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Corporate Objectives & Strategy

Author: Jim Riley  Last updated: Sunday 23 September, 2012

Put simply, corporate strategies are essentially about what the business wants to achieve.  Business strategy is about how those corporate objectives are to be achieved.

Business strategy is concerned with deciding which markets and activities the business should be involved in; where it wants to be; and how it is going to get there.  Strategy is about making high-level decisions and forms the management game plan for…

  • Satisfying customers (meeting customer needs)
  • Running the business (organising resources in the most efficient and effective way)
  • Beating the competition (strategies and tactics to gain competitive advantage)
  • Achieving corporate objectives

Corporate (or business) objectives are set at the high level and are quite distinct from any more detailed functional objectives set for the functional areas of a business. The position of corporate objectives in the hierarchy of business objectives can be illustrated as follows:

Hierarchy of business objectives

  • The objectives cascade down from the mission getting progressively more specific
  • Overall objectives are translated into more specific objectives for different parts of the business
  • The hierarchy ensures that at each level the objectives are consistent with the objectives that are above them in the hierarchy

Examples of corporate objectives would include targets for:

  • Sales revenue (a traditional measure of the size and strength of a business – if revenue is growing then the business is growing)
  • Profit (both the absolute level of profit and the profit margin – i.e. return on sales)
  • Return on investment (e.g. ROCE, ROI: particularly important for capital-intensive businesses)
  • Growth (sales volume, revenue, profit, earnings per share)
  • Market share (the proportion of markets and industries owned by the business or its products)
  • Cash flow (this can be similar to a profit objective, but with the focus on maximising the net cash inflow of the business)
  • Shareholder value (particularly important for publicly-quoted businesses where senior management are tasked with growing the value of the business)
  • Corporate image & reputation (increasingly important – links closely with corporate social responsibility, product and customer service quality, and business ethics)

Many factors will influence the corporate objectives that are set.  Precisely which factors depends on the nature of the business and its markets, and the business ownership.  Some examples of those factors include:

Factors Influencing Corporate Objectives

Age of the business
Size and legal status
Ownership (e.g. privately owned; stock exchange quoted)
Views of owners and managers
Market conditions
Legislation

State of the economy
Competition
Risk and attitude to risk
Corporate culture
Political factors
Social attitudes

Corporate objectives can also be considered the main or primary objectives of a business. The set the agenda for the secondary objectives:

Primary Objectives

Secondary Objectives

The ultimate, long term goals of the business (3-10 years typically)

These are the key strategic objectives such as profit growth or shareholder returns

Make a direct contribution to meeting primary objectives

E.g. sales growth will help business achieve profit target

Also known as tactical objectives

Usually focused on the short or medium-term (1-3 years)

A similar distinction can also be made between strategic (corporate) and tactical (functional) objectives:

Strategic

Tactical

Focused on long-term

Focused on short-term

Set by the Board

Set by line management

Involve higher risk & uncertainty

Relatively low-risk

Likely to involve significant investment / business resources

Limited resources invested

Difficult to change in the short-term

Relatively easy to change at minor financial cost

Stretching & challenging

Realistic & achievable




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Revision quizzes for business students

Starting a Business

Sources of Finance for a Startup
Franchising
Cash Flow Forecasting for a Startup
Creating & Protecting Business Ideas
Startups and Understanding the Market
Market Research for a Startup
Locating the Startup Business
Choosing a Legal Structure for a Startup
Employing People in a Startup
Generating and Protecting a Business Idea
Using Breakeven in Decision-Making

Finance

Revenues
Breakeven Basics
Costs, Revenues and Profits
Business Costs
Using Budgets
Using Breakeven in Decision-Making
Investment Appraisal Basics
Financial Strategies
Measuring and Improving Profit
Improving Cash Flow
Working Capital
Balance Sheet
Income Statement
Financial Efficiency Ratios
Profitability Ratios and ROCE
Liquidity Ratios
Gearing

Marketing

Competition
Products & Brands
Place (Distribution)
Promotion
Pricing
Price Elasticity of Demand

Business Organisation

Basics of Business Growth
Business Activities
Legal Structure Basics
Franchising
Sole Traders and Partnerships
Limited Companies
Generating and Protecting a Business Idea
Organisational Structures

People

Working in Teams
Communication Basics
Communication Methods
Workforce Planning
Recruitment, Selection & Training
Employee Motivation
Organisational Structures

Operations

Operational Objectives
Critical Path Analysis
Scale and Resource Mix
Lean Production
Capacity Management
Customer Service Basics
Managing Quality
Operational Decision-making
Using Technology in Operations
Working with Suppliers

Economic Environment

Economic Sectors
Government Spending & Taxation
Inflation
Unemployment
Interest Rates & Monetary Policy

Business Strategy

Leadership styles
Business Culture
Change Management






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