FINANCIAL VS.

STRATEGIC OBJECTIVES

In a business, objectives are important to measure success. There are two main types of
objectives: financial objectives and strategic objectives.

Financial objectives focus on money and profits. These include:

 Growth in revenues: Increasing the total money earned from sales over time.
 Growth in earnings: Raising the net profit after deducting all costs and expenses.
 Higher dividends: Providing more profit-sharing to shareholders.
 Larger profit margins: Increasing the percentage of profit made from each sale.
 Greater return on investment (ROI): Ensuring higher profits compared to the money
invested.
 Higher earnings per share (EPS): Distributing more profit per individual company
share.
 Rising stock price: Increasing the value of company shares in the stock market.
 Improved cash flow: Enhancing the ability to generate and use cash efficiently.

These goals help a company remain profitable and financially stable. They are important for
business owners, investors, and other stakeholders.

Strategic Objectives Strategic objectives focus on competition and long-term success. These
include:

 Larger Market Share: Gaining a larger percentage of the market compared to

competitors.
o Example: A beverage company launching a marketing campaign to attract
customers from competitors.
 Quicker On-Time Delivery Than Rivals: Ensuring quicker and more reliable order
fulfillment.
o Example: An online store offering same-day delivery to outperform rivals who
take two days.
 Shorter Design-To-Market Times Than Rivals: Speeding up the process of bringing
new innovations to market.
o Example: A smartphone brand releasing updated models every year to stay ahead
of competitors.
 Lower Costs Than Rivals: Reducing production and operational costs while maintaining
quality.
o Example: A clothing brand switching to a more cost-effective supplier to sell at
lower prices than competitors.
 Higher Product Quality Than Rivals: Improving the durability, reliability, and
effectiveness of products.
o Example: A car manufacturer investing in better materials to ensure higher
vehicle safety and longevity.
 Wider Geographic Coverage Than Rivals: Growing the business by entering new
geographical markets.
 o Example: A coffee chain opening stores in different countries to increase its
customer base.
 Achieving Technological Leadership: Innovating and utilizing the latest technological
advancements.
o Example: A software company integrating artificial intelligence into its products
before competitors.
 Consistently Getting New Or Improved Products To Market Ahead Of Rivals:
Ensuring a competitive edge by consistently developing superior offerings.
o Example: A fashion brand releasing trendsetting designs months ahead of the
competition.

These goals help a company build a strong market position and attract more customers.

Not Managing by Objectives An unidentified educator once said, “If you think education is
expensive, try ignorance.” The idea behind this saying also applies to establishing objectives.
Strategists should avoid the following alternative ways to “not managing by objectives.”

 Managing by Extrapolation: This approach follows the belief, “If it ain’t broke, don’t
fix it.” It means continuing to do the same things in the same way as long as everything
appears to be working well. However, this can lead to stagnation and missed
opportunities for innovation and improvement.
 Managing by Crisis: This method assumes that the best strategists are those who can
solve problems quickly. While problem-solving is important, constantly reacting to crises
instead of planning ahead can result in disorganized decision-making and a lack of long-
term direction.
 Managing by Subjectives: This approach means there is no clear plan or direction.
Instead, employees and managers make decisions based on their own understanding,
without clear guidelines. This often leads to confusion and inefficiency, as subordinates
struggle to figure out the company's objectives and priorities.
 Managing by Hope: This method is based on optimism and uncertainty. Decisions are
made with the hope that things will work out, often without solid planning or analysis.
Companies relying on hope rather than strategy may find themselves unprepared for
challenges and unable to achieve their goals.

The Balanced Scorecard The Balanced Scorecard, developed by Robert Kaplan and David
Norton, is a strategy evaluation and control technique. It helps businesses measure performance
by balancing financial and nonfinancial measures. It also aligns shareholder objectives with
customer and operational objectives to create a more comprehensive approach to strategic
management. This framework ensures that companies do not focus solely on financial outcomes
but also on long-term growth and sustainability.
LEVELS OF STRATEGIES

Strategy making is not just a task for top executives. As discussed in Chapter 1, middleand
lower-level managers too must be involved in the strategic-planning process to the extent
possible.

In large firms, there are actually four levels of strategies: corporate, divisional, functional, and
operational.

 The corporate level is the highest-level strategy in an organization. It defines the

organization’s overall direction and the high-level ideas of how to move towards it. These
plans are usually created by leadership, such as the CEO and top management. Generally,
this is the group involved because they have a deep understanding of the company and the
strategic business knowledge needed to steer the organization in the right direction. They
usually span a 3-5 year period.

 The division level focuses on how a business unit within the organization competes within
its industry or market segment. This level of strategy involves decisions related to
positioning, differentiation, and gaining competitive advantage. It is crucial for ensuring
that the business unit can successfully compete in its specific market and contribute to the
overall corporate goals.

 The primary objective of functional level is to align the activities and efforts of these
individual departments with the broader goals and strategic objectives set at higher levels,
such as corporate and business strategy. Functional strategies have a fairly narrow focus.
They are designed to address the unique challenges and opportunities within each
functional area.

 Operational level, situated at the lowest tier of the strategic hierarchy, focuses on the day-
to-day actions and tactics needed to run the business, manage processes, and implement
change effectively. It’s the “boots-on-the-ground” aspect of strategy, ensuring that plans
are translated into tangible actions and results. In simple terms, this is the strategy that will
inform the day-to-day work of employees and will ultimately keep your organization
moving in the right direction.

In small firms, the persons primarily responsible for having effective strategies at the various
levels include the business owner or president at the company level and then the same range of
persons at the lower two levels, as with a large firm. It is important to note that all persons
responsible for strategic planning at the various levels ideally participate and understand the
strategies at the other organizational levels to help ensure coordination, facilitation, and
commitment while avoiding inconsistency, inefficiency, and miscommunication. Plant managers,
for example, need to understand and be supportive of the overall corporate strategic plan (game
plan) while the president and the CEO need to be knowledgeable of strategies being employed in
various sales territories and manufacturing plants.

May I call Ms. Gonzales to continue the discussion?