"There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits."
- Milton Friedman (1912 - 2006), recipient of the Nobel Prize in Economics in 1976

Like vision and mission statements, business objectives can give employees and managers a genuine sense of direction and purpose. Hence, they can help to motivate employees and raise productivity. While strategy and tactics originated as military terms, their use has spread to the corporate world. Strategy refers to the overarching plan or set of goals for the business as a whole and takes effort, commitment, and resources over a prolonged period of time to accomplish. Tactics are the specific actions or steps that are undertaken to accomplish the organization's strategy.

Business objectives can be categorised as long-term (strategic objectives) or short-term (tactical objectives).

Strategic objectives refer to the long-term goals that the whole organization continually strives to achieve. They are used to achieve the overall strategic goal or vision or mission of the business as an organization. They require a greater level of investment in human and financial resources than tactical objectives. Strategic objectives are often related to what the owners of the business want to focus on, such as growth, profit maximization, protecting shareholder value, or ethical objectives.

An example of a growth objective might be to improve the market share of a business by expanding its product portfolio in a particular market. This will take a longer time to achieve than tactical objectives. Strategic objectives are the responsibility of executive directors (senior management) and are ultimately about results.

Strategy is ultimately about results

Tactical objectives refer to the short-term and specific goals of a business with definitive timelines for specific functional areas of an organization. Therefore, they are easier to change or reverse than strategic objectives. In general, tactical objectives have a pre-determined time frame of less than a year. Tactical objectives are usually delegated (entrusted) to the others lower down in the organizational hierarchy. Examples of such objectives relate to performance targets, such as to improve labour productivity or to reduce operational waste within different functional areas or departments of the business.

Strategies

• Strategies are the actions in which a business plans to reach its long-term organizational aims and corporate-wide objectives.

• Examples of these strategic decisions include: diversification, overseas expansion, and mergers or takeovers (see  Unit 1.5 Growth and evolution).

• Strategies used to achieve the strategic objectives are decided by the senior leadership team or board of directors.

• Strategies also affect and are affected by the functional areas of business: human resources strategies (see Unit 2), finance strategies (see Unit 3), marketing strategies (see Unit 4), and operations management strategies ( Unit 5).

Tactics

• Tactics are the shorter term approaches to achieving (tactical and operation) objectives.

• They are the methods used by an organization to meet specific and measurable goals.

• They are used by the workforce to work towards achieving the strategic objectives of the organization.

 Key concept - Change

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.”
- Warren Buffett (b. 1930), Chairman and CEO of Berkshire Hathaway

It is common for an organization to change its business objectives over time due to changes in the internal and/or external business environment. The internal environment refers to situations and settings within the business itself. Hence, the organization will have some degree of control over these matters. The external environment refers to situations and factors that are those beyond the control of a business. This includes consideration of changes in any combination of the following aspects of the external business environment (see BMT 3 - STEEPLE analysis):

• Social factors

• Technological factors

• Economic factors

• Environmental factors

• Political factors

• Legal factors, and

• Ethical factors.

Think about how changes in both the internal and external environments can lead to a change in business objectives. Use real-world examples to substantiate your responses, and be prepared to share your findings with the rest of the class.

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Suggested areas for investigation

Changes in the internal environment have an impact on business objectives. Examples include the impacts of change on:

• Costs of production

• Morale, motivation, and productivity of workers

• Liquidity, cash flow, and budgets

• Organizational culture

• Growth strategies and evolution of the business

• Managers

• The board of directors

• The financial health of the business.

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Changes in the external environment will also impact on the business objectives of an organization. Examples of such factors include changes in:

• The state of the economy, e.g., whether there is an economic boom or an ongoing and prolonged recession caused by a global financial crisis or a pandemic

• Laws and regulations governing business operations and practices

• The degree or intensity of rivalry (competition) in the industry

• Innovations and new products launched by competitors

• Social trends, e.g., attitudes towards business ethics and corporate social responsibilities

• Technological progress and the impact on business operations, e.g., big data and customer loyalty programmes or e-commerce and online shopping.

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The internal environment will help to determine the strengths and weaknesses of the organization, whereas the external environment will reveal opportunities and threats (see BMT 1 - SWOT analysis).

 Exam Practice Question

Using relevant examples, distinguish between tactical objectives and strategic objectives.   [4 marks]

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Answers

A tactical objective is a short-term target that is in line with the organization’s long-term goals. Typically, tactical objectives have a pre-determined time frame of less than a year. An example of such an objective is to improve labour productivity in the workplace by using non-financial methods to motivate the workforce.

By contrast, a strategic objective is a long-term goal used to achieve the overall strategic goal or aim of a business.  For example, a strategic objective might be to improve the market share of a company by expanding its product portfolio in a particular market. This will take a longer time to achieve than tactical objectives.

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Award [1 – 2 marks] if both tactical objectives and strategic objectives are outlined, although the response lacks some detail and/or clarity. Examples might also be missing and/or a clear distinction is not made.

Award [3 – 4 marks] if both terms are clearly understood and a distinction is made. There is good use of appropriate examples and proficient use of business management terminology throughout the answer.

• Tactics are the actions required to achieve the short term objectives of an organization.

• Tactical objectives refer to the short-term and specific goals of a business with definitive timelines for specific functional areas of an organization.

• Strategies are the actions required to achieve the long term objectives of an organization.

• Strategic objectives refer to the long-term goals or aims that the whole organization continually strives to achieve.