A corporate umbrella is a strategy employed by larger, more well-known brands and corporations, to arrange different brand names under a single, unified corporate name. Corporate umbrellas allow these brands to establish their own brand name and strategy, while still receiving the overall support and reputation of the larger corporation.
In essence, a corporate umbrella simply creates multiple brands beneath a larger, more well-known corporation. This allows the brands beneath the larger corporation to receive support, both financial and advisory, and the structure, credibility, and reputation of the overall and larger corporation.
Many large corporations opt to diversify their brands via corporate umbrellas as to allow independence for these brands. In addition, corporate umbrellas help to realize additional revenue and profit streams and areas of growth, without as-much risk to the larger corporation.
Many large corporations utilize a corporate umbrella strategy. Some of the larger, more well-known corporate umbrellas include Alphabet, Nestle, and P&G. These companies, among others, utilize corporate umbrellas to provide credibility, reputation, and access to larger markets for their smaller brands.
For example, when introducing a new product beneath the Nest brand name, which falls under the Alphabet corporate umbrella, they are afforded the luxury of Alphabet’s reputation, credibility, access, and reach. They are then able to more effectively market and showcase their offerings to consumers, while still retaining a level of independence and decision making.
Corporate umbrellas are especially useful for larger corporations that may have too many moving parts. Such companies may find it difficult for any Chief Executive Officer (CEO) to handle and sustain growth and vision for all brands. By employing a corporate umbrella, the board of directors and the chief executive is better able to manage the core business offerings, while remaining abreast on the developments and vision of the individual brand names.
Though corporate umbrellas reduce risk and may increase revenue streams and profit, they do come with some risk adjustments. Mainly, any misstep or error by the brand may trickle upwards and affect the larger corporation. This is even more amplified by reputational problems, which may be seen as inherent across the larger corporation. In addition, falling revenue or mismanagement by a brand may also affect the overall corporations bottom line.