Strategic objectives – definition and types

Strategic objectives are the foundation on which organisations build their future, guiding actions and decisions critical to long-term success. They reflect a company’s growth aspirations and provide a compass in a rapidly changing business environment.

From this article you will learn:

• What are strategic objectives?
• What is the difference between strategic and operational objectives?
• What is the relationship between strategic objectives and the company’s mission, vision and values?
• How do strategic objectives influence the company’s growth strategy?
• How are strategic objectives determined?
• What types of strategic objectives are there?
• What are some examples of strategic objectives?
• What role do strategic objectives play in the day-to-day operations of the company?

Strategic objectives – definition

Strategic objectives are the foundation of an organisation’s future. They are broad, long-term plans and priorities that guide activities and resource allocation to achieve specific results. They derive from the organisation’s vision and mission and reflect its purpose for existence. They also require looking several years ahead, which can prepare the organisation for upcoming challenges and opportunities. At the same time, they must remain flexible to adapt to unforeseen changes in the environment.

Strategic objectives are the long-term plans and aspirations of an organisation that shape its activities and are the foundation of the company’s overall strategy.

Definition of strategic objectives.

Strategic objectives define where an organisation should focus its resources, such as time, finances and teamwork. They also set the direction for all levels of the organisation and determine the day-to-day activities so that they drive the organisation forward. For this to happen, they need to be measurable, so the SMART method is often used to formulate them.

Strategic versus operational objectives

Strategic objectives and operational objectives differ in scope, time horizon and nature, but are closely related. Strategic objectives are broad and focus on the long-term future of the organisation. They require strategic thinking and are often set by top management. Operational objectives, on the other hand, are the short-term and more specific activities of the organisation. They are usually set by middle managers and team leaders, who are responsible for completing tasks and monitoring progress. They require meticulous planning and coordination of resources, as operational goals directly relate to production, operations, delivery or customer service.

Although the two types of objectives are different in nature, they are closely linked. Strategic ones set the direction and operational ones are the steps by which the company moves towards it. This is a symbiotic relationship because without strategic objectives, operational activities can become fragmented and ineffective, while without operational objectives, the vision and mission anchored in the strategic objectives will remain unrealised.

Strategic goals versus mission, vision and company values

Together, the strategic objectives, mission, vision and values of the company shape the strategy and direction of an organisation. The mission is the fundamental purpose and essence of the company’s activities. Vision, in turn, presents the future that the organisation wishes to create or achieve. Values are the set of beliefs and principles that guide the behaviour of the organisation and its employees – they can be seen as the ethical compass and cultural framework within which the company pursues its mission and vision.

Strategic objectives concretise the mission and vision – the mission answers the question ‘what do we do’, the vision ‘where are we going’, the strategic objectives define ‘how will we get there’. They set out the specific actions, priorities and directions your company needs to take on the road to success. These four elements combine to create a coherent, coordinated strategy that drives the company forward.

Strategic objectives versus business development strategy

Strategic objectives and business development strategy form a framework that guides the company’s activities, but each has a specific function. A business development strategy is a comprehensive plan that sets out how your company intends to develop its business. It can cover various aspects, such as market penetration, product development, diversification of your offering, geographical expansion or even acquisitions of other companies. Strategic objectives, on the other hand, are specific, measurable goals that a company must achieve in order to pursue its growth strategy.

In this dynamic, strategic objectives are directly linked to the growth strategy. Strategy is the ‘map’ and overall direction, while strategic objectives are the ‘markers’ indicating whether the company is moving towards its goal. Without clearly defined strategic objectives, the development strategy would be unclear and progress would be difficult to measure. On the other hand, strategic objectives without being underpinned by a solid growth strategy may lead the company in a direction that ultimately proves to be inadequate or insufficient.

Methods for setting strategic objectives

Setting strategic objectives is a key part of an organisation’s strategic planning process. Each of the methods listed below has its own merits and may be more or less appropriate depending on the company’s specific situation, but in practice a combination of different techniques is often used. Here are the most popular ones:

• SWOT analysis is one of the most popular methods used to identify strategic objectives. SWOT stands for: Strengths (Strengths), Weaknesses (Weaknesses), Opportunities (Opportunities) and Threats (Threats). This analysis involves assessing an organisation’s internal strengths and weaknesses, as well as external opportunities and threats, to help identify areas on which the company should focus.
• The SMART method is one of the most common ways of setting goals. It states that strategic objectives should be specific, measurable, achievable, relevant and time-bound.
• Competitor analysis helps to assess the company’s position relative to its competitors and to understand where it has competitive advantages.
• The Balanced Scorecard method involves using a balanced set of financial and non-financial indicators to clearly define objectives and the means to achieve them.
• The scenario modelling technique consists of creating different, detailed scenarios of the future, which can take into account various variables such as market changes, technological innovations or new regulations. Based on these, strategic objectives can be developed.
• The MBO (Management by Objectives) process is an approach in which managers and their subordinates jointly identify objectives and act to achieve them. This system promotes participation and effectively increases employee involvement and motivation.
• Resource-Based Planning focuses on an organisation’s internal resources and capabilities. Companies analyse key resources and skills and then build strategic objectives around their strengths.

Types of strategic objectives

The categories of strategic objectives can vary or overlap, but should always address the unique challenges and opportunities of each company. The objectives themselves can be classified in different ways, but are most commonly grouped according to the business area to which they relate or by their nature:

• Financial objectives relate to the economic performance of the organisation, such as increasing revenue, maximising profits, reducing costs or improving profitability. They are often key for investors and management.
• Market objectives focus on the company’s market position and may include activities such as increasing market share, developing new markets, increasing brand awareness or introducing new products.
• Operational objectives relate to the internal processes and performance of the organisation. They may relate to improving operational efficiency, product or service quality or lead times.
• Personnel/human capital objectives focus on employees and address issues such as competence development, employment, employee retention or organisational culture in a company.
• Innovation objectives focus on the development of new products, services, technologies or processes within the company. They may relate to building an innovation culture, increasing the R&D budget or establishing strategic partnerships.
• Social and environmental objectives refer to corporate social responsibility (CSR) and sustainability. They concern aspects such as reducing greenhouse gas emissions, sustainable use of resources or community involvement.
• Strategic risk management objectives relate to identifying, assessing and minimising the various risks that may affect the organisation. The aim is to protect the company from potential risks, both internal and external.

Examples of strategic objectives

Strategic objectives may sound different depending on the organisation, but the most important thing is that they are formulated according to the SMART method. Here are examples of strategic objectives created using this method:

• Increase annual revenue by 20% by expanding into three new markets and introducing two new products by the end of the fiscal year.
• Become the leader in the XYZ regional market, achieving 30% market share over the next two years, through strategic partnerships and marketing campaigns targeting young consumers.
• Reduce operating costs by 15% in 18 months by implementing new technologies to automate production and logistics processes.
• Achieve 90% employee satisfaction within a year by offering training and development opportunities and introducing flexible working options.
• Launch an innovative product that solves X customers’ problem by investing in R&D and collaborating with leading research institutes.
• Reduce the carbon footprint by 25% in five years by using sustainable manufacturing practices, switching to renewable energy sources and promoting recycling throughout the supply chain.
• Minimise operational risk by implementing a risk management system that identifies potential risks and develops mitigation strategies over the next six months.
• Realise a full digital transformation of the company within 3 years by investing in new technologies, training employees in digital skills and digitising 80% of our customer processes.

All the examples have a few things in common: they are concretely formulated, measurable, achievable, relevant to the company’s business strategy and time-bound. This allows companies to monitor progress and measure the effectiveness of their implementation.

The role of strategic objectives

The role of strategic objectives in an organisation is multidimensional. They act as a bridge between the current state of the company and the future vision of the organisation. They also provide a concrete roadmap and define the directions that the company should take to achieve its long-term aspirations.

In the internal context, they play a key role in mobilising the resources, energy and time of the company’s employees. They give teams and individuals clear direction and indicate what they should focus on. This can increase their commitment and motivation. Strategic objectives are also central to decision-making at all levels of the organisation, as they are priorities that help managers decide where to allocate resources, what initiatives to fund and where to focus efforts.

In the broader market and competitive context, strategic objectives help define your company’s Unique Selling Proposition. They can also help you find a market niche, differentiate your offering or even define a new market. They also provide constancy and direction, helping you navigate through the dynamic business world, adapt to disruption and seize new opportunities. Strategic objectives address the essence of how an organisation defines its path to success, mobilises resources and creates value not only for its customers and employees, but also for the greater good.