Page 243 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 13: Functional and Operational Implementation

Introduction Notes

Once corporate level and business level strategies are developed, management must turn its
attention to formulating strategies for each functional area of the business unit. For effective
implementation of strategies, functional strategies provide direction to functional managers
regarding the plans and policies to be adopted in each functional area.
13.1 Functional Strategies

Functional Strategy is the approach taken by a functional area to achieve corporate and business
unit objectives and strategies by maximising resource productivity. It is concerned with
developing and nurturing a distinctive competence to provide a company or business unit with
a competitive advantage. Just as a multi-divisional corporation has several business units, each
with its own business strategy, each business unit has its own set of departments, each with its
own functional strategy.

13.1.1 Nature of Functional Strategies

Functional strategies are essential to implement business strategy. In fact, the effectiveness of a
corporate or business strategy execution depends critically on the manner in which strategies
are implemented at the functional level. The corporate strategy provides the long-term direction
and scope of a firm. The business strategy outlines the competitive posture of its operations in
an industry. The functional strategy clarifies the business strategy, giving specific short-term
guidance to operating managers in the areas of operations, marketing, finance, HR, R&D etc.,
and increases the likelihood of their success.

Orientation of the functional strategy, therefore, depends on the business strategy.

Example: If a business unit follows a differentiation strategy through high quality
products, its production strategy emphasises expensive quality assurance processes over cheaper,
high-volume production; a human resource functional strategy that emphasises hiring and
training of a highly skilled, but costly, workforce; and a marketing functional strategy that
emphasises extensive advertising to increase demand rather than using marketing incentives to
retailers. Similarly, if the business unit follows a low-cost competitive strategy, a different set of
functional strategies emphasising cost-cutting measures would be needed to support the business
strategy.

13.1.2 Need for Functional Strategies

Functional managers need guidance from the corporate and business strategies in order to make
decisions. In simple terms, functional strategies tell the functional manager what to do in his
area to achieve business objectives.
Glueck and Jauch have suggested five reasons to show why functional strategies are needed.
Functional strategies are developed to ensure that:
1. The strategic decisions are implemented by all the parts of an organisation.
2. There is a basis available for controlling activities in different functional areas of a business.

3. The time spent by functional managers on decision-making may be reduced.
4. Similar situations occurring in different functional areas are handled by the functional
managers in a consistent manner.
5. Coordination across different functions takes place where necessary.

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