We explain what the objectives and strategies of a company are, what types of each exist and their differences.
Objectives and strategies
In the business world, people often talk about the objectives set and the strategies necessary to achieve them. However, there may be a margin of confusion regarding each concept that we must first resolve.
First, an objective is a point of arrival, be it long, medium or short term. It is a task that we wish to fulfill, a goal that we wish to achieve, which is why they are usually based, in the case of companies, on their mission, vision and values, that is, on what they want to become.
Types of objectives
There are different ways to classify the objectives, according to what they pursue. For example, it is possible to distinguish between short, medium or long-term objectives, depending on how close their fulfillment is in time: close, medium or distant. But in each of these cases it is also possible to distinguish between:
- Essential objectivesThose who are fundamental to the organization, who provide it with meaning and are its north, its goal, without which the company would have no purpose and would not know where to go. For example, a logging company may have the essential objective of conquering the regional timber niche.
- Instrumental objectives, those that must be met in order to move towards the achievement of the essential, that is, secondary, partial objectives, which are not part of the business foundation, but without which it would be impossible to meet the important objectives. For example, the logging company in the previous example is going to have to deal with the sustainability of the wood, in order to grow to fill the niche of the region.
Instead, strategies are the way the organization plans to meet those objectives, that is, the action plan or the roadmap towards it. This concept is essential to design the company’s procedure, since it does not make sense to propose actions that are not part of any strategy, that is, that do not lead to the fulfillment of any of the corporate objectives.
Types of strategies
Like objectives, strategies can be very diverse and varied, depending on what purpose they pursue or what type of actions they intend to develop. Thus, it is possible to talk about:
- Integration strategies, when they propose actions that tend to control distributors, suppliers or competitors, that is, when they promote business dominance.
- Intensive strategies, when they pursue the improvement of the company’s positioning through intensive market penetration plans, market development or product development, that is, strategies that seek to increase business power with existing products.
- Diversification strategies, when they raise the need to safeguard or protect the assets of the company, to improve its competitiveness against the rest of the market. These are defensive actions that can consist of divestment, risk-sharing, shrinkage, and liquidation strategies.
- Growth strategies, when they seek to seize an opportune moment to expand the sales, profits and markets of the company.
- Stability strategies, when they focus on sustaining the current situation of the company and thus preserving its size and line of business.
- Reduction strategies, when methods of downsizing the company are considered to correct a bad performance, either by making cuts, reorienting the company, cutting distribution costs, etc.
Understanding objectives and strategies is key to proper organizational performance, and is essential when making important decisions. Well, as the proverb sums up, “the wind is never favorable for those who do not know where it is going.”