Boston Consulting Group (BCG) Matrix

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an organization to examine different businesses in it’s portfolio on the basis of their related market share and industry growth rates. It is a two dimensional analysis on management of SBU’s (Strategic Business Units). In other words, it is a comparative analysis of business potential and the evaluation of environment.


According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share.


Relative Market Share = SBU Sales this year leading competitors sales this year.

Market Growth Rate = Industry sales this year - Industry Sales last year.

The analysis requires that both measures be calculated for each SBU. The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance. The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership.

BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting market growth rate. The mid-point of relative market share is set at 1.0. if all the SBU’s are in same industry, the average growth rate of the industry is used. While, if all the SBU’s are located in different industries, then the mid-point is set at the growth rate for the economy.

Resources are allocated to the business units according to their situation on the grid. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a particular type of business.

1. Stars- Stars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. Net cash flow is usually modest. SBU’s located in this cell are attractive as they are located in a robust industry and these business units are highly competitive in the industry. If successful, a star will become a cash cow when the industry matures.
2. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be utilized for investment in other business units. These SBU’s are the corporation’s key source of cash, and are specifically the core business. They are the base of an organization. These businesses usually follow stability strategies. When cash cows loose their appeal and move towards deterioration, then a retrenchment policy may be pursued.
3. Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share. They require attention to determine if the venture can be viable. Question marks are generally new goods and services which have a good commercial prospective. There is no specific strategy which can be adopted. If the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars.
4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash. Due to low market share, these business units face cost disadvantages. Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitor’s/rival firms. These business firms have weak market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share. Number of dogs should be avoided and minimized in an organization.

Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among different business units and makes it possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such as-

1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also. Thus, the true nature of business may not be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high costs also involved with high market share.
4. Growth rate and relative market share are not the only indicators of profitability. This model ignores and overlooks other indicators of profitability.
5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more than cash cows sometimes.
6. This four-celled approach is considered as to be too simplistic.

Porters Five Forces

Introduction

The model of the Five Competitive Forces was developed by Michael E. Porter in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980.

Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes.
Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change.

Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.


Origins 
Five Forces comes out of Porter’s work on competition at Harvard University. It has been widely used in business – but less so in the public and voluntary sector.

=mc has used it in a number of practical UK and US charity settings:
To help one smaller charity identify where there was a ‘gap’ in the market – with relatively weak competitors – that they could make a massive impact in 
to enable a large charity with a failing retain division work out how they could most easily ‘exit’ from their network of under performing shops 
to help a charity keen to get into special events fundraising which of the four key suppliers they should use to make their entry to the market



Why use the tool? 
The Porter’s Five Forces tool is a simple but powerful tool for understanding where power lies in a business
situation. This is useful, because it helps you understand both the strength of  your current competitive
position, and the strength of a position you’re looking to move into.
 
With a clear understanding of where power lies, you can take fair advantage of a situation of strength,
improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your
planning toolkit.
 
Conventionally, the tool is used to identify whether new products, services or businesses have the potential
to be profitable. However it can be very illuminating when used to understand the balance of power in other
situations.

 The Five Competitive Forces The Five Competitive Forces are typically described as follows:

Porter says you can decide what to do in terms of market position by 

assessing 5 key forces: 

• New Entrants: Are there many potential new entrants keen to get 
  into this market – or are there barriers like, charity registration, to entry?  
• Buyer’s Power: Can ‘buyers’ – from customers to donors –  negotiate about price/donation level and so put you under pressure? 
• Substitute Products and Services: Are there alternatives to what you do that donors or customers might use? 
• Power of Suppliers: If there are relatively few suppliers they can make rules and deals which impact on fund raising. 

• Current Competitor: Rivalry among current competitors impacts on the attractiveness of a given market. How competitive is this market? 

Bargaining Power of Suppliers

The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services.

Supplier bargaining power is likely to be high when:

• The market is dominated by a few large suppliers rather than a fragmented source of supply,
•  There are no substitutes for the particular input,
•  The suppliers customers are fragmented, so their bargaining power is low,
•  The switching costs from one supplier to another are high,
•  There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins. This threat is especially high when

          · The buying industry has a higher profitability than the supplying industry,

          · Forward integration provides economies of scale for the supplier,

          · The buying industry hinders the supplying industry in their development (e.g. reluctance to accept new releases of products),

          · The buying industry has low barriers to entry.

In such situations, the buying industry often faces a high pressure on margins from their suppliers. The relationship to powerful suppliers can potentially reduce strategic options for the organization.

Bargaining Power of Customers

Similarly, the bargaining power of customers determines how much customers can impose pressure on margins and volumes.

• Customers bargaining power is likely to be high when
•  They buy large volumes, there is a concentration of buyers,
•  The supplying industry comprises a large number of small operators
•  The supplying industry operates with high fixed costs,
•  The product is undifferentiated and can be replaces by substitutes,
•  Switching to an alternative product is relatively simple and is not related to high costs,
•  Customers have low margins and are price sensitive, 
•  Customers could produce the product themselves,
•  The product is not of strategical importance for the customer,
•  The customer knows about the production costs of the product
•  There is the possibility for the customer integrating backwards.

Threat of New Entrants

The competition in an industry will be the higher, the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. There is always a latent pressure for reaction and adjustment for existing players in this industry. 

The threat of new entries will depend on the extent to which there are barriers to entry. 

These are typically

•  Economies  of scale (minimum size requirements for profitable operations),
•  High initial investments and fixed costs, 
•  Cost advantages of existing players due to experience curve effects of operation with fully depreciated assets,
•  Brand loyalty of customers 
•  Protected intellectual property like patents, licenses etc,
•  Scarcity  of important  resources, e.g. qualified expert staff
•  Access  to raw materials is controlled by existing players,
•  Distribution channels are controlled by existing players,
•  Existing  players have close customer relations, e.g. from long-term service contracts,
•  High switching costs for customers
•  Legislation and government action

Threat of Substitutes

A threat from substitutes exists if there are alternative products with lower prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and 

hence reduce the potential sales volume for existing players. This category also relates to complementary products. Similarly to the threat of new entrants, the treat of substitutes is determined by factors like

•  Brand loyalty of customers,
•  Close customer relationships,
•  Switching costs for customers,
•  The relative price for performance of substitutes,
•  Current trends.

Competitive Rivalry between Existing Players

This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry.

Competition between existing players is likely to be high when

•  There are many players of about the same size,
•  Players have similar strategies
•  There  is not much differentiation between players and their products, hence, there is much price competition
•  Low  market growth rates (growth of a particular company is possible only at the expense of a competitor),
•  Barriers  for exit are high (e.g. expensive and highly specialized equipment).

Porter's Generic Competitive Strategies (ways of competing)

A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. The focus strategy has two variants, cost focus and differentiation focus.

1. Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.

2. Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

3. Focus

The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments.

Value Chain Analysis

The Value Chain
The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and
Sustaining superior Performance" (1985). The value chain analysis describes the activities the organization performs and links them to the organizations competitive position.

Value chain analysis describes the activities within and around an organization, and relates them to an
analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular activity adds to the organizations products or services. This idea was built upon the insight that
an organization is more than a random compilation of machinery, equipment, people and money. Only
if these things are arranged into systems and systematic activates it will become possible to produce
something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage.

Porter distinguishes between primary activities and support activities. Primary activities are directly
concerned with the creation or delivery of a product or service. They can be grouped into five main
areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of
these primary activities is linked to support activities which help to improve their effectiveness or efficiency. There are four main areas of support activities: procurement, technology development (including R&D), human resource management, and infrastructure (systems for planning, finance, quality,
information management etc.).

The basic model of Porters Value Chain is as follows:

The term  ‚Margin’ implies that organizations realize a profit margin that depends on their ability to
manage the linkages between all activities in the value chain. In other words, the organization is able
to deliver a product / service for which the customer is willing to pay more than the sum of the costs of
all activities in the value chain.


Some thought about the linkages between activities: These linkages are crucial for corporate success.
The linkages are flows of information, goods and services, as well as systems and processes for adjusting activities.

Their importance is best illustrated with some simple examples: 


Only if the Marketing & Sales function delivers sales forecasts for the next period to all other departments in time and in reliable accuracy, procurement will be able to order the necessary material for the correct date. And only if procurement does a good job and forwards order information to inbound logistics, only than operations will be able to schedule production in a way that guarantees the delivery of products in a timely and effective manner – as pre-determined by marketing.

In the result, the linkages are about seamless cooperation and information flow between the value
chain activities. In most industries, it is rather unusual that a single company performs all activities from product design, production of components, and final assembly to delivery to the final user by itself. Most often, organizations are elements of a value system or supply chain. Hence, value chain analysis should
cover the whole value system in which the organization operates.


Within the whole value system, there is only a certain value of profit margin available. This is the difference of the final price the customer pays and the sum of all costs incurred with the production and delivery of the product/service (e.g. raw material, energy etc.). It depends on the structure of the value system, how this margin spreads across the suppliers, producers, distributors, customers, and other elements of the value system. Each member of the system will use its market position and negotiating power to get a higher proportion of this margin. Nevertheless, members of a value system can cooperate to improve their efficiency and to reduce their costs in order to achieve a higher total margin to the benefit of all of them (e.g. by reducing stocks in a Just-In-Time system).

A typical value chain analysis can be performed in the following steps:


· Analysis of own value chain – which costs are related to every single activity
· Analysis of customers value chains – how does our product fit into their value chain
· Identification of potential cost advantages in comparison with competitors
· Identification of potential value added for the customer – how can our product  add value
to the customers value chain (e.g. lower costs or higher performance) – where does the
customer see such potential

SWOT Analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a projector in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. The technique is credited to Albert Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from Fortune 500 companies.

A SWOT analysis must first start with defining a desired end state or objective. A SWOT analysis may be incorporated into the strategic planning model. Strategic Planning has been the subject of much research.

• Strengths: characteristics of the business or team that give it an advantage over others in the industry.
• Weaknesses: are characteristics that place the firm at a disadvantage relative to others.
• Opportunities: external chances to make greater sales or profits in the environment.
• Threats: external elements in the environment that could cause trouble for the business.

Identification of SWOTs is essential because subsequent steps in the process of planning for achievement of the selected objective may be derived from the SWOTs.

Strengths, Weaknesses, Opportunities and Threats (SWOT).

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.

In SWOT, strengths and weaknesses are internal factors.

For example:

A strength could be:

• Your specialist marketing expertise.
• A new, innovative product or service.
• Location of your business.
• Quality processes and procedures.
• Any other aspect of your business that adds value to your product or service.

A weakness could be:

• Lack of marketing expertise.
• Undifferentiated products or services (i.e. in relation to your competitors).
• Location of your business.
• Poor quality goods or services.
• Damaged reputation.

In SWOT, opportunities and threats are external factors.

For example:

An opportunity could be:

• A developing market such as the Internet.
• Mergers, joint ventures or strategic alliances.
• Moving into new market segments that offer improved profits.
• A new international market.
• A market vacated by an ineffective competitor.

A threat could be:

• A new competitor in your home market.
• Price wars with competitors.
• A competitor has a new, innovative product or service.
• Competitors have superior access to channels of distribution.
• Taxation is introduced on your product or service.

Simple rules for successful SWOT analysis.

• Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis.
• SWOT analysis should distinguish between where your organization is today, and where it could be in the future.
• SWOT should always be specific. Avoid grey areas.
• Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
• Keep your SWOT short and simple. Avoid complexity and over analysis
• SWOT is subjective.

Once key issues have been identified with your SWOT analysis, they feed into marketing objectives. SWOT can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis. So SWOT is a very popular tool with marketing students because it is quick and easy to learn. During the SWOT exercise, list factors in the relevant boxes. It's that simple. Below are some FREE examples of SWOT analysis - click to go straight to them

Confrontation Matrix

A Tool to combine the internal factors with the external factors is the confrontation matrix.

	Opportunities	Threats
Strengths	Offensive Make the most of these	Adjust Restore Strengths
Weaknesses	Defensive Watch Competition Slowly	Survive Turn around

Factors that shape a company's strategies

Organizations do not exist in a vacuum. Many factors enter into the forming of a company's strategy. Each exists within a complex network of environmental forces.

These forces, conditions, situations, events, and relationships over which the organization has little control are referred to collectively as the organization's environment.

In general terms, environment can be broken down into three areas:

1. the macroenvironment, or general environment (remote environment) - that is, economic, social, political and legal systems in the country;
2. operating environment - that is, competitors, markets, customers, regulatory agencies, and stakeholders; and
3. the internal environment - that is, employees, managers, union, and board directors.

Analysis Of The Macro environment

An organizations ignores the macro environment at its own great peril. Many studies support the concept that there are needs to be a link between the organization's strategic decisions and its environment.

All organizations are affected by four macro environmental forces:political-legal, economic, technological, and social.

Political And Regulatory Forces

Political-legal forces include the outcomes of elections, legislation, and court judgments, as well as the decisions rendered by various commissions and agencies. The political sector of the environment presents actual and potential restriction on the way an organization operates.

Among the most important government actions are: regulation, taxation, expenditure, takeover (creating a crown corporation, and privatization. The differences among local, national, and international subsectors of the political environment are often quite dramatic. Political instability in some areas makes the very form of government subject to revolutionary changes.

In addition the basic system of government and the laws the system promulgates, the political environment might include such issues as monitoring government policy toward income tax, relative influence of unions, and policies concerning utilization of natural resources.

Political activity my also have a significant impact on three additional governmental functions influencing a firm's external environment:

* Supplier function. Government decisions regarding creation and accessibility of private businesses to government-owned natural resources and national stockpiles of agricultural products will profoundly affect the viability of some firm's strategies.

* Customer function. Government demand for products and services can create, sustain, enhance, or eliminate many market opportunities.

* Competitor function. The government can operate as an almost unbeatable competitor in the marketplace, Therefore, knowledge of government strategies can help a firm to avoid unfavorable confrontation with government as a competitor.

In general, the impact of government is far-reaching and increasing.

Economic Forces

Economic forces refer to the nature and direction of the economy in which business operates. Economic factors have a tremendous impact on business firms. The general state of the economy (e.g., depression, recession, recovery, or prosperity), interest rate, stage of the economic cycle, balance of payments, monetary policy, fiscal policy, are key variables in corporate investment, employment, and pricing decisions.

The impact of growth or decline in gross national product and increases or decreases in interest rates, inflation, and the value of the dollar are considered as prime examples of significant impact on business operations.

To asses the local situation, an organization might seek information concerning the economic base and future of the region and the effects of this outlook on wage rates, disposable income, unemployment, and the transportation and commercial base. The state of world economy is most critical for organizations operating in such areas.

Technological Forces

Technological forces influence organizations in several ways. A technological innovation can have a sudden and dramatic effect on the environment of a firm. First, technological developments can significantly alter the demand for an organization's or industry's products or services.

Technological change can decimate existing businesses and even entire industries, since its shifts demand from one product to another. Moreover, changes in technology can affect a firm's operations as well its products and services.

These changes might affect processing methods, raw materials, and service delivery. In international business, one country's use of new technological developments can make another country's products overpriced and noncompetitive. In general,

Technological trends include not only the glamorous invention that revolutionizes our lives, but also the gradual painstaking improvements in methods, in materials, in design, in application, unemployment, and the transportation and commercial base. They diffusion into new industries and efficiency" (John Argenti).

The rate of technological change varies considerably from one industry to another. In electronics, for example change is rapid and constant, but in furniture manufacturing, change is slower and more gradual.

Changing technology can offer major opportunities for improving goal achievements or threaten the existence of the firm. Therefore, "the key concerns in the technological environment involve building the organizational capability to (1) forecast and identify relevant developments - both within and beyond the industry, (2) assess the impact of these developments on existing operations, and (3) define opportunities" (Mark C. Baetz and Paul W. Beamish).

These capabilities should result in the creation of a technological strategy. Technological strategy deals with "choices in technology, product design and development, sources of technology and R&D management and funding" (R. Burgeleman and M. Maidique).

The effect that changing technology can have upon the competition in an industry is also dealt with other chapters. Technological forecasting can help protect and improve the profitability of firms in growing industries.

Social Forces

Social forces include traditions, values, societal trends, consumer psychology, and a society's expectations of business.

The following are some of the key concerns in the social environment:ecology (e.g., global warming, pollution); demographics (e.g., population growth rates, aging work force in industrialized countries, high educational requirements); quality of life (e.g., education, safety, health care, standard of living); and noneconomic activities (e.g., charities).

Moreover, social issues can quickly become political and even legal issues. Social forces are often most important because of their effect on people's behaviour. For an organization to survive, the product or service must be wanted, thus consumer behaviour is considered as a separate environmental behaviour. Behaviour factors also affect organisations internally, that is, the employees and management.

A society's expectations of business present other opportunities and constraints. These expectations emanate from diverse groups referred to as stakeholders. Stakeholders include a firm's owners (stockholders), members of the board of directors, managers and operating employees, suppliers, creditors, distributors, customers, and other interest groups - at the broadest level, stakeholders include the general public.

Determining the exact impact of social forces on an organization is difficult at best. However, assessing the changing values, attitudes, and demographic characteristics of an organization's customers is an essential element in establishing organizational objectives.

Strategy objectives

What is an objective? 
A good definition is: "Objectives are statements of specific outcomes that are to be achieved"

As we shall see, objectives are set at various levels in a business - from the top (corporate) and through the layers underneath (functional and unit).
Objectives are often set in financial terms.  That means that the objective is expressed in terms of a financial outcome that is to be achieved. Those could include:

• Desired sales or profit levels
• Rates of growth
• Amount of cash generated
• Value of the business or dividends paid to shareholders

However, it is incorrect to say that objectives have to be expressed in money terms, or that they have to be able to be measured. Some objectives are hard to measure, but are often important.  For example, an objective to be:

• An innovative player in the market
• A leading in the quality of customer service

A popular way to look at objectives is to see them as part of a hierarchy of forward-looking terms which help set and shape the strategy of a business.  That hierarchy can be summarised as follows:

Corporate objectives

Corporate objectives are those that relate to the business as a whole.  They are usually set by the top management of the business and they provide the focus for setting more detailed objectives for the main functional activities of the business.
This can be illustrated as follows:

Corporate objectives tend to focus on the desired performance and results of the business. It is important that corporate objectives cover a range of key areas where the business wants to achieve results rather than focusing on a single objective. 
Peter Drucker suggested that corporate objectives should cover eight key areas:

Area	Examples
Market standing	Market share, customer satisfaction, product range
Innovation	New products, better processes, using technology
Productivity	Optimum use of resources, focus on core activities
Physical & financial resources	Factories, business locations, finance, supplies
Profitability	Level of profit, rates of return on investment
Management	Management structure; promotion & development
Employees	Organisational structure; employee relations
Public responsibility	Compliance with laws; social and ethical behaviour

Functional objectives

A well-established business will divide its activities into several business functions.  These traditionally include areas such as:

• Finance & administration
• Marketing & sales
• Production & operations
• Human resource management

Whilst each of these functional areas requires specialist expertise, their activities are not carried out in isolation from the rest of the business. It is vital in your studies to consider the ways in which the functional activities are connected to each other.
However, it is common for each functional area to be set its own objectives, which should be consistent with the higher-level corporate objectives.
So, functional objectives are:
Set for each major business function and are designed to ensure that the corporate objectives are achieved
Consider some example objectives for the marketing function. Examples of functional marketing objectives” might include:

• We aim to build customer database of at least 250,000 households within the next 12 months
• We aim to achieve a market share of 10%
• We aim to achieve 75% customer awareness of our brand in our target markets

SMART objectives

Many business textbooks suggest that both corporate and functional objectives need to conform to a set of criteria referred to as an acronym SMART.
The SMART criteria are summarised below:

Specific	The objective should state exactly what is to be achieved.
Measurable	An objective should be capable of measurement – so that it is possible to determine whether (or how far) it has been achieved
Achievable	The objective should be realistic given the circumstances in which it is set and the resources available to the business.
Relevant	Objectives should be relevant to the people responsible for achieving them
Time Bound	Objectives should be set with a time-frame in mind. These deadlines also need to be realistic