Once higher level corporate and business strategies have been formulated, management has to formulate and implement strategy for each of the functional areas of business. Strategy of one functional area cannot be looked at in isolation. Different functional areas of the business are interwoven together and how a functional strategy is synergized with other functional strategies determines its effectiveness.
Functional strategies are designed to help in the implementation of corporate and business level strategies. For effective implementation, the strategists have to provide direction to the functional managers regarding the plans and policies to be adopted. In fact, the effectiveness of strategic management depends critically on the manner in which strategies are implemented. Functional strategies provide details to business strategy and govern as to how key activities of the business are to be managed.
Reasons for Need of Functional Strategies
The reasons why functional strategies are needed can be enumerated as follows:
1.¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† F- Functional strategies lay down clearly what is to be done at the functional level.
2. ¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† U-Upfront to help¬† in¬† bringing¬† harmony¬† and¬† coordination¬† as¬† they¬† are¬† formulated¬† to achieve major strategies.
3. ¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† C-Create sense of direction to the functional staff.
4. ¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† T-Target basis and control activities in the different functional areas of business.
5. ¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† I-Implementation of corporate strategies and the business strategies formulation at the business level.
6.¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† O-Overcoming Similar situations occurring in different functional areas are handled in a consistent manner by the functional managers.
7.¬† ¬†¬†¬†¬†¬†¬†¬†¬†¬† N-Needed to segregate strategies into viable functional plans and policies that are compatible with each other. In this way, strategies can be implemented by the functional managers. Environmental factors relevant to each functional area have an impact on the choice of functional strategies. Corporate strategies influence the formulation of functional strategies.
Important Role of Functional Level Strategy
Functional strategies play two important roles.
1.¬†¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† Provide support to overall business strategy.
2. ¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† Spell out as to how functional managers will work to ensure better performance in their respective functional areas.
Strategies in functional areas including marketing, R & D, production, financial, human resource management, and logistics are based on the functional capabilities of an organization.
-In terms of the levels of strategy formulation, functional strategies operate below. Functional strategies are made within the framework of corporate level strategies and guidelines therein that are set at higher levels of the organization.
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