Tag: Competitive Analysis

Functional Strategies refer to the specific tactics and actions developed by various departments within an organization to support overarching business strategies and objectives. Each functional area—such as marketing, finance, human resources, operations, and information technology—crafts its strategy to optimize performance and contribute to the company’s goals. These strategies are tailored to the unique capabilities, processes, and needs of each function and are crucial for the efficient allocation of resources, coordination of activities, and achievement of competitive advantage. Effective functional strategies ensure that each department aligns with the broader strategic vision of the organization, creating synergy and improving overall operational effectiveness to maximize business success and sustainability.

Features of Functional Strategies:

• Specificity:

Functional strategies are detailed and tailored to address the unique challenges and opportunities within a specific department such as marketing, finance, operations, or human resources.

• Alignment:

They are designed to align with the overall corporate strategy, ensuring that each functional area contributes effectively to the overarching goals of the organization.

• Resource Allocation:

Functional strategies involve specific plans for allocating resources within a department to maximize efficiency and effectiveness in achieving set objectives.

• Goal-Oriented:

These strategies are goal-oriented, focused on achieving specific outcomes that contribute to the success of the entire organization.

• Measurability:

They include measurable targets and key performance indicators (KPIs) that help assess the performance of each functional area and its impact on the organization’s success.

• Adaptability:

Functional strategies are flexible, allowing departments to adapt to changes in the external environment, including market conditions, technology, and regulatory changes.

• Integration:

Effective functional strategies are integrated with each other, ensuring that the activities of different departments are coordinated and mutually supportive, avoiding silos within the organization.

• Competitive Advantage:

They are often designed to leverage the strengths and core competencies of a functional area to provide a competitive advantage, such as innovation in product development or excellence in customer service.

Importance of Functional Strategies:

• Enhanced Coordination:

Functional strategies help coordinate activities within individual departments and ensure that these activities are aligned with the broader strategic goals of the organization, leading to more cohesive and effective operations.

• Resource Optimization:

They facilitate the optimal use of resources within each department, ensuring that resources such as time, money, and personnel are utilized efficiently and effectively to achieve specific functional goals.

• Goal Achievement:

Functional strategies are essential for translating high-level organizational goals into actionable plans within each department, which helps in achieving specific and measurable outcomes that contribute to the overall success of the business.

• Improves Accountability:

By setting specific objectives for each department, functional strategies improve accountability by making it easier to track performance and hold individual departments responsible for their results.

• Increases Adaptability:

They allow departments to quickly adapt to changes in the market or industry by having strategies that are tailored to the specific dynamics and challenges faced by each functional area.

• Supports Innovation:

Functional strategies can foster innovation by encouraging departments to develop creative solutions and improvements within their specific areas of expertise, thus contributing to competitive advantage.

• Enhances Communication:

Clear functional strategies improve communication within and across departments by defining clear roles, responsibilities, and expectations, which helps in reducing conflicts and enhancing synergy.

• Drives Competitive Advantage:

By maximizing the efficiency and effectiveness of each department, functional strategies contribute to building and sustaining a competitive advantage. For example, a cutting-edge marketing strategy can help capture greater market share, while an innovative R&D strategy can lead to the development of unique products.

Challenges of Functional Strategies:

• Alignment with Corporate Strategy:

One of the primary challenges is ensuring that functional strategies align well with the overall corporate strategy. Misalignment can lead to efforts that do not support or even contradict other organizational goals.

• Resource Constraints:

Functional areas often compete for limited resources, such as budget, personnel, and technology. Balancing these resources effectively across various departments can be challenging and may impact the effectiveness of functional strategies.

• Interdepartmental Coordination:

Ensuring coordination and cooperation among different functional areas can be difficult. Lack of coordination can lead to silos that hinder information sharing and collaborative problem-solving.

• Adaptability to Change:

External changes such as market dynamics, economic conditions, and technological advancements require functional strategies to be flexible. Adapting strategies in response to these changes can be challenging, particularly in larger, less agile organizations.

• Measuring Performance:

Developing clear, measurable KPIs that accurately reflect the performance of functional strategies can be complex. Without precise metrics, assessing effectiveness and making informed decisions becomes problematic.

• Skill Gaps:

Effective implementation of functional strategies often requires specific skills and expertise. Skill gaps within teams can lead to suboptimal execution of these strategies.

• Cultural Fit:

Functional strategies must fit within the organizational culture to be effective. Strategies that clash with the established culture may face resistance, reducing their effectiveness or leading to failure.

• Innovation Constraints:

While functional strategies aim to optimize current operations, they can sometimes constrain innovation by focusing too heavily on refining existing processes and products. Balancing operational excellence with innovation is a significant challenge.

Strategy Evaluation is a crucial phase in the strategic management process where the effectiveness of a strategic plan is assessed. This involves systematically analyzing the performance of implemented strategies to determine their success in achieving organizational goals. The evaluation process includes monitoring ongoing performance, comparing actual outcomes against predefined objectives, and identifying deviations. It also entails assessing the relevance of the current strategy in the face of evolving external and internal conditions. Strategy evaluation helps organizations to understand whether strategic choices are delivering the desired results, and it provides the basis for necessary adjustments. Effective strategy evaluation ensures that an organization remains aligned with its objectives and can adapt to changing circumstances, thereby maintaining competitiveness and sustainability.

Nature of Strategy evaluation:

• Continuous Process:

Strategy evaluation is not a one-time activity but a continuous process that occurs throughout the implementation of a strategy. It requires regular monitoring and assessment to ensure that strategies are responsive to changes in the internal and external environment.

• Multidimensional:

The evaluation involves assessing multiple dimensions of performance, including financial results, market share, customer satisfaction, and internal operational efficiency. This comprehensive approach helps in understanding the overall impact of the strategy.

• Objective and Systematic:

Effective strategy evaluation must be objective, relying on measurable data to assess performance. It should be systematically integrated into the strategic management process, with clear criteria and methodologies for assessment to avoid biases and ensure consistency.

• Forward-Looking:

While it often reviews past and current performance, strategy evaluation is also forward-looking. It involves forecasting and scenario planning to anticipate future challenges and opportunities, allowing organizations to proactively adjust their strategies.

• Adaptive:

Strategy evaluation must be adaptive, offering the flexibility to modify strategies as needed. This adaptiveness is crucial in today’s fast-paced business environments where internal and external factors can change rapidly.

• Integrated with Decision-Making:

The insights gained from strategy evaluation should directly influence decision-making processes. This integration ensures that strategic adjustments are informed by concrete evaluation data, leading to better-aligned and more effective strategic moves.

Importance of Strategy evaluation:

• Performance Assessment:

Strategy evaluation allows organizations to assess whether strategic initiatives are meeting their intended goals. It provides metrics and feedback on the effectiveness of strategies in real time, helping managers understand where they are succeeding and where improvements are needed.

• Adaptability:

In today’s fast-changing business environment, the ability to adapt strategies based on performance and changing conditions is crucial. Strategy evaluation provides the data necessary to make informed decisions that can pivot or redirect resources as needed.

• Resource Allocation:

Effective strategy evaluation helps ensure that resources are being used efficiently. By regularly assessing the outcomes of strategy implementation, organizations can optimize the use of their resources, reallocating them from underperforming areas to those with greater potential.

• Risk Management:

It helps in identifying risk factors in strategies and their implementation. Early detection of potential risks allows organizations to take corrective actions proactively, thereby mitigating losses and leveraging opportunities more effectively.

• Alignment with Objectives:

Regular evaluation helps maintain alignment between the strategy and the organization’s long-term objectives. It ensures that all strategic activities contribute towards the overarching goals, and adjustments can be made to keep efforts on track.

• Feedback Loop:

Strategy evaluation establishes a critical feedback loop for continuous improvement. Feedback from the evaluation phase is essential for refining strategies, enhancing processes, and improving outcomes over time.

• Organizational Learning:

It facilitates organizational learning by documenting successes and failures. This learning contributes to better strategic planning in the future as insights are gathered on what works and what doesn’t.

• Stakeholder Confidence:

Regular and transparent evaluation processes improve credibility and stakeholder confidence. Investors, management, and other stakeholders are more likely to support an organization that actively evaluates and adapts its strategies based on solid data.

Strategy Control

Strategy Control is the systematic process used by organizations to monitor and regulate the implementation of their strategies to ensure that strategic objectives are being met effectively and efficiently. It involves the ongoing assessment of performance against established goals and the external environment to identify any deviations or operational setbacks. Strategy control allows for corrective actions to be taken when performance does not align with expectations. This control process is essential for adapting strategies in response to changes in market conditions, competitive dynamics, or internal organizational shifts. By providing a mechanism for continuous feedback and adjustment, strategy control ensures that an organization remains on track towards achieving its strategic goals, thus enhancing overall strategic management and organizational resilience.

Nature of Strategy Control:

• Integrative:

Strategy control integrates with all levels of strategic planning and implementation. It connects long-term objectives with operational activities and aligns them to ensure that every action contributes toward achieving strategic goals.

• Dynamic:

It is dynamic and adapts to changes in the internal and external environments. As market conditions, competitive landscapes, and organizational capacities evolve, strategy control mechanisms help managers adjust their strategies in real-time to stay relevant and effective.

• Continuous Process:

Strategy control is not episodic; it is a continuous process that happens throughout the lifecycle of a strategy. It involves regular monitoring and revising of strategies to ensure that they are effective under current circumstances.

• Preventive and Corrective:

It serves both preventive and corrective functions. Preventive controls are designed to anticipate and mitigate potential deviations before they occur, while corrective controls are implemented to adjust strategies after deviations have been identified.

• Feedback-Oriented:

Central to strategy control is the use of feedback. This feedback, derived from various performance metrics, allows organizations to evaluate their progress against set benchmarks and make necessary adjustments.

• Decision Supportive:

Strategy control provides essential information that supports strategic decision-making. By assessing performance and identifying trends and anomalies, it guides leaders in making informed decisions about future strategic directions or necessary adjustments to current strategies.

Importance of Strategy Control:

• Ensures Alignment with Objectives:

Strategy control is crucial for ensuring that all actions and initiatives within the organization remain aligned with the strategic objectives. It helps in monitoring whether the activities at different levels of the organization contribute towards the overall goals.

• Adaptability to Environmental Changes:

The business environment is dynamic, with frequent changes in market conditions, competition, regulations, and technology. Strategy control allows organizations to respond to these changes promptly by adjusting strategies in a timely manner to maintain competitiveness and relevance.

• Optimizes Resource Utilization:

Effective strategy control helps in ensuring that resources are not wasted on non-productive or less effective activities. It aids in optimizing the allocation and use of resources (financial, human, and operational) to enhance efficiency and effectiveness.

• Mitigates Risks:

By continuously monitoring progress and performance, strategy control helps identify potential risks and issues before they become significant problems. This proactive approach allows organizations to implement corrective measures early, thereby reducing potential losses and taking advantage of emerging opportunities.

• Facilitates Decision Making:

Strategy control provides management with critical feedback based on performance data. This feedback is integral for making informed decisions regarding the continuation, modification, or termination of strategies based on their effectiveness and efficiency.

• Improves Organizational Learning and Development:

Through continuous monitoring and evaluation, strategy control contributes to organizational learning by highlighting what is working well and what is not. This process encourages a culture of continuous improvement and helps build a knowledge base that can influence future strategies.

Key differences between Strategy evaluation and Strategy Control

Aspect	Strategy Evaluation	Strategy Control
Purpose	Assess effectiveness	Ensure alignment
Focus	Outcome analysis	Process monitoring
Timing	Periodic	Continuous
Orientation	Retrospective	Proactive and corrective
Primary Role	Judgment	Adjustment
Scope	Broader assessment	Specific performance checks
Feedback Type	Strategic insights	Operational feedback
Outcome	Decision-making support	Performance alignment
Decision Influence	Strategic redirection	Tactical adjustments
Typical Tools	SWOT, KPI analysis	Dashboards, real-time alerts
Information Flow	Often top-down	Both top-down and bottom-up
Implementation	Analytical and reflective	Dynamic and directive

Leadership is the process by which an individual influences, motivates, and enables others to contribute toward the effectiveness and success of the organization or group they are leading. Effective leaders possess the ability to set and achieve challenging goals, take swift and decisive action, outperform their competition, and inspire others to perform at their best. They exhibit qualities such as vision, courage, integrity, humility, and focus along with the ability to plan strategically and catalyze cooperation among their team. Leadership is not just about commanding people but about coaching them, nurturing their skills, and building relationships. It extends beyond mere management activities and includes influencing others towards achieving common goals. It plays a critical role in handling change, driving innovation, and ensuring that an organization consistently aligns with its strategic objectives.

Definitions of Leadership:

1. John C. Maxwell:

“Leadership is influence – nothing more, nothing less.”

2. Peter Drucker:

“The only definition of a leader is someone who has followers.”

3. Warren Bennis:

“Leadership is the capacity to translate vision into reality.”

4. US. Army:

“Leadership is the process of influencing people by providing purpose, direction, and motivation to accomplish the mission and improve the organization.”

5. Ken Blanchard:

“The key to successful leadership today is influence, not authority.”

6. Bill Gates:

“As we look ahead into the next century, leaders will be those who empower others.”

Nature of Leadership:

• Influence:

Leadership fundamentally involves influencing others’ beliefs, attitudes, and actions towards achieving defined objectives.

• Visionary:

Effective leaders have a clear vision for the future, which they communicate and use to inspire and guide others.

• Motivational:

Leaders motivate people to engage in their work and strive towards achieving personal and organizational goals.

• Relational:

Leadership requires strong interpersonal skills, as it is built on relationships with followers. Good leaders nurture these relationships to foster trust and loyalty.

• Adaptive:

Leaders must be adaptable, able to adjust their strategies and approaches in response to changing environments or unexpected challenges.

• Ethical and Integrity-based:

True leadership is grounded in ethical practices and integrity, ensuring decisions and actions are aligned with values and principles.

• Service-oriented:

Leadership often involves a service-oriented approach, focusing on serving the needs of the organization and its members before one’s own.

• Transformational:

Leaders often drive change, transforming organizations through innovative approaches and by catalyzing overall growth and improvement.

Types of Leadership:

• Autocratic Leadership:

Autocratic leaders make decisions unilaterally, without much input from team members. This style is effective in situations where quick decision-making is crucial, but it may suppress creativity and reduce team morale.

• Democratic Leadership:

Also known as participative leadership, democratic leaders involve team members in the decision-making process, fostering a sense of collaboration and shared responsibility.

• Transformational Leadership:

Transformational leaders inspire and motivate followers to exceed their expected performance and to engage in the process of transforming the organization. This style focuses on initiating change in organizations, groups, and oneself.

• Transactional Leadership:

This leadership style is based on transactions or exchanges that occur between leaders and followers. Performance is based on adequate reward or punishment systems.

• Laissez-faire Leadership:

Also known as delegative leadership, in this style, leaders provide little or no direction and give team members as much freedom as possible. All authority or power is given to the employees and they must determine goals, make decisions, and resolve problems on their own.

• Servant Leadership:

Servant leaders focus on the needs of others before their own and seek to develop or promote their followers. They prioritize empowering and uplifting those who work for them.

• Charismatic Leadership:

Charismatic leaders inspire enthusiasm in their teams and are energetic in motivating others to move forward. This type of leadership often results in high levels of loyalty among team members.

• Situational Leadership:

Developed by Paul Hersey and Ken Blanchard, situational leadership proposes that no single leadership style is best. Instead, it all depends on the situation at hand and may involve directing, coaching, supporting, or delegating as the situation demands.

• Ethical Leadership:

Ethical leaders are characterized by their integrity and ability to make decisions based on ethical and moral principles rather than personal or organizational gain.

• Cross-Cultural Leadership:

This leadership involves leading employees from different cultures, recognizing and bridging cultural differences to enhance team performance.

Importance of Leadership:

• Vision and Direction:

Leaders provide a clear vision and direction for the future, helping to align and inspire individuals toward common goals. Their vision acts as a roadmap, guiding the efforts and energy of the entire organization.

• Motivation and Engagement:

Effective leaders motivate their followers and increase their engagement, which is essential for achieving high levels of productivity and maintaining high morale. Leaders recognize and reward efforts, which enhances commitment and loyalty.

• Change Management:

Leaders play a critical role in managing change within an organization. They can help the organization navigate through transitions smoothly by anticipating challenges, managing responses, and keeping the organization focused on long-term objectives.

• Building Culture:

Leadership is key in shaping and sustaining an organization’s culture. Leaders set the tone through their behavior, values, and expectations, which collectively influence the organization’s norms and practices.

• Conflict Resolution:

Leaders are often tasked with resolving conflicts within teams and among stakeholders. Their ability to handle disputes amicably can prevent disruptions and maintain harmony within the organization.

• Resource Allocation:

Effective leadership ensures that resources are allocated efficiently and wisely. Leaders make strategic decisions that maximize the use of limited resources to achieve the best outcomes.

• Innovation and Growth:

Leaders foster an environment that encourages innovation and supports growth. By setting a vision for growth and supporting creative solutions, they can drive progress and ensure the organization stays relevant in a changing market.

• Decision Making:

Leaders are responsible for making decisions that affect the organization’s future. Their ability to make informed, strategic decisions can mean the difference between success and failure.

• Developing Future Leaders:

Leaders play a crucial role in mentoring and developing future leaders. Through coaching and development opportunities, they help nurture the next generation of leaders who are essential for organizational continuity.

• Influence and Advocacy:

Leaders often serve as the face of the organization, representing its interests in broader forums. Their ability to influence and advocate effectively can help shape industry standards, public perceptions, and regulatory environments.

Challenges of Leadership:

• Adapting to Change:

Keeping pace with rapid changes in technology, markets, and regulatory environments can be daunting. Leaders must continuously adapt their strategies and operations to remain competitive.

• Managing Diversity:

As workplaces become increasingly diverse, leaders face the challenge of managing teams with varied cultural backgrounds, values, and expectations. Ensuring inclusion and equity while harnessing the strength of diversity is a critical challenge.

• Decision-Making Under Pressure:

Leaders often need to make quick decisions with limited information, especially in crisis situations. Balancing speed with accuracy and managing the associated risks is a significant challenge.

• Maintaining Vision and Energy:

Keeping the organization’s vision alive and maintaining enthusiasm can be difficult, particularly during tough times. Leaders must continually motivate themselves and their teams, despite obstacles.

• Balancing Personal and Professional Life:

Leadership roles often demand long hours and high levels of commitment, which can lead to work-life balance issues. Managing personal and professional life effectively to prevent burnout is a common challenge.

• Dealing with Resistance to Change:

Implementing new strategies or directions often meets with resistance within the organization. Leaders need to manage this resistance tactfully and ensure smooth transitions by gaining buy-in through effective communication and involvement.

• Building and Retaining a Strong Team:

Recruiting, developing, and retaining talent are critical for any leader. Challenges include creating a strong team dynamic and dealing with issues such as turnover and conflict within the team.

• Ethical Leadership and Integrity:

Maintaining high ethical standards and integrity in decision-making, especially in the face of contrary pressures (e.g., to meet short-term financial goals) is a perpetual challenge.

• Effective Communication:

Leaders must be adept communicators, capable of conveying complex ideas clearly and persuasively to a variety of stakeholders. Miscommunication can lead to inefficiency and conflict.

• Leadership Development:

Continuously improving one’s leadership skills and developing other potential leaders within the organization can be challenging but is essential for sustainable success.

McKinsey’s 7-S Framework is a Management model developed in the 1980s by McKinsey consultants, including Tom Peters and Robert Waterman, to diagnose and organize a company effectively. It outlines seven interdependent factors that are categorized as either “hard” or “soft” elements: Strategy, Structure, and Systems are “hard” elements that are tangible and easier to identify. They refer to the actual processes and organizational arrangements necessary for operations. Shared Values, Skills, Style, and Staff are “soft” elements, often less tangible and influenced by culture. These components must be aligned for a company to achieve success. The framework is particularly useful for understanding organizational change and ensuring that all aspects of the organization work harmoniously towards common goals.

Elements of McKinsey’s 7’s Framework:

McKinsey’s 7-S Framework is a comprehensive model that breaks down the essential elements that organizations need to align for effective strategy implementation and organizational performance. Each element interacts with the others, making it crucial that they are all aligned when any change is made.

1. Strategy:

The plan devised to maintain and build competitive advantage over the competition. It defines how the organization intends to achieve its goals.

2. Structure:

The way the organization is structured and who reports to whom. This includes the organizational hierarchy, departmental setup, and reporting lines.

3. Systems:

The daily activities and procedures that staff members engage in to get the job done. This includes all formal and informal procedures that govern everyday operations.

4. Shared Values:

Originally called “Superordinate goals,” these are the core values of the company that are evident in the corporate culture and the general work ethic. This is the central element of the model that ties all other elements together.

5. Skills:

Actual skills and competencies of the employees within the organization. It encompasses the capabilities and abilities that the workforce brings to their work engagements.

6. Style:

Style of leadership adopted by the organization. This can refer to how key managers behave in achieving the organization’s goals, how decisions are made, and how leaders interact with their teams.

7. Staff:

The employees and their general capabilities. It involves how the organization recruits, develops, and retains its staff.

Scope of McKinsey’s 7’s Framework:

• Organizational Alignment and Change Management:

Helps in aligning departments and processes during a change. The framework ensures that all aspects of the organization are harmonized to support the change, making it ideal for managing mergers, acquisitions, or any major organizational restructuring.

• Strategy Development and Implementation:

Facilitates a holistic view of the organization when planning and implementing strategies. It ensures that the strategy is supported across all seven elements for effective execution.

• Performance Improvement:

Assists in identifying areas of improvement by examining the interactions between the elements. Organizations can use the framework to pinpoint why certain areas are underperforming and what can be optimized.

• Organizational Design and Structure:

Guides the design or restructuring of an organization’s architecture by considering how various elements like structure, systems, and staff need to interrelate.

• Integration of New Processes or Technology:

Supports the integration of new technology or processes by checking alignment across the elements to ensure that the adoption is seamless and enhances operational effectiveness.

• Cultural Assessment and Development:

Helps in understanding and evolving an organization’s culture. By analyzing shared values, style, and staff, leaders can better cultivate a culture that supports the organization’s goals.

• Leadership Development and Team Building:

Useful in developing leadership styles and team dynamics that are congruent with achieving organizational objectives. It examines how leadership (style) and team capabilities (staff) align with the overall strategy.

• Corporate Diagnostics:

Acts as a diagnostic tool to assess the health of the organization across multiple dimensions, identifying misalignments that could hinder performance and suggesting areas for improvement.

Steps of McKinsey’s 7’s Framework:

• Identify the Objective:

Start by clarifying what you want to achieve with the framework. This could be to facilitate a merger, support a new strategy, or improve organizational efficiency.

• Assess Current State:

Collect data and analyze each of the seven elements (Strategy, Structure, Systems, Shared Values, Skills, Style, Staff) to understand their current state. This assessment should identify how each element is currently aligned with the others.

• Compare Against Desired State:

Define the ideal state for each of the seven elements aligned with the organizational goals and objectives. This involves outlining how you ideally want each element to operate and interact with the others.

• Identify Gaps and Inconsistencies:

Compare the current state with the desired state to identify discrepancies and areas that require change. This gap analysis will highlight where changes are needed and what those changes should involve.

• Develop Action Plans:

Based on the gaps identified, create detailed action plans for each of the seven elements. These plans should specify what needs to be changed, how the change should be implemented, who will be responsible, and by when these changes should be completed.

• Implement Changes:

Execute the action plans, ensuring that changes in one element are complemented by and supportive of changes in the others. This step may involve restructuring, retraining staff, changing management practices, or updating systems and processes.

• Monitor and Adjust:

Continuously monitor the effects of these changes and evaluate how they are impacting the organization. Use feedback to adjust elements and further refine strategies and operations. This step ensures that the organization remains aligned with its strategic objectives and can adapt to new challenges or opportunities.

• Review and Reinforce:

Regularly review the entire framework and reinforce the changes made. This may involve ongoing training, repeated assessments, and recalibrations of strategies and structures to ensure long-term alignment and success.

Functional Strategies are at the heart of competitive advantage of any firm. These strategies are a great help to the implementation of integrated business strategy of the firm. They are as basis for attaining the strategic intent of the firm. Functional strategies are formed in correlation with the changing competitive environment.

Every business firm is built around certain basic functions such as production, marketing, finance, human resources, information system, operational research and development, etc. Many other functions are supporting activities which are significant for the business. Melvin J. Stanford says that for a firm to fulfill its purposes and progress towards it objectives, strategic alternatives within each of these functional areas must be developed, selected and implemented by management.

Functional strategies are the collective activities of day-to-day decisions made by respective functional department heads who are responsible in creating and adding value to the product or service. They are involved in designing product, raising finance, manufacturing the required product, delivering product to customers, and support product or service of each business within the corporate portfolio.

These activities are carried out by efficient utilization of available resources and capabilities; and integrating the activities within the functional area as, for example, coordinating among research in marketing, purchasing, inventory control, promotion, advertising and shipping in production.

Functional strategies are derived from business level strategy. Remember the three generic strategies-low cost leadership; differentiation and focus strategy. For example, take a firm pursuing low cost leadership strategy. When the strategy is implemented, all the functional areas have to be focused on low cost structure.

According to Thompson and Strickland, strategy making is not just a task for senior executives. In large enterprises, decisions about what business approaches to take and what new moves to initiate involve senior executives in the corporate office, heads of business units and product divisions, the heads of major functional areas within a business or division (manufacturing, marketing and sales, finance, human resources, and the like), plant managers, product managers, district and regional sales managers, and lower-level supervisors. In diversified enterprises, strategies are initiated at four distinct organization levels-

These are as follows:

1. Corporate Strategy

It is a strategy for the company and all of its businesses as a whole.

2. Business Strategy

It is a strategy for each separate business the company has diversified into.

3. Functional Strategy

Then there is a strategy for each specific functional unit within a business. Each business usually has a production strategy, a marketing strategy, a finance strategy, and so on.

4. Operating Strategy

And finally, this is a still narrower strategy for basic operating units — plants, sales districts and regions, and departments within functional areas.

Importance of Functional Strategy

Today, every firm faces challenges in optimizing resources such as finance, production facilities, technology, and marketing opportunities in functional areas. Functional managers need strategies to make the best of opportunities and to identify avenues for growth. They need strategic focus on their decisions in their fields.

The importance of functional strategies is pointed out under the following headings:

1. Help in Operation of Business Functions

Functional strategies provide operational help in the conduct of various functional activities. For example, a finance manager has to necessarily take decisions on funding opportunities, deploying projects, reducing capital costs, or acquiring another firm. In addition, he has to decide on strategic options to manage working capital, which may be used to decide the various aspects of receivables management, factoring, payables management, inventory strategy, and treasury management.

Similarly, to manage human resource function, a number of strategic initiatives can be deployed by a firm. Managers need strategic focus on various functions. The production and operations management function also involves a number of strategic issues.

2. Managerial Road Map

Thompson and Strickland write, “A company needs a functional strategy for every major business activity and organizational unit. Functional strategy, while narrower in scope than business strategy, adds relevant detail to the overall business game plan. It aims at establishing or strengthening specific competencies calculated to enhance the company’s market position. Like business strategy, functional strategy must support the company’s overall business strategy and competitive approach. A related role is to create a managerial road map for achieving the functional area’s objectives and mission.”

3. Help in Implementation of Grand Strategy

Pearce and Robinson state that “functional strategies must be developed in the key areas of marketing, finance, production, R&D, and personnel. 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.”

4. Decisional Guides to Action

Functional strategies guide and translate thought into action designed to accomplish specific annual objectives. Thus, functional strategies may be regarded as decisional guides to action that make the strategies work. They clarify many conflicting issues and problems, giving specific short-term guidance to operating managers and employees.

5. Improves Effectiveness and Efficiency and Creates Super Profitability

It should be noted that functional strategies aim at improving the effectiveness of a company’s operations and thus its ability to attain superior efficiency, quality, innovation, and customer responsiveness. It is important to keep in mind the relationships of functional strategies, distinctive competencies, differentiation, low cost, value creation, and profitability.

We can note that functional-level strategies can build resources and capabilities of a firm that enhance superior efficiency, quality, innovation. These in turn, create low cost, value and superior profitability.

6. Builds Competitive Advantage

Functional strategies can improve the efficiency, reliability (quality), and consumer responsiveness of its service. Thus, they can be used to build a sustainable competitive advantage. Functional strategies can increase efficiency of activities and thereby lower their cost structure. In fact, functional strategy is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage.

Types of Functional Strategy

1. Marketing Strategy

The definition of marketing strategy can be given, as: “A marketing strategy is a practice that allows an organization to focus on the available resources and turn the opportunities into productivity to increase sales and achieve justifiable competitive lead.” Marketing strategies provide detailed information to the necessary plans to be taken, to carry out the marketing program.

By using an effective marketing plan an organization may go for capturing a large share of existing market, develop a new market for its current products, or develop new products for its existing market or even go for total diversification strategy that mean developing a new product for an entirely new market.

The marketing strategy based on building an organization that revolves around customer satisfaction helps the organization in achieving fast growth rate. It describes how the organization is going to engage customers, identify the prospects, and the competition in the market.

2. Financial Strategy

The financial strategy deals with the availability or sources, usages, and management of funds. It focuses on the alignment of financial management with the corporate and business objectives of an organization to gain strategic advantage. It emphasizes on the aspects such as – how much fund is required. When the fund is required? How the funds should be raised? In addition, by what are the means to use and manage the funds?

3. Operations Strategy

According to Slack and Lewis, operations strategy can be defined as: “the total pattern of decisions which shape the long term capabilities of any type of operations and their contribution to the overall strategy, through the reconciliation of market requirements with operations resources.” One must not be confused between two terms that are “operations” and “operational”.

However, the words are similar but have different meaning. ‘Operations’ refers to those parts of business which deals with producing goods and services. ‘Operational’ means short term and limited plans. For example, a marketing strategy defines the procedures and approaches to be used by an organization to position its business in the market.

4. Human Resource Management Strategy

Human resource management (HRM) strategy assists in implementing the specific function of human resource management to any organization. Human resource management strategy provides a practical framework of managing human resource in line with the organization’s corporate objectives.

It involves a four-way approach:

• Developing a strategic framework
• Generating HR mission statement
• Applying SWOT analysis
• Making HR planning decisions