Corporate Development: Definition, Types and Strategies
By Indeed Editorial Team
Updated 10 November 2022
Published 30 November 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.
Corporate development, or corp dev, is an essential element of any company's success. Successful corporate growth requires investment in development, including the implementation of strategies specifically designed to promote growth. For you to work in developing businesses, you become an expert in understanding what corporate growth is and how to achieve it in any company or sector. In this article, we explore what corporate development is, why it's important and look at some of the most important types and strategies of corporate growth.
What is corporate development?
Corporate development is the title given to a group of professionals whose role is to develop and implement strategies designed to grow the business. This includes creating partnerships, restructuring divisions, improving performance and expanding into new markets. Corp dev is key to the continuing growth of any company, and companies require skilled, experienced development teams to stay competitive. Companies often consider internal and external development:
Internal vs external
The responsibilities of development professionals comprise internal and external tasks, depending on whether they require focus inside or outside of an organisation.
Internal development responsibilities include:
identifying and filling gaps in a company's products and services portfolio
implementing strategies to motivate staff and improve employee performance
hiring and structuring employees and HR assets in an efficient way
External development responsibilities include:
scouting out potential corporate partners and allies
identifying businesses to acquire
monitoring the market and competitors
Why is corporate development important?
Corp dev is vital for the long-term survival of any company or organisation. Development teams help successful businesses maintain their advantageous position in the market, improve performance across a company and boost long-term profits. Experienced development professionals can help a business expand into new markets, acquire a competitor, market products and services to wider audiences and increase turnover and business valuation.
What are the goals of corporate development?
The primary goal of any development team is to further a company's journey towards operational excellence. This includes:
improving the experiences of both clients and customers
optimising efficiency and streamlining business processes
increasing profits by raising revenue and decreasing overheads
investing company money in growth
assessing the allocation of company assets
implementing business strategies with a growth mindset
increasing productivity and employee performance
The team's ultimate goal is always growth, but to achieve successful long-term growth, it's important that development teams lead a company at the right pace. Growing too fast risks business capital and security, while growing too slowly can lead to stagnation and loss of market share. For this reason, it's important to have a team of professionals focused on assessing, evaluating and coming up with strategies to develop the business in the best way.
Types of development teams
There are three common types of development strategies, each of which structures the team differently within an organisation. Each type of corp dev team has its advantages and disadvantages. See below the most common types of development teams:
In the centralised model, teams work centrally within a company to get a clear view of the organisation and how it works. This gives development teams the time to spot potential threats and opportunities early and make it easier to structure deals with other businesses around the company's portfolio.
Centralised development teams work with other divisions within a company to carry out essential business operations, for example, by working with support teams when acquiring a new business. The centralised model is the most common type of development strategy in organisations across the world, but it does require the permanent allocation of resources to a dedicated development team.
The hybrid business development model usually means a smaller team who utilise several internal and external resources to carry out development operations. For example, a hybrid development team may outsource some tasks to consultants or freelancers while still developing and implementing overall growth strategies in-house. The hybrid model of business development offers a good trade-off between the centralised and decentralised models, allowing organisations to take early action while still flexing to the needs of individual projects.
A decentralised development model means that an organisation has no dedicated development team. Instead, companies consult with development professionals when necessary. For example, when a company is restructuring or considering a new acquisition.
Companies may source development team members externally or choose them from other internal departments within the company. The decentralised model of business development is the least popular model. While it does offer the flexibility to hire teams only as and when needed, which saves money, it's also usually less effective than having dedicated full-time development professionals.
Types of development strategies
Development specialists employ different strategies to reach a company's growth goals. Some of the most commonly used development strategies for businesses are below:
Mergers and acquisitions
Mergers and acquisitions play an essential role in developing and growing a business. Merger and acquisition deals enable companies to buy out smaller companies to eliminate competition and acquire a company's revenue, customers and cash flow.
Acquiring a new company requires a restructuring of an organisation to incorporate the new, smaller company into the larger one. Mergers and acquisitions require a team of development professionals with knowledge and experience in risk management, financial modelling and negotiation.
Optimising shareholder value
Ensuring that your company offers maximum value to shareholders is another key aspect of most business development strategies. Shareholders play an important role in the management of a company, including taking votes on mergers and acquisitions and having input in the strategic direction that a company takes.
Ensuring that shareholders are happy with their investment in a company is the best way to raise its stock price on the market and, consequently, the value of a business. In general, shareholders care about profits and returns, but they may also have strong views on an organisation's ethics.
Strategic partnerships with other corporations can be a mutually beneficial relationship for two or more companies, allowing both companies to benefit from the other's strong position in the market. Two or more corporations partnering with one another can benefit from increasing production capacity without increasing costs. Partnering with another company is an alternative to merging or acquiring another company and requires development teams who can think strategically and negotiate favourable terms for both parties.
An alliance is another kind of collaboration between two companies in which companies may agree to share assets, resources and skills. This doesn't mean that they're partners, as both corporations are still in direct competition with one another. Alliances can offer mutual benefits to two or more companies, especially when new entrants to a market ally with more established companies to gain credibility and experience. In this situation, development teams seek out suitable companies to ally with and negotiate the terms and goals of the alliance.
Equity carve-outs and divestitures
Equity carve-outs and divestitures can help a company to manage its capital in the most efficient way by eliminating assets that aren't necessary and increasing overall returns on capital. For putting this development strategy in action, the development team requires high-level experience in financial modelling and business valuation methods, considering asset valuation, returns, historical earnings, discount cash flow valuation and other factors when preparing a strategy for offloading unneeded assets.
How do companies measure the success of development strategies?
Development teams use various metrics to measure the success of the strategies they implement. Some of the most common metrics used to evaluate the success of a team include:
Return on investment (ROI): This refers to the amount of net profit a company makes over time in comparison to expenditure. A high ROI is one of the main priorities of most shareholders and is vital to the success of a company.
Net present value (NPV): It's the current value of cash inflows against the current value of cash outflows.
Revenue increase: It means that a company's income has increased.
Synergetic effect: This is one way to measure the success of a merger or acquisition, effectively measuring the performance and value of the newly merged entity against the combined value of the two separate entities.
Employee turnover rates: These are likely to be low if development strategies are working effectively.
Customer retention rate: This is likely to grow or remain high when teams implement successful development strategies.
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