Strategic objectives<\/h3>\r\nStrategic objectives<\/span> are the big-picture goals for the company: they describe what the company will do to try to fulfill its mission. Strategic objectives are usually some sort of performance goal\u2014for example, to launch a new product, increase profitability, or grow market share for the company\u2019s product.\r\n\r\n(Figure)<\/a><\/strong> shows what might be some strategic objectives for Disney. To make people happy (Disney\u2019s vision), Disney focuses on entertainment (its mission). Top executives then decide each year what entertainment products the company will offer. Because Disney is a large corporation (more on that shortly), it has a variety of resources available to create entertainment products to offer. For example, they may decide to release three movies this year, as well as build a new theme park and create five new shows for their television network. In reality, the strategic objectives at Disney are much more complex than this, because some of these choices involve long-term efforts (they cannot build a theme park in one year).\r\n\r\n \r\n\r\nA Possible Strategic Path from Vision to Objective for Disney<\/div>\r\n![\"A](\"https:\/\/openstax.org\/apps\/archive\/20220422.171947\/resources\/9cd35996dded0791270b5cb554dfd1ade4b20bef\")
<\/div>\r\n(Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)<\/div>\r\n \r\n\r\n<\/div>\r\n<\/div>\r\n\r\nLevels of Strategies<\/h3>\r\n
Once a firm has set its objectives, it then must turn to the question of how it will achieve them. A business-level strategy<\/span> is the framework a firm uses to organize its activities, and it is developed by the firm\u2019s top managers. Examples of business-level strategies include cost leadership and differentiation. These strategies are pursued by businesses with a single product or a range of products.<\/p>\r\nFor example, imagine that you own a coffee shop. You aren\u2019t Starbucks\u2014you are a local shop in your neighborhood, and you run it yourself. You have employees, but you are the manager, owner, and all-around decision maker. While developing your vision and mission statements, you have already made some basic decisions about how your shop will operate. For example, you have chosen to either offer quick, inexpensive coffee (cost leadership) or a full-service coffee experience (differentiation). That decision impacts whether or not you choose premium or discount suppliers, how your shop is decorated, and how many employees you have to offer attention (service) to your customers. A business-level strategy guides a company in how they approach the activities in the value chain. Operations, for example, would focus on efficiency for a cost leader and focus on adding value for a differentiator.\r\n\r\nWhen you develop strategic objectives for your shop, you will decide whether or not you want to try to attract more customers (grow), maintain your business at its current level, or shrink your business (perhaps you feel you don\u2019t have enough time to spend with your family). If you decide that your objective is to grow, for example, you should set a specific target, say, to grow revenue by 10%. Once you set that specific objective, you can exhibit out exactly what business-level actions you will need to take to reach that target.\r\nEven if a business is much larger than a local coffee shop, the strategic objectives pursued by these larger companies are not significantly different in concept. Large companies like Nike or Apple, which have many different business units, develop strategies at several levels. Each individual business unit (say Nike Basketball) will have a manager who decides the objectives for that unit, just as in the coffee shop example. However, the company as a whole will have a chief executive officer (the top manager for the company) who develops strategy for the entire corporation. Corporate strategy<\/span> is the broadest level of strategy, and is concerned with decisions about growing, maintaining, or shrinking very large companies. At this level, business-level strategy activities, such as an advertising campaign to attract new customers for a single product line, are not going to be enough to significantly impact the company as a whole.<\/p>\r\nThe corporate CEO essentially manages a group of businesses (unless the firm operates as one business unit) and develops strategies to create success for the overall group. Think of the group of businesses as an investment portfolio: investors try to have a diverse set of investments to spread risk and maximize the performance of the overall portfolio. On any given day, an investment that isn\u2019t doing so well should be offset by one that is doing well. Corporate strategy tries to achieve the same thing, and CEOs have to weigh the pros and cons of each business unit and how it is contributing to the success of the overall corporation. For example, a company that has business units that do well in the winter (ski resorts) will try to also have business units that will perform in the summer (swimming pools) to reduce the risk of having periods of low revenue. One tool that corporate strategists use to understand how each of their businesses contributes to the corporation as a whole is the BCG Matrix<\/span>, illustrated in (Figure)<\/a><\/strong>.\r\n\r\n \r\n\r\nThe BCG Matrix<\/div>\r\n![\"A](\"https:\/\/openstax.org\/apps\/archive\/20220422.171947\/resources\/5f643c0fc79bb78827c7b227052ac5977e9cc57c\")
<\/div>\r\n(Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)<\/div>\r\n \r\n\r\n<\/div>\r\nThe BCG Matrix gives managers a quick picture of which business units are doing well and which are not. The tool has recommendations for businesses in each quadrant\u2014for example, a business in the dog quadrant should be sold or closed. Cash cows provide income to the corporation, and stars provide growth. A CEO is always trying to balance the group of business units throughout the quadrants to maximize overall corporate performance. Note that the BCG Matrix is not applicable for firm\u2019s that operate in one business unit.\r\n\r\nIn order to achieve the scale of growth necessary to meet corporate strategic objectives, a CEO must find ways to develop entirely new business units or reach brand-new markets. For example, for Walmart to grow their 2017 revenue by 5%, they would need to add $25 billion in new revenue. That\u2019s more revenue than opening some new stores could generate. CEOs have several ways of growing their corporations, as shown in (Figure)<\/a><\/strong>.\r\n
Levels of Strategies<\/h3>\r\n
Once a firm has set its objectives, it then must turn to the question of how it will achieve them. A business-level strategy<\/span> is the framework a firm uses to organize its activities, and it is developed by the firm\u2019s top managers. Examples of business-level strategies include cost leadership and differentiation. These strategies are pursued by businesses with a single product or a range of products.<\/p>\r\nFor example, imagine that you own a coffee shop. You aren\u2019t Starbucks\u2014you are a local shop in your neighborhood, and you run it yourself. You have employees, but you are the manager, owner, and all-around decision maker. While developing your vision and mission statements, you have already made some basic decisions about how your shop will operate. For example, you have chosen to either offer quick, inexpensive coffee (cost leadership) or a full-service coffee experience (differentiation). That decision impacts whether or not you choose premium or discount suppliers, how your shop is decorated, and how many employees you have to offer attention (service) to your customers. A business-level strategy guides a company in how they approach the activities in the value chain. Operations, for example, would focus on efficiency for a cost leader and focus on adding value for a differentiator.\r\n\r\nWhen you develop strategic objectives for your shop, you will decide whether or not you want to try to attract more customers (grow), maintain your business at its current level, or shrink your business (perhaps you feel you don\u2019t have enough time to spend with your family). If you decide that your objective is to grow, for example, you should set a specific target, say, to grow revenue by 10%. Once you set that specific objective, you can exhibit out exactly what business-level actions you will need to take to reach that target.\r\n Even if a business is much larger than a local coffee shop, the strategic objectives pursued by these larger companies are not significantly different in concept. Large companies like Nike or Apple, which have many different business units, develop strategies at several levels. Each individual business unit (say Nike Basketball) will have a manager who decides the objectives for that unit, just as in the coffee shop example. However, the company as a whole will have a chief executive officer (the top manager for the company) who develops strategy for the entire corporation. Corporate strategy<\/span> is the broadest level of strategy, and is concerned with decisions about growing, maintaining, or shrinking very large companies. At this level, business-level strategy activities, such as an advertising campaign to attract new customers for a single product line, are not going to be enough to significantly impact the company as a whole.<\/p>\r\nThe corporate CEO essentially manages a group of businesses (unless the firm operates as one business unit) and develops strategies to create success for the overall group. Think of the group of businesses as an investment portfolio: investors try to have a diverse set of investments to spread risk and maximize the performance of the overall portfolio. On any given day, an investment that isn\u2019t doing so well should be offset by one that is doing well. Corporate strategy tries to achieve the same thing, and CEOs have to weigh the pros and cons of each business unit and how it is contributing to the success of the overall corporation. For example, a company that has business units that do well in the winter (ski resorts) will try to also have business units that will perform in the summer (swimming pools) to reduce the risk of having periods of low revenue. One tool that corporate strategists use to understand how each of their businesses contributes to the corporation as a whole is the BCG Matrix<\/span>, illustrated in (Figure)<\/a><\/strong>.\r\n\r\n \r\n<\/div>\r\n