Task 3Setting Strategic Objectives (SO)

OBJ

ECT

IVES

Need for SO

• It is a MUST:– To transform qualitative context of VMS

into something quantifiable• Quality Quantity

VMSGuides the top management as to•WHAT TO ACHIEVE and•HOW TO GO ABOUT IT

SOAre expressed in specific quantifiable terms•WHAT IS ENVISAGED BEHIND VMS

Need for SO

• Attainment of SO – upon which the substance and meaning of VMS are deemed appreciated

• Absence of SO – VMS becomes nothing but a dream of its leaders that will never see fruition

Nature of Setting SO

• GOALS and OBJECTIVES– May sound ordinary and similar– May be taken as one– Have to be associated with VMS

• SO – considered a critical component of the SM process

• MS – addresses the question of WHO THE COMPANY IS and is the REASON FOR EXISTENCE

• GOALS – represent the desired general ends towards which efforts are directed

• OBJECTIVES – specific and quantified versions of goals

Nature of Setting SO

• Setting SO• Means doing it in quantifiable terms

– “What is a QUANTITATIVE OBJECTIVE?”» Something that is to be addressed/achieved by specific

groups (operating units)

• Can begin by setting out a GOAL

• Strategic Management• A tool for enhancing COMPETITIVENESS• Highly dependent on the KINDS OF OBJECTIVES it has

set forth for short-medium and long-term

Strategic INTENT vs. Strategic THRUST

Strategic INTENT

•Strategic biases (synonymous)•Must be internalized, valued, or imbibed by advocates of SM•Connotes a DIRECTION and BURNING DESIRE•A firm would like to pursue with bulldog tenacity

Strategic THRUST

•Insinuates decision-making process•Biased by Senior Management view (PARADIGMS)

•Focusing management’s attention on a particular area• WHERE IT WANTS TO EXCEL•WHERE IT WANTS TO CONCENTRATE ITS RESOURCES

•To develop the supreme competencies and capabilities that will sustain a COMPETITIVE ADVANTAGE

Strategic THRUST

• 4 subsectors• Technology products• Customer sectors• Distribution region• Rules of the game resources

• 4 external considerations• Emerging• Developing• Maturing• Declining

Characteristics of SO• SO – CONCRETE ARTICULATION of the firm’s VISION & MISSION

Converts V&M into specific performance TARGETS

Serve as YARDSTICKS to track performance

Pushes the firmto be INVENTIVE and FOCUSED ON RESULTS

Helps prevent COMPLACENCY

Serve as PULL/MAGNET towards common direction

Objectives at Functional and Operating Levels

• While development of policies and strategies may be approached in a variety of ways, objectives setting is better off as a top-down approach rather than a bottom-up approach or better yet, a top-bottom-top scenario

Objectives at Functional and Operating Levels

• As a top-down approach, objective setting can be done using the following as guide:

a) First, establish organization-wide objectives and performance targets.

b) Next, set business and product line objectives.

c) Then, establish functional and departmental objectives.

d) Individual objectives are established last.

Business/Product

ab

cd

EXAMPLES

• Strategic objectives may come in the form of the following:

a) Increase firm’s market share;b) Overtake key rivals on quality or customer service or product

performance;c) Attain lower overall costs than rivals;d) Boost firm’s reputation with customers;e) Attain stronger foothold in international markets;f) Achieve technological superiority;g) Become leader in new product introductions; andh) Capture attractive growth opportunities.

Examples of Objectives

Result Indicator Short-term(1 Year)

Long-term(5 Years)

Market share Percent 30% 35%

Growth Peso sales P10 Million P15 Million

Profitability Return on Investment

12% 15%

Debt D/E ratio 0.40 .30

Stockholder Earning per share (EPS)

P2.40 P3.5

Employee Turnover <10% <8%

Society Charity Projects P100,000 P1,000,000

What are considered Good Objectives?

• Specific

• Measurable

• Achievable

• Realistic and Resource-oriented

• Time-bound