Strategic Objectives of a firm
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The document discusses strategic objectives of firms, business strategy, contextual factors, contingency factors, and factors relating to performance management systems (PMS). Strategic objectives are long-term targets set for 3-5 years that are divided among business units and individuals. Business strategy determines the direction of a firm to achieve long-term success by adapting to changes. Contextual factors influencing goals and decisions include historical, personal, and socio-cultural aspects. Contingency factors considered in planning include social, economic, cultural, and political risks. An effective PMS aligns individual goals with corporate strategy, provides coaching, appraises performance, and rewards meeting standards.
Strategic Objectives of a firm
- 1. 1. Strategic objectives of a firm Setting objectives for the organization is one of the most important and challenging task. The failure and success of the firm depends upon the setting of strategic objectives. Strategic objectives are formulated for a longer period and are set for three to five years. Strategic objectives are divided into targets for business units, departments; functional areas, teams, and individuals. These objectives are a blend of financial and nonfinancial measures. This enables the organization to align itself to achieve the strategic objectives. Organizations follow the following points while setting the strategic objectives. To see the organization’s competencies and competitive advantages To see the current and projected influences on the industry and the competitive environment To see the current and future constraints on resources and operations To see the current possibilities, probabilities, and capabilities in the organization. To analyse the previously pursued opportunities that didn’t work. To see how opportunities will work? To analyse what things are needed in the organization? To clarify what things should be changed or shed? The most important factor what is the current financial position (debt, equity, cash), etc.? 2. The business Strategy The business strategy is the direction an organization takes with the objective of achieving business success in the long term. Recent approaches have focused on the need for companies to adapt to and anticipate changes in the business environment, i.e. a flexible strategy. The development of a corporate strategy involves establishing the purpose and scope of the organization's activities and the nature of the business it is in, taking the environment in which it operates, its position in the marketplace, and the competition it faces into consideration; most times analysed through a SWOT analysis. 3. Contextual factors Personal, historical, and socio-cultural aspects of a financial situation that influence an individual or family's attitudes and behaviour, including goal setting, decision making, and judgment about what to believe or how to act. • Historical aspects of context: Each individual and family brings a unique personal history to the financial situation, and each interacts with the workplace, school, and neighbourhood environments with personal norms, expectations, and social structures that have evolved over time. • Personal aspects of context: The perceptions, values, and goals of all parties involved in the financial situation.
- 2. • Socio-cultural aspects of context: The larger social institutions (such as the media, business and industry, economy) and cultural values, folkways, mores, and language that influence financial decision making. 4. Contingency factors Contingency Factors play an important role in contingency planning within an organization. They are what makes a company more prepared for the unexpected situations that can arise all too often within the corporate world. Having a good contingency plan may be what makes the difference between a company coming through a difficult trading period and not making it. • Contingency planning is vital as it prepares a company for any unforeseen or unexpected circumstances that may arise. • Contingency factors are what are taken into consideration within this overall planning phase. When carrying out this phase, staff will need to look at particular factors that could prove a risk to the company's normal operations. • Contingency factors may include social, economic, cultural or political factors that could affect the company. For example, this type of planning may be more important for a company that deals with suppliers or clients from countries where there is political instability for example. • Contingency factors can either influence a business directly or indirectly. This is why getting the plan in place is important as it will reduce potential risk to the company if any factors arise that prevent it from achieving its full potential. • Part of contingency planning will also involve looking at ways contingency factors could be managed or reduced so as to reduce the potential risk to the company. 5. Factors relating to PMS There are many ways to approach the task of creating a performance management process, but most are organised something like this: 1. Individual goals and corporate strategy are defined and communicated company-wide. 2. Progress on goals is monitored, and management provides coaching on performance. 3. Individual performance is appraised with feedback and formal documentation. Compensation is given based upon performance. If performance meets or exceeds the desired standard, a reward is given. If performance does not meet the desired standards, a performance development plan is created to address the gap, and a new performance date is scheduled. A first-rate performance management plan is the key to creating an engaged and aligned workforce—the hallmark of all successful businesses. Without one, your organization could lose more than just time and money – you could lose knowledge, employees and, in the end, your competitive edge.