Corporate development is responsible for creating and maintaining strategic partnerships as well as various business growth and restructuring initiatives. Alternatively, business development is defined as the activities and ideas utilized in order to optimize a company.
A corporate development team can include any individuals that are associated with business growth and restructuring initiatives. Common corporate development activities range from acquisitions to divestitures.
A business development team is responsible for identifying and succeeding in new market opportunities. Common business development activities range from creating the best content possible within company marketing initiatives to implementing customer service improvements.
Corporate development aims to produce marked financial and operational performance improvements. There are various structural types of corporate development including the centralized, hybrid, and decentralized model.
The decentralized model of corporate development exists in businesses that do not possess a designated corporate development department. Instead of maintaining a full time corporate development team on staff, a team is assembled on an as needed basis.
When specific teams are assembled under the decentralized model of corporate development, team members are selected based on their unique skillsets and experience. The decentralized model is not a popular model of corporate development and is the least utilized out of the three available models.
The centralized model is the most popular and frequently utilized corporate development model type. A common misconception regarding the centralized model is that the corporate development team acts and functions as a stand alone department.
Alternatively, the centralized model works frequently within company objectives and initiatives alongside other departments. The establishment and maintenance of a centralized model of corporate development can benefit a company by providing consistent surveillance over the competition and innovation potential.
The third structure of corporate development is the hybrid model. As its name suggests, the hybrid structure is a middle point between the centralized and decentralized model of corporate development.
In this corporate strategy type, the corporate development team is lean. As such, in the hybrid model professionals are very specifically and purposefully chosen for their roles on the corporate development team.
In an ever growing and ever changing global market, investing in business development and corporate development initiatives are both essential for long term profitability and continual business growth.
While business development and corporate development sometimes engage in the same activities, such as building strategic partnerships and maintaining them, there are notable differences between the two.
Important information regarding corporate development activities as well as additional explanations regarding the differences that exist between corporate development and business development include-
Larger corporations regularly purchase and take over smaller businesses. There is a wide spectrum of circumstances where acquisitions and mergers are beneficial for both parties involved, from gaining active top performing employees to customer base expansions.
Both mergers and acquisitions are essential for a company to maintain a competitive advantage and innovative edge. Skills necessary for successful merging and acquisition by corporate developers include financial modeling and asset management expertise.
Remember-: Acquisitions and mergers are ideally beneficial for both companies involved in the transaction.
2. Strategic Partnerships
Both a business development team and corporate development team should consider the creation and maintenance of strategic alliances as a top priority. One significant finance related benefit of strategic partnerships includes decreased private equity risks.
Another prominent benefit of strategic partnerships is within company improvements. For example, a strategic partnership with an active top corporation could help create the best content for marketing purposes.
Strategic alliances are especially helpful when a company wishes to establish new markets overseas. Partners who have been recently active in other countries can assist with the acclimation to culturally specific business practices and protocol.
Hedge fund managers and shareholders can significantly influence a business and its operations. Questions that hedge fund managers and shareholders pose and opinions they hold should impact important business decisions.
Instead of viewing these questions and opinions as overwhelming or intrusive, corporate development and business development professionals can utilize them for both benefits within company and externally. Identifying and implementing creative and innovative solutions that satisfy both shareholders and hedge fund managers should consistently remain a top priority.
Tip-: Shareholders and hedge fund managers can inspire a corporate development team to find innovative solutions.
Divestitures are a common response to the external and internal pressure that businesses experience. Both carve outs and divestitures are corporate strategy solutions that a corporate development team may consider.
Divestitures and carve outs necessitate financial modeling and modeling valuation skills. However, when executed correctly, carve outs and divestiture techniques can result in excellent fiscal returns.
In the United States and abroad, corporate development is an important business function.
Although corporate development and business development have some overlap in tasks, they have notable differences that all business professionals should be aware of.