TYPES OF GOALS AND OBJECTIVES

Goals should be closely tied to an organization's mission and vision statement. The
strategic goals, tactical goals and objectives, and operational goals and objectives support
the mission statement of the organization.

STRATEGIC GOALS.
Strategic goals are set at the top of an organization and directly support the mission
statement. Strategic goals are related to the entire organization instead of any one
department. There are eight types of strategic goals found in organizations. The first type
of strategic goal affects market standing, for example "to control 45 percent of the market
share in the United States by the year 2011." Strategic goals regarding market standing
help position a company as a market leader in any given industry. An example of the
second strategic goal, innovation, is "to develop three new applications for use in
businesses in the United States over the next three years." Productivity, the third type of
strategic goal, involves reductions in manufacturing costs or increases in output. The fourth
type of strategic goal is the efficient use of physical assets and financial resources, such
as human resources. The fifth type of strategic goal involves the organization's profits and
is usually defined in terms of return on assets or market value of stocks. Management
development and performance is the sixth type of strategic goal, which concerns the
conduct of managers as well as their continuing development. An example of this type of
strategic goal is "to increase the number of hours offered in management training courses
by 15 percent over the next year." The seventh type of strategic goal addresses the conduct
of employees, as well as the concern for their attitudes and performance. An example of
this type of strategic goal is "to reduce turnover by 12 percent over the next two years."
Finally, the eighth type of strategic goal is concerned with the public and social
responsibility of the organization. These types of goals might be concerned with
reducing pollution or contributing to different charities.

TACTICAL GOALS.
Tactical goals and objectives are directly related to the strategic goals of the organization.
They indicate the levels of achievement necessary in the departments and divisions of the
organization. Tactical goals and objectives must support the strategic goals of the
organization. For example, if a strategic goal states that the organization is going to reduce
total costs by 15 percent next year, then the different departments of the company would
set tactical objectives to decrease their costs by a certain percentage so that the average of
all departments equals 15 percent.

OPERATIONAL GOALS.
Operational goals and objectives are determined at the lowest level of the organization and
apply to specific employees or subdivisions in the organization. They focus on the individual
responsibilities of employees. For example, if the department's tactical goal is related to an
increase in return on assets by 5 percent, then the sales manager may have an operational
objective of increasing sales by 10 percent.

SUPER-ORDINATE GOALS.
Super-ordinate goals are those goals that are important to more than one party. They are
often used to resolve conflict between groups. Through cooperating to achieve the goal,
the tension and animosity between groups is often resolved. Feelings of camaraderie are
created along with trust and friendship. Super-ordinate goals can be powerful motivators
for groups to resolve their differences and cooperate with one another. In order for them
to be successful, the parties must first perceive that there is mutual dependency on one
another. The super-ordinate goal must be desired by everyone. Finally, all parties involved
must expect to receive rewards from the accomplishment of the goal.

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Setting.html#ixzz5yLuHZeFe

The business objective is a goal, i.e. where the business wants to

reach in the future. For example, a business wants to set up its
franchise in another state in the next 3 years or it wants to increase its
workforce in the coming months.

Business needs objectives, without objectives the business is like a

car without headlights driving blind. Objectives of business are the
purpose for which the business is established and performed. We can
call objectives the cornerstone of every business.

Objectives are needed in every area where performance and results

directly affect the survival and prosperity of a business. The right
choice of objectives is critical for the success of the business. The
objectives of a business can be classified into two main categories,
which are

1. Economic objectives
2. Social objectives

Economic Objectives of Business

We learned in the previous topic that business is an economic
activity. Hence, its purpose is to show economic results. Let’s
understand the economic objectives of the business. They are as
follows:

1] Profit Earning

Business is a set of activities undertaken with the prospect of sale for

the purpose of earning a profit. Profit is the extra income over the
expenses. The main objective of any business is to earn a profit. Just
as a plant cannot survive without water, similarly a business cannot
sustain without profit.

Profit is necessary for growing and expanding business activities.

Profit guarantee a consistent stream of capital for the modernization
and augmentation of business activities in the future. Profits likewise
show the scale of stability, efficiency, and advancement of the
business organization.

2] Market Share / Creation of Customers

In the words of Drucker, “There is only one valid definition of

business purpose; to create a customer. “ Profits are not generated out
of thin air. They are the result of the hard work of the businessman to
satisfy the needs of the customers.

In the long run, the survival of the business completely depends upon
the market share captured by the business. The creation of good and
satisfaction of the needs of the customer is a crucial purpose of the
business. So to generate profit and demand, the business must supply
premium quality and give value for money products.

3] Innovation & Utilization of Resources

Innovation normally means to change processes or creating more

effective processes, products and ideas. Nowadays, business is ever-
changing and dynamic. To keep up with the growing competition a
businessman has to introduce efficient design, latest trends, upgraded
machinery, new techniques, etc.

Large corporations invest a humongous amount of capital in their

Research & Development department to boost innovation. Whereas,
on the parallel lines, utilization of resources is a proper use of
workforce, raw material, capital and technology used in the business.
A business has limited resources and that’s why its main objective is
to put these resources to correct divisions.

4] Increasing Productivity

Productivity is a scale to measure the efficiency of the business

activity. It is usually the last objective but just as important because
productivity is measured by the output given by the activities. It is the
end result of any business activity. Each business must go for more
prominent productivity – to guarantee its survival and development.
This goal can be accomplished by decreasing wastages and making
proficient utilization of machines and supplies, HR, cash and so
forth.

Social Objectives of Business

According to Dayton Hudson “The business of business is serving
society, not just making money.” Business is one of the pillars on
which the society stands. Therefore, it is a part of the society. In fact,
it cannot thrive without the resources from the society. The
business earns its income from the sale of products and services to
the society. It is mandatory on the part of the business to take care of
the social factors. The necessary social objectives of a business are as
follows:

1] Providing Goods & Services at Reasonable Prices

Business exists in the first place to satisfy the needs of the society.
It’s the first and major social objective of the business. Products and
services ought to be of better quality and these ought to be provided
at sensible costs. It is additionally the social commitment of business
to keep away from misbehaviors like boarding, Black promoting
and manipulative advertising.

2] Employment Generation

One of the major problem today’s generation facing is

unemployment. Business generates employment. Therefore, it is the
social objective of a business to give chances to beneficial
employment to individuals of the society. In a nation like India,
unemployment has turned into a critical issue.

3] Fair Remuneration to Employees

The business does not run on its own but the people are responsible
for the success and failure of the business. The people on the inside
of the business are more valuable i.e. employees. They are an asset of
the business and make a ground-breaking contribution to the
business. They must be given reasonable pay for their work.

Notwithstanding wages and salary, a significant piece of profits

ought to be distributed among them in acknowledgment of their
commitments. Such sharing of benefits will expand the inspiration
and proficiency of employees.

4] Community Service

Business must give back something to the society. As a result, the

Library, dispensary, educational foundations and so on which a
business can make and help in the advancement of society are
created. Business enterprises can build schools, colleges, libraries,
hospitals, sports bodies and research institutions. They can help non-
government organizations (NGOs) like CRY, Help Age, and others
which render services to weaker sections of society.
 Mission Statement
The mission statement of a company is a declaration of what they do every day. It defines the
day-to-day activities of the work they do, and every person who works for the organization
contributes to that mission. Think of it like the person who sets daily or weekly goals for him or
herself to accomplish. It describes to employees and customers what is being done right now.
It is present focused and can change very quickly depending on the circumstances of the
business' market.

For a company's employees, it gives workers a sense of purpose about the value of their work.
It is a broad statement that describes the cohesiveness of an organization, even if they do
multiple and varied types of work in their individual departments. Many times Mission statements
often start with statements such as, "We provide…" or "We offer…" or "We are a…" The
mission statements establish a framework for the behavior of those working in the company.
Performance standards can be based off a company's mission statement. This can guide
decision making for employees at various levels of the company.

Vision Statement
A vision statement is a clear, definitive statement of what you want to accomplish, and what the
world will look like once you've accomplished your mission. It's the perfect scenario that you're
working towards accomplishing. Also, knowing what is important in the community you are
working in is oftentimes extremely important in crafting a vision statement. Unlike the mission
statement, it is future oriented. It provides a sense of what the company values to those both
inside and outside the company. At times, some companies will use their vision statement for
public relations purposes.

Since a vision statement is used to direct overall strategic goals for a company, they tend not
to change very often. Each goal is another step on the path toward achieving the overall vision of
the company. Vision statements are written in the present tense but still serve the future of
the enterprise. When a vision statement can be read in the present tense and be accurate, an
organization will know that their vision is being achieved. For example, a vision statement for a
nonprofit who works to eliminate homelessness may read, "All children will live in safe, affordable
housing." Therefore, making sure children are in safe, appropriate housing is the overall strategic
goal of that non-profit.

Forms of Merger
1. Merger through Absorption: When two or more entities are combined, into
an existing company, it is known as merger through absorption. In this type of
merger, only one entity survive after the merger, while the rest of all
cease to exist as they lose their identity. E.g. Tata Chemicals Limited (TCL)
absorbed Tata Fertilizers Limited (TFL).
2. Merger through Consolidation: When two or more companies fuse to give
birth to a new company, it is known as merger through consolidation. This
implies that all the companies to the merger are dissolved, i.e. they lose
their identity and a new company is created. E.g. Consolidation of
Hindustan Computers Limited, Indian Reprographics Limited, Indian Software
Company Limited Hindustan Instruments Limited, to form a new company
HCL Limited.
 The common feature of the two forms of the merger is that the resulting or
surviving company acquires the ownership of other entities and unite their
operations, with its own.

Types of Merger

1. Horizontal Merger: The merger is said to be horizontal when the companies

that are combined operate in the same industry or deal in similar lines of
business. The market share of the newly formed company is greater than the
individual entities. It is aimed at reducing competition, increasing market
share, economies of scale and research and development.
2. Vertical Merger: Vertical merger takes place when companies are having
‘buyer-seller relationship’, join to create a new company. It is an integration
of two companies that are working in the same industry, though at a
different stage of production and distribution. It can be upstream or
downstream, i.e. where the business takes over its suppliers, then it is an
upstream merger while if the company extend to its distribution entities, the
merger is termed as downstream.
3. Conglomerate Merger: A type of business integration, in which the merging
companies are not related to each other, i.e. neither horizontally nor
vertically. In a conglomerate merger, two or more companies operating in
different business lines combine under one flagship company. This is further
divided into, managerial conglomerate, financial conglomerate and concentric
conglomerate.
4. 1. Financial Conglomerates – Under this merger company provides only cash to the
company and do not interfere in the operation aspect of the business, hence company
which do financial conglomerate does not intend to run the business rather they are
financial investor in the company.
5. 2. Managerial Conglomerate – Under this merger company not only provides
finance but also participate in the operations aspect of the business by providing
staff as well as management to the company which it is taking over so as to
improve the operational efficiency of the company.
6. Co-generic Merger: Co-generic merger is when the companies undergoing
merger operate in the same or related industry. However, their product
lines are different, as in they do not offer same products but related one. The
acquired and target company share similar distribution channels.
7. Reverse Merger: A merger wherein a publicly listed company is taken
over by a privately held company and provides an opportunity, to the
private company to go public, without going through the complex and
lengthy process of getting listed on the stock exchange. In this type of
amalgamation, the unlisted company acquires majority shares in the listed
company.

The decision of merger is taken with great planning and analysis considering
all the positives and negatives. The sole aim is to accelerate growth and
build a good image in the market. It also enhances company’s profitability
through economies of scale, synergy, operating economies, entry to new
product lines, etc. Further, it removes financial constraints and also minimises
financial cost.

However, there are certain restrictions, like high employee turnover, culture
conflicts, etc. which might hit the efficiency and effectiveness.

TAKEOVER

Poison Pill
With this strategy, the target company aims at making its own stock less
attractive to the acquirer. There are two types of poison pills. The "flip-
in" poison pill allows existing shareholders (except the bidding company) to
buy more shares at a discount. This type of poison pill is usually written into
the company's shareholder-rights plan. The goal of the flip-in poison pill is
to dilute the shares held by the bidder and make the takeover bid more difficult
and expensive.

The "flip-over" poison pill allows stockholders to buy the acquirer's shares at a
discounted price in the event of a merger. If investors fail to take part in the
poison pill by purchasing stock at the discounted price, the outstanding
shareswill not be diluted enough to ward off a takeover.

An extreme version of the poison pill is the "suicide pill" whereby the takeover-
target company may take action that may lead to its ultimate destruction

White Knight
A white knight is a company (the "good guy") that gallops in to make a friendly
takeover offer to a target company that is facing a hostile takeover from
another party (a "black knight"). The white knight offers the target firm a way
out with a friendly takeover.

Backflip takeovers
This occurs when the acquiring company becomes a subsidiary of the company it
purchases.

Imagine your company is called John Doe Inc. It has lots of money but very few
people globally know it exists. You hear that BaliBubu Plc is in financial trouble. It is
also a company with products that are famous all over the world.

A hostile takeover
In a hostile takeover situation, the target company does not want the bidder to
acquire it. This can only really happen in a publicly-listed company because the
directors are not typically majority shareholders.

The bidder does not back always off if the board of a publicly-listed company rejects
the offer. If the bidder still pursues the acquisition, it becomes a hostile takeover
situation.

Sometimes there may also be a hostile takeover situation if the bidder announces its
firm intention to make an offer, and then immediately makes the offer directly – thus,
not giving the board time to get organized.

If the bidder can divide board and or shareholder opinion, it has a better chance
of succeeding. There are five different ways that a hostile takeover situation can play
out.

A reverse takeover
A reverse takeover occurs when a private company purchases a publicly-listed
company.

In fact, it is an effective way for the private company to ‘float’ itself. In other words, it
can go public without all the IPO expense and time. IPO stands for Initial Public
Offering.

BAILOUT TAKEOVER

A bailout takeover refers to a scenario where the government or a financially stable

company takes over control of a weak company with the goal of helping it regain its
financial strength. The acquiring entity takes over the weak company, usually by means of
purchasing a controlling amount of the company’s stock shares. Share exchange programs
may also be used.
The goal of the bailout takeover is to help turn around the operations of the company without
liquidating its assets. The acquiring entity achieves this by developing a rescue plan and
appointing a manager to spearhead the recovery while protecting the interests of the investors
and shareholders.

What is vertical integration?

Vertical integration is a competitive strategy by which a company takes
complete control over one or more stages in the production or
distribution of a product. It is covered in business courses such as the
MBA and MiM degrees.

A company opts for vertical integration to ensure full control over the
supply of the raw materials to manufacture its products. It may also employ
vertical integration to take over the reins of distribution of its products.
A classic example is that of the Carnegie Steel Company, which not only
bought iron mines to ensure the supply of the raw material but also took
over railroads to strengthen the distribution of the final product. The
strategy helped Carnegie produce cheaper steel, and empowered it in the
marketplace.

What is horizontal integration?

Horizontal integration is another competitive strategy that companies use.
An academic definition is that horizontal integration is the acquisition of
business activities that are at the same level of the value chain in similar or
different industries.
In simpler terms, horizontal integration is the acquisition of a related
business: a fast-food restaurant chain merging with a similar business in
another country to gain a foothold in foreign markets.

Vertical Integration in Strategic Management

Types of vertical integration strategies

As we have seen, vertical integration integrates a company with the units
supplying raw materials to it (backward integration), or with the
distribution channels that carry its products to the end-consumers (forward
integration).
For example, a supermarket may acquire control of farms to ensure supply
of fresh vegetables (backward integration) or may buy vehicles to smoothen
the distribution of its products (forward integration).
A car manufacturer may acquire tyre and electrical-component factories
(backward integration) or open its own showrooms to sell its vehicle
models or provide after-sales service (forward integration).
There is a third type of vertical integration, called balanced integration,
which is a judicious mix of backward and forward integration strategies.

Credit: strategicmanagementinsight.com

When is vertical integration attractive for a business?

Several factors affect the decision-making that goes into backward and
forward integration. A company may go in for these strategies in the
following scenarios:

 The current suppliers of the company’s raw materials or components, or

the distributors of its end products, are unreliable
 The prices of raw materials are unstable or the distributors charge high
fees
 The suppliers or distributors earn big margins
 The company has the resources to manage the new business that is
currently being taken care of by the suppliers or distributors
 The industry is expected to grow significantly

Advantages of vertical integration

What are the benefits of vertical integration? Let us take the example of a
car manufacturer implementing this strategy. This company can
 smoothen its supply chain (by ensuring ready supply of tyres and
electrical components in the exact specifications that it requires)
 make its distribution and after-sales service more efficient (by opening its
own showrooms)
 absorb for itself upstream and downstream profits (profits that would
have gone to the tyre and electrical companies and showrooms owned by
others)
 increase entry barriers for new entrants (by being able to reduce costs
through its own suppliers and distributors)
 invest in specific functions such as tyre-making and develop its core
competencies

Disadvantages of vertical integration

But what is the downside? What are the drawbacks of vertical integration?
Let us see the main disadvantages.
 The quality of goods supplied earlier by external sources may fall
because of a lack of competition.
 Flexibility to increase or decrease production of raw materials or
components may be lost as the company may need to sustain a level of
production in pursuit of economies of scale.
 It may be difficult for the company to sustain core competencies as it
focuses on the integration of the new units.
However, there are alternatives to vertical integration, such as purchases
from the market (of tyres, for example) and short- and long-term contracts
(for showrooms and with service stations, for example).

Horizontal Integration in Strategic

Management
Horizontal integration, as we have seen, is a company’s acquisition of a
similar or a competitive business—it may acquire, but it may also merge
with or takeover, another company to strengthen itself—to grow in size or
capacity, to achieve economies of scale or product uniqueness, to reduce
competition and risks, to increase markets, or to enter new markets.
Quick examples of horizontal expansion are Standard Oil’s acquisition of
about 40 other refineries and the acquisition of Arcelor by Mittal Steel and
that of Compaq by HP.

Credit: aventalearning.com

When is horizontal integration attractive for a

business?
A company can think of acquisitions and mergers for horizontal integration
in the following situations:

 When the industry is growing

 When rivals lack the expertise that the company has already achieved
 When economies of scale can be achieved
 When the company can manage the operations of the bigger organisation
efficiently, after the integration

Advantages of horizontal integration

The advantages of horizontal integration are economies of scale, increased
differentiation (more features that distinguish it from its competitors),
increased market power, and the ability to capture new markets.
 Economies of scale: The bigger, horizontally integrated company can
achieve a higher production than the companies merged, at a lower cost.
 Increased differentiation: The company will be able to offer more
product features to customers.
 Increased market power: The new company, because of the merger of
companies, will become a bigger customer for its old suppliers. It will
command a bigger end-product market and will have greater power over
distributors.
 Ability to enter new markets: If the merger is with an organisation
abroad, the new company will have an additional foreign market.

Disadvantages of horizontal integration strategy

As touched upon earlier, the management of a company should be able to
handle the bigger organisation efficiently if the advantages of horizontal
integration are to be realised.
The legal ramifications will have to be studied as there are strict anti-
monopoly laws in many countries: if the merged entity threatens to
oust competitors from the market, these laws will be used against it.
Standard Oil, which was seen as a powerful conglomerate brooking no
competition, was split up into over 30 competing companies in an anti-
trust case.
As a company grows bigger with horizontal integration, it might become
too rigid, and its procedures and practices may become unfriendly to
change. This could prove dangerous to it.
Moreover, synergies between companies that may have been predicted
may prove elusive or non-existent (for example, the failed horizontal
integration of hardware and software companies merged in the expectation
of “synergies” between their products).
The decision whether to employ vertical or horizontal integration has a
long-term influence on the business strategy of a company.
Each company will have to choose the option more suitable to it, based on
its unique place in the market and its customer value propositions. A deep
analysis of its strengths and resources will help it make the right choice.

A Range of Elasticity

The price elasticity of demand is commonly

divided into one of five elasticity alternatives- Alternative Coefficient (E)
-perfectly elastic, relatively elastic, unit
elastic, relatively inelastic, and perfectly Perfectly Elastic E=∞
inelastic--depending on the relative response
of quantity to price. These five alternatives Relatively Elastic 1<E<∞
form a continuum of possibilities.

Unit Elastic E=1

The chart to the right displays the five
alternatives based on the coefficient of
elasticity (E). The negative value obtained Relatively Inelastic 0<E<1
when calculating the price elasticity of
demand is ignored. Perfectly Inelastic E=0

 Perfectly Elastic: The top of the chart

begins with perfectly elastic, given by E = ∞. Perfectly elastic means an
infinitesimally small change in price results in an infinitely large change in
quantity demanded.

 Relatively Elastic: The second category is relatively elastic, in which the

coefficient of elasticity falls in the range 1 < E < ∞. With relatively elastic
demand, relatively small changes in price cause relatively large changes in
quantity. Quantity is very responsive to price. The percentage change in quantity
is greater than the percentage change in price. Here a 10 percent change in price
leads to more than a 10 percent change in quantity demanded (maybe something
20 percent).

 Unit Elastic: The third category is unit elastic, in which the coefficient of elasticity
is E = 1. In this case, any change in price is matched by an equal relative change
in quantity. The percentage change in quantity is equal to the percentage change
in price. For example, a 10 percent change in price induces a equal 10 percent
change in quantity demanded. Unit elastic is essentially a dividing line or
boundary between the elastic and inelastic ranges.

 Relatively Inelastic: The fourth category is relatively inelastic, in which the

coefficient of elasticity falls in the range 0 < E < 1. With relatively inelastic
demand, relatively large changes in price cause relatively small changes in
 quantity. Quantity is not very responsive to price. The percentage change in
quantity is less than the percentage change in price. In this case, a 10 percent
change in price induces less than a 10 percent change in quantity demanded
(perhaps only 5 percent).

 Perfectly Inelastic: The final category presented in this chart is perfectly inelastic,
given by E = 0. Perfectly inelastic means that quantity demanded is unaffected by
any change in price. The quantity is essentially fixed. It does not matter how
much price changes, quantity does not budge.