Business Strategy: Developing Functional Strategies

Functional strategy: What is it and why develop one?
A functional strategy is a short-term game plan to improve the effectiveness of key

functional areas.
A functional strategy is the approach a business functional takes to achieve corporate

and business unit objectives and strategies by maximizing resource productivity. It deals
with a relatively restricted plan that provides the objectives for a specific business
function.
A functional strategy helps set objectives that guide the optimum allocation of resources
among different business functions. This strategy also guides and facilitates
coordination among the functions to maximise their outcomes. Functional Strategy is
concerned with the question – How do we support the business strategy within
functional departments, such as Marketing, HR, Production and R&D?
Functional strategy often aims to improve the effectiveness of a company’s operations

within departments. Within these departments, employees often refer to their Marketing
Strategy, Human Resource Strategy or Innovation Strategy. When all the functional
departments of a company work together in same direction, they ultimately achieve the
business and corporate. Hence, the goal of functional strategy is to align these
strategies as much as possible with the business strategy.
Developing Functional Strategies
Functional strategy refers to the set of strategic initiatives taken in one part of a
business. Some authors refer to these as functional "strategies": "A functional strategy
is the short-term game plan for a key functional area within a company" , some others
prefer to regard them "as plans, or tactics, for carrying out the business strategy". A
company needs a functional strategy for every major functional activity.
Functional strategies must be developed in the following areas: finance, marketing,

production/operations, R&D, and personnel. The primary role of a functional strategy is
to support the company's overall business strategy. Functional strategies help in
implementation of grand strategy by organizing and activating specific subunits of the
company to pursue the business strategy in daily activities.
Summary
Even in the best of times, developing the right strategy for your company can be a challenge.
You have to worry about the now, while also planning for the future. By definition, strategy is
really about where to play and how to win the game. However, according to research outlined in
the Harvard Business Review, 85% of executive leadership teams spend less than one hour per
month discussing strategy and 50% spend no time at all. The research also reveals that, on
average, 95% of a company’s employees don’t understand its strategy. It’s no wonder, then, that
90 percent of businesses fail to meet their strategic targets. What sets successful companies apart
is that they have a coherent strategy. They also have mechanisms to ensure that all their
stakeholders (employees, suppliers, etc.) live the strategy every day. They carry it all the way
through every aspect of their execution. Bottom line, execution without strategy is aimless!
Functional Strategy – Development of Functional

Strategies
The development of functional strategies aims at formulating the
strategies at the top management level that is practically feasible at the
functional level. Strategies need to be segregated into viable and
unviable functional strategies. Viable functional strategies are those
that are compatible with each other, thereby augmenting the
horizontal fit.
In this way, the functional managers can implement the strategies.
The process of development of functional strategies may range from
the formal to the informal. Larger and more complex organizations
may have several strategies related to every major function.
Comparatively smaller organization may operate with fewer policies,
most of which could be informal and understood.
Vertical Fit:
The concept of vertical fit defines functional strategies in terms of
their capability to contribute to the creation of a strategic advantage
for the organization.
Viewed in this way we can have the following types of
functional strategies:
(1) Strategic marketing functional strategies focus on the alignment of
marketing management within an organization with its corporate and
business strategies to gain a strategic advantage.
(2) Strategic financial functional strategies focus on the alignment of
financial management within an organization with its corporate and
business strategies to gain a strategic advantage.
(3) Strategic operations functional strategies focus on the alignment of
operations management within an organization with its corporate and
business strategies to gain a strategic advantage
(4) Strategic human resource functional strategies focus on the
alignment of human resource management within an organization
with its corporate and business strategies to gain a strategic
advantage.
(5) Strategic information management functional strategies focus on
the alignment of information management within an organization
with its corporate and business strategies to gain a strategic
advantage.
Horizontal Fit:
The concept of horizontal fit means that there has to be an integration
of the operational activities undertaken to provide a product of service
to a customer. These have to take place in the course of operational
implementation.
Operational implementation is the approach an organization adopts to
achieve operational effectiveness. When an organization performs
value-creating activities optimally and in a way that is better than its
competitors, it results in operational effectiveness.

Business Strategy: Developing Functional Strategies

Uploaded by

Copyright:

Available Formats

Business Strategy: Developing Functional Strategies

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Business Strategy: Developing Functional Strategies

Uploaded by

Copyright:

Available Formats

What is a functional strategy and why is it important?

What are the different types of functional strategies discussed?

Functional strategy: What is it and why develop one?

A functional strategy is a short-term game plan to improve the effectiveness of key

A functional strategy is the approach a business functional takes to achieve corporate

Functional strategy often aims to improve the effectiveness of a company’s operations

Developing Functional Strategies

Functional strategies must be developed in the following areas: finance, marketing,

Functional Strategy – Development of Functional

You might also like