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My Introspective

by Laurus Nobilis
My BrainCast

Strategic Management

Progressive Goals Setting (E)

 

Goal Setting

 


What is the progressive goal setting? What makes the balance between overstretching and realistic goal setting?

 

Posted: Jun 2009


Every business has it's own targets or goals. Those goals are expressed in units sold, revenue generated, profit obtained, etc. One thing is common for every successful company – the progressive growing goals setting. Companies always try to set the target for incoming year higher than for the actual year. Why?

It is true that long term continuous uniform growth is impossible, due to saturation of market or simply because effect of exponential growth. Still it is important to maintain expansive strategy for the company. The saturations can be avoided by diversification of company's activities in several fields. The growth of the company has many benefits for existence of the company.

  • Increased growth is generating more sales and revenue

  • Increased revenue creates potentially higher profit

  • Higher profit earning allows investment in development

  • Development offers possibility for further growth

  • Higher sales volume provides bigger market share

  • Market share growth eventually brings the company to the status of leading brand within the market segment or category captain

  • Leading market share builds brands strength and consumer loyalty, which offers possibility of continuous growth

  • Higher sales volume produces better capacity utilization

  • Higher capacity utilization reduces cost per sold unit, which contributes to profitability increase

  • Efficient and growing company has a good reference for the valuation of their shares on stock market

  • Of course the list is even longer. Finally, all these effects cumulatively are producing extended possibility of growth through the effect of synergy

It is true that long term continuous uniform growth is impossible, due to saturation of market or simply because effect of exponential growth. Still it is important to maintain expansive strategy for the company. The saturations can be avoided by diversification of company's activities in several fields.


All these positive effects have some drawbacks too. Fast growing company requires a fast development of capacities, both technical and human resources. If the company suddenly stop to growth, or even start to decline, than these capacities can be excessive burden to the company. In such situation the company must conduct cutting of capacities or reprogram activities to different areas of potential growth. Also, fast growing company is demanding for employees.

This demand can produce high employee turnover, which brings problems with of lack of skills, knowledge and experience of newly employees. If the turnover is high and consequently employees are on average underdeveloped, this can also create the negative impact to the growth of the company.

These two sides of the progressive goal setting are not opposing each other, but simply they complement to each other. The right approach to goal setting is the balance between aggressive growth and natural growth. Aggressive growth can be counterproductive, due to system burnout that can create. On the other hand, relaying only to natural growth, occurred simply by population increase or coincidence, can easily turn into decline.

Today, in the highly competitive markets in every niche, the imperative is to establish and maintain sustainable growth through progressive goal setting. Simply, if the company is pressing for the growth, probably it will avoid decline.

The company that is not pressuring for the growth will definitively face the decline. 

 

Goal setting

The Fishbone Diagram ( or Ishikawa Diagram ) is the perfect tool for root cause analysis of the growth trends.

Aggressive Growth - Enforced growth that has no long term sustainability
Balanced Growth - Growth that is higher than average competitors. Difference in growth rate gives advantage to the company
Market Growth - Natural Growth of caused by population growth, increased wealth, changes of consumer preference, etc.
Declining Companies - Trend of companies who didn't invest in market expansion  

 

 

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