself the best opportunity of developing a corporate development strategy that achieves your goals. As we’ll see, you don’t have to keep to the plan rigidly – there will be possibilities and, undoubtedly, some negatives along the way. However, recognizing what you want is critical to obtaining it. Related Articles
What are the four stages of corporate development?Every business, whether it's big or small, goes through the 4 stages of business growth:. Startup.. Growth.. Maturity.. Renewal or decline.. What are the stages of corporate development in strategic management?Structure of Corporate Development. #1 Centralized model. ... . #2 Hybrid model. ... . #3 Decentralized model. ... . #1 Mergers and Acquisitions. ... . #2 Long-term Partnerships. ... . #3 Divestitures and Carve-outs. ... . #5 Strategic Alliances. ... . #6 Creative Transactions for Optimizing Shareholder Value.. What is the first stage of corporate development?The Four Stages of Corporate Development
Development: Every company starts with an idea. Whether that's an idea for a product or to provide a service, the first stage of corporate development is ideation, and then research.
What is the meaning of corporate development?Corporate development is the process of achieving growth for a business through internal restructuring and external opportunities for acquisitions and mergers, investments, and divesting assets. All corporate development processes increase the value of a business.
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