Corporate strategies and marketing strategies often coincide or overlap because, contrary to popular belief, a major focus of marketing includes the strategic planning aspects of developing, pricing and distributing a product. The two diverge when corporate strategy has less to do with product or service development and sales and more to do with profitability initiatives.
Strategy refers to planning and goal setting to reach long-term and big-picture objectives, as opposed to tactics, which refers to the execution of strategies. For example a business might create a brand strategy that targets affluent consumers to segment the market, creating a low-volume, high-margin path to profitability. The tactics to create this brand image would include efforts such as setting higher prices to create perceived value and selling only in upscale retail locations.
Corporate strategy focuses primarily on profitability. Corporate strategies include: creating an organizational structure, debt reduction to improve the company’s balance sheet, diversifying the product or service line to increase profits or decrease dependence on one product, merging with or buying another business to create economies of scale, accessing new technology and increasing sales volume, reducing overhead costs to increase profit margin, retooling to decrease production costs and reducing overall operating expenses.
Marketing strategies refer to plans that involve making or selling a product. They revolve around the marketing mix, also known as the “Four P’s” of product, price, place and promotion. Marketing strategies include: creating a product with a unique selling benefit, targeting a particular consumer demographic, setting prices based on profit and brand-management needs, selling in places and using channels that maximize profits without damaging the brand and using advertising, promotions, social media and public relations activities that support the company’s brand message.
The executive management of a business must stay in close contact with their marketing department to determine if any corporate strategies they wish to pursue align with the company’s marketing strategies. For example, a corporate cost-containment strategy that includes using cheaper materials to make the company’s product might damage an upscale brand the business relies on to support its pricing, distribution and brand strategies. If an upscale women’s shoe company buys a bargain-brand women’s footwear company, the marketing department will most likely suggest that management not merge the two companies, but instead operate separate brands using centralized administrative services. If the company were to merge the two and sell both products under the same name, it would confuse consumers and damage both brands.
Well-managed small businesses usually start their planning process with a broad mission statement or vision. While this starting point is both necessary and admirable, it usually does not become useable by management until the mission is translated into a strategic plan that is then used to guide operations. Managers gain from an understanding of the difference between strategic and operational objectives because this distinction plays a major role in the conversion of an overarching vision into concrete, specific tasks.
Strategic objectives are long-term organizational goals that help to convert a mission statement from a broad vision into more specific plans and projects. They set the major benchmarks for success and are designed to be measurable, specific and realistic translations of the mission statement that can be used by management to guide decision-making. Strategic objectives are usually developed as a part of a two- to four-year plan that identifies key strengths and weaknesses and sets out the specific expectations that will allow the company or organization to achieve its more broad-based mission or vision statement.
Operational objectives are daily, weekly or monthly project benchmarks that implement larger strategic objectives. Operational objectives, also called tactical objectives, are set out with strategic objectives in mind and provide a means for management and staff to break down a larger strategic goal into workable tasks. For example, achieving the strategic goal of a 25 percent increase in sales revenue requires the completion of the operational objective to develop and execute an effective advertising strategy along with other operational objectives. As with strategic objectives, operational objectives also should be measurable and specific, though their focus is narrower.
The most important difference between a strategic and an operational objective is its time frame; operational objectives are short-term goals, while strategic objectives are longer-term goals. Strategic and operational objectives also function differently in practice as strategic objectives are still usually too broad to make sense as a specific set of daily tasks or weekly projects. Operational objectives, on the other hand, are specific and short term enough to be considered usable in everyday time and asset allocation.
Even though strategic and operational objectives are substantially different, it is important to recognize that they are closely related. An organization is unlikely to achieve a strategic objective if it fails to effectively translate it into workable operational objectives. At the same time, operational objectives will lack cohesion with each other and with the overall organizational mission if they are not designed to affect the achievement of strategic objectives. Put simply, strategic objectives only become useful when translated into operational objectives and operational objectives are only effective when designed to serve a strategic objective.