Have you ever wondered what sets corporate and business development apart? At first glance, these terms might seem interchangeable as both implement strategies required for company-wide growth, right? But digging deeper, you’ll find that these teams or business departments operate differently, each playing a unique role in driving growth and achieving strategic goals.
Imagine your company as a ship navigating the vast ocean of the business world. Business development is the crew on deck, adjusting the sails, charting the immediate course, and ensuring the ship captures every gust of wind (or market opportunity) to keep moving forward.
Meanwhile, corporate development is the captain in the crow’s nest, scanning the horizon for long-term opportunities, steering the ship towards new territories, and making the big decisions that will shape the ship’s future course.
In this blog, we'll see the distinct roles of corporate and business development, offering insights into how they contribute to a company's success and real-world examples of how companies have leveraged these functions to achieve their goals.
What is Corporate Development?
Corporate development is a company’s strategic powerhouse responsible for defining and executing its long-term growth strategies. Whether through mergers and acquisitions (M&A), divestitures, or joint ventures, it focuses on activities that fundamentally alter the company's structure and direction.
For instance, when Facebook(now Meta) acquired Instagram for $1 billion in 2012, it wasn't just buying any other photo-sharing app. It was strategically moving to dominate the social media landscape and secure its future in a rapidly changing digital world.
What is Business Development?
Business development, on the other hand, is all about day-to-day operations. Here, the primary goal is to drive sales, explore new markets, and build relationships with partners and customers. Think of it as the team that keeps the wheels turning, ensuring that the company captures every opportunity present to grow within its existing framework.
A great example is Amazon's relentless focus on expanding its customer base by constantly entering new markets and forming strategic partnerships, such as its collaboration with Kohl’s to accept Amazon returns in stores, drive foot traffic, and boost sales for both companies.
What does Corporate Development Do?
DealRoom works closely with the corporate development functions of companies of all sizes, giving insight into the function's role.
The role involves:
Strategic Planning
Corporate development plays an important role in shaping a company’s strategic direction. It involves working closely with department heads and board members to identify growth opportunities and set long-term goals aligning with the company’s vision. For example, when Alphabet, Google’s parent company, was formed, it was a strategic move to restructure and streamline all its operations. The new entity allowed Google to focus on its core business while enabling its other ventures to grow independently. This restructuring allowed Alphabet to innovate and invest in new technologies without being constrained by Google’s business model.
Mergers and Acquisitions
M&A is the most well-known function of corporate development. It involves finding the right companies to acquire or merge with to enhance a company’s competitive advantage. A classic example is Disney’s acquisition of Pixar in 2006 for $7.4 billion. This deal revitalized Disney’s animation business and brought in a new wave of creativity and technological innovation that continues to drive the company’s success to date.
Divestitures
Divestitures involve selling off parts of the business that no longer align with the broader company’s strategic objectives. Though usually a tough decision, it often becomes necessary to free up resources and focus on areas with the most growth potential. Take IBM, for instance. In 2014, IBM sold its x86 server business to Lenovo for $2.1 billion. The move allowed IBM to shift its focus away from hardware and towards higher-margin businesses like cloud computing and artificial intelligence (AI), positioning the company for future growth.
Partnerships and Joint Ventures (JVs)
Corporate development isn’t just about buying or selling companies; it’s also about forging strategic partnerships and joint ventures that can open new doors for growth.
Consider the joint venture between Starbucks and PepsiCo, which created the ready-to-drink coffee category with products like Frappuccino. This partnership allowed Starbucks to tap into PepsiCo’s vast distribution network and expand its reach into grocery and convenience stores worldwide.
Fundraising
Corporate development strategies often lead to securing the capital needed for the company’s growth initiatives. Whether raising debt or equity, the corporate development team works closely with the CFO to ensure the company has the financial resources it needs to strive in the industry and execute its strategic plans. A notable example is Tesla’s numerous fundraising rounds to finance the development of its electric vehicles. By raising billions of dollars through stock offerings and convertible notes, Tesla eventually accelerated its growth and became a leader in the electric vehicle industry.
Related: Top 4 Software Tools Used in Corporate Development
What does Business Development Do?
As outlined above, the term ‘business development’ is often lumped in with sales and marketing, and that’s reflected in the responsibilities undertaken by the function, which include:
Client Acquisition
At its core, business development is about growing the company’s customer base. This often involves working closely with the sales team to identify and pursue new customer opportunities.
For example, when Salesforce expanded its client acquisition efforts to target small and medium-sized businesses (SMBs), it unlocked a massive new market. By tailoring its offerings and sales strategies to the needs of SMBs, Salesforce rapidly grew its customer base and established itself as a dominant player in the cloud CRM space.
Market Research and Analysis
Understanding customer trends, market trends, and the competitive landscape is essential for identifying new business opportunities.
For instance, Netflix’s business development team used market research to anticipate the shift from physical DVDs to streaming content. By recognizing this trend early and investing heavily in streaming technology, Netflix was able to pivot its business model and become the world’s leading streaming service.
Partnership Development
Business development teams often also work to establish partnerships that can enhance their various business units or company’s offerings and expand its market reach.
An example is the partnership between Uber and Spotify, which allowed Uber riders to stream their Spotify playlists during rides. This partnership provided a unique customer experience, strengthened Uber’s brand and helped Spotify reach a wider audience.
Product Development and Diversification
One more area the business development teams focus on is identifying new product opportunities and collaborating with product teams to bring them to market.
Apple’s development of the iPhone is a prime example. While Apple was already highly successful with its Mac computers and iPods, the business development team recognized the potential for their business growth was to invest in a new product in the smartphone market. By working closely with the product team, Apple was able to develop and launch the iPhone, which became a cornerstone of the company’s success.
Company Promotion
Promoting the company and its products or services is a key responsibility of business development. This can involve various activities, from attending industry events to creating marketing strategies that raise brand awareness.
For example, when Airbnb was still a startup, its business development team used guerrilla marketing tactics and strategic partnerships with companies like Craigslist to promote its platform and quickly grow its user base.
Key Differences Between Corporate Development and Business Development
Although both corporate and business development aims to grow the company, they do so in distinct ways. Below are the key differences that can help you see how each function contributes uniquely to a company's success-
Scope
Corporate development focuses on strategic initiatives that can help reshape a company’s direction overall, such as entering an entirely new industry or restructuring the company to better align with its future goals. For example, when Microsoft shifted its focus from software products to cloud services, it wasn’t just a change in product lines but a significant shift in how the company positioned itself in the technology landscape.
In contrast, business development focuses more on identifying and capitalizing on opportunities within its current business model, such as launching new products or forming strategic partnerships to enhance market reach.
Scale
Corporate development operates broadly and, in turn, makes decisions that impact the entire organization. This could mean acquiring companies or divesting business units to streamline operations. Business development, in contrast, works on a smaller scale, targeting specific markets or customer segments with initiatives that have a more immediate impact on revenue and market presence.
Timeframe
Corporate development has a long-term timeframe, with decisions that take years to fully realize. It’s about strategic planning and executing moves that align with the company’s long-term goals.
However, Business development works on shorter timelines and focuses on quick wins and immediate results, often within a fiscal year.
Objectives
Corporate development aims to build long-term competitive advantages through strategic initiatives and create sustainable growth. It enhances the company’s value and ensures its financial health.
On the other hand, business development aims to drive revenue growth and expand the customer base, focusing on profitability in the short to mid-term.
Role within the Organization
Corporate development operates at the executive level, shaping the company’s direction and working closely with top management.
Business development is more integrated with sales and marketing. It plays a crucial role in daily operations and ensures that the company remains competitive and continues to grow within its current markets.
How Does Corporate Development and Business Development (BD) Work Together?
Several areas of corporate development overlap, creating synergies between them.Both aim to create long-term value for the company, so collaborating for better results is in everyone’s best interest. The following list of areas where they can collaborate is extensive but not exhaustive:
Strategy Alignment
BD teams' feedback from the market can and should impact the company’s strategy. For example, the BD team would inform the Corporate Development team of a large shift of customers into a new product line, thereby enabling them to make more informed strategic decisions.Transaction Collaboration
Business development teams must assist corporate development at all phases as deals evolve. This is particularly pertinent at the integration phase, where the BD team needs to work on integrating the entities at an operational level, maintaining client relationships, and ensuring that sales targets are met.
Partnership Development
As mentioned in the sections above, business and corporate development functions involve creating partnerships for a company. With business development, this tends to be earlier on in the relationship. Still, as the relationship grows, it can be forwarded to corporate development, who can discuss more transformative actions (JVs, for instance) with the partner.
Conclusion
When you look at corporate and business development, it’s clear that these two functions are incredibly complementary. Sales and strategy are two sides of the same coin. Your company’s long-term direction often hinges on how well you manage short-term performance. Revenues generated today provide the cash flow needed to fuel tomorrow’s strategic moves, whether through mergers, acquisitions, or other growth initiatives. To maximize your efforts in corporate and business development, you must ensure constant collaboration between these teams.
At DealRoom, we’ve seen firsthand how this synergy can unlock substantial value, whether you’re navigating a small partnership or a billion-dollar transaction. We’ve designed our platform to support this collaboration, giving both teams the tools to work seamlessly together. If you’re looking to elevate your company’s growth strategy, the DealRoom M&A Platform can help you bring your corporate and business development efforts to the next level.
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