Business planning is a process that companies both large and small use to determine a course of action that leads to revenue growth and increased profits -- in other words, a path to success. Two important aspects of the business planning process are setting objectives, also called goals, and making strategic choices to reach these objectives.
Objectives are forward-looking statements of what a business owner intends to accomplish. These can be quantifiable -- for example, increasing sales 20 percent in the upcoming year. Many objectives are not expressed in numerical terms, however, such as setting a goal of improving morale in the sales and marketing division. Businesses usually have short-term objectives -- those set to be accomplished in the next year -- and longer-term objectives that can look out as far as five years or more.
Purpose of Objectives
Having objectives in place allows you to measure your company's progress. You can compare the number of units you planned to sell, for example, versus what actually occurred and try to understand the reasons behind any positive or negative variances. For a business to succeed, all members of the management team and staff must make a coordinated effort. Setting objectives and communicating them to the members of the organization ensure that everyone is focused on the highest-priority tasks and is operating under the same assumptions about the company's future. A business owner doesn't want the marketing manager setting overly optimistic objectives while the production department is expecting weak demand for the company's products.
Strategic Choices Defined
Every company has a certain amount of resources available to it -- among them financial resources, human resources, productive capacity and distribution channels. Strategic choices are the specific steps a company intends to take to deploy these resources. Your strategic choices could include determining what products and services to sell, where to sell them, how to sell them and what target markets to sell them to. A strategic choice could be acquiring a competitor if the objective is to gain market share. Another strategic choice might be to focus on selling at trade shows rather than using advertising to reach potential customers.
Importance of Strategic Choices
Whether a business succeeds or fails depends in large measure on the strategic choices made by the owner. Spending large amounts of time and money introducing a product that turns out to have a very limited market is an example of a bad strategic choice. Anticipating a change in consumer tastes and introducing a service to take advantage of that change before competitors do is an example of a good strategic choice. The development of business strategy takes into account that all companies must cope with limited resources to some extent. The most successful companies can allocate scarce resources to the projects that have the greatest positive impact on revenue growth or improvements in productivity and efficiency that can increase profit margins.
Relationship to Objectives
The objectives describe where the company wants to go. The strategies depict how it intends to get there. A restaurant might have an objective of increasing the number of customers it serves in the next year by 12 percent. Several different strategies could be employed to move the company toward this objective. For example, kitchen operations can be simplified so meals are brought to diners more quickly. Or the restaurant could offer special discounts on nights when business typically has been slow.
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