A functional strategy is the approach a business functional takes to achieve corporate and business unit objectives by maximizing resource productivity. It deals with a relatively restricted plan that provides the objectives for a specific business function.
A Functional Strategy provides direction to ensure that each of the functions within an organization performs in alignment with the company’s goals, strategies, values, and policies so as to maximize shareholder value while managing internal competencies.
Types of functional Strategies
Basically there are two distinct types of functional strategies that should be distinguished from each other:
- Market-facing (or product-related)
The marketing department is often given credit in case studies for being “the most important” in companies, and it is true that successful marketing activities can contribute significantly to the success of a firm. The reason for this lies in the fact that marketing contributes directly to meeting customer demands and delivering value.
As such, market-facing functional strategies must be designed in such a way that they drive revenues by either selling products or services directly to customers (e.g., an Internet bank), or indirectly through distribution channels (e.g., via financial advisors).
The remaining business functions deliver their value propositions mostly indirectly through collaboration with other departments and stakeholders; some examples include logistics, human resources, information systems and finance.
Only few companies make an explicit distinction between direct and indirect sources of value creation when targeting markets. Therefore, customer-facing business functions are often grouped together in order to capture the fact that they generate value through indirect activities. These include:
- Sales and marketing services
- Professional or knowledge services
- Support services
Due to these constraints, companies face many tradeoffs in their strategy making process. Although every functional strategy will require different resource allocations, they can be divided into three categories, which are not mutually exclusive.
A tactical approach is based on pursuing specific targets in order 2 reach overarching strategic objectives, such as increasing profitability or generating growth.
An adaptive approach involves making incremental changes to functional activities based on market and/or technological developments.
A transformational approach aims at rethinking an entire business unit, its structure and processes by making significant changes to how it operates. This is often considered as the most difficult type of strategy to implement, as it requires a major shift in thinking (i.e., culture) within all levels of the organization.
How functional strategy help?
It helps define what should be done, when it should be done, how well it need to be executed, who needs to do it and how much resources are required.
Functional Strategies are used at all levels of organizations including the cosmetic department (e.g., skin care) up through vice president (e.g., vice president of operations) and the chief executive officer (CEO).
Effective functional strategies
- Provide direction to ensure that each of the functions within an organization performs in alignment with the company’s goals, strategies, values, and policies so as to maximize shareholder value while managing internal competencies.
- Help determine what should be done, when it should be done, how well it needs to be executed, who needs to do it and how much resources are required in order for an organization to reach its objectives over time.
- How well a Functional Strategy is drafted determines whether or not funds are spent on initiatives that will bring value back to the organization.
- A “well-drafted” strategy will provide a high return on investment (ROI) and reduce the potential for resource allocation conflicts.
Functional Strategy is a business strategy where resources are allocated to achieve the different functions within the business.
Objectives of functional strategy
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 maximize their outcomes. From marketing to human resources, each function may have its own objectives that all contribute towards overall organizational goals.
A functional strategy provides direction for business managers responsible for leading teams in achieving common goals. For example, managing customer relations may be an objective of corporate marketing strategies using various tools such as telemarketing representatives or advertising campaigns if these are used to promote product development; while another department within marketing may implement direct mail strategies if their focus is more on brand promotion and increased sales.
Which thing promotes functional strategy?
Functional strategy often promotes the value of developing and maintaining good relationships among co-workers to achieve common goals. Functional managers or directors may collaborate with other functional leaders to meet organizational objectives. Collaboration between various departments within a business such as sales, human resources, and marketing can enable organizations to develop better products and improve how these are marketed for increased sales and growth in market share.
The allocation of resources within functions do not need to be distributed equally across projects or major revenue areas but should be sufficient according to the organization’s needs relative to where the greatest returns will be achieved (the return on investment). For example, if a company is expecting higher returns from their advertising strategies than from promoting brand awareness through direct mail initiatives then the bulk of their resources should be dedicated to advertising strategies.
What is demand facing business?
Demand-facing business functions are those whose main purpose is to support customer requirements, such as marketing and sales. In contrast, the function of supply chain management is an example of a strategy-supporting business function because it supports corporate or divisional strategies by coordinating activities across functional boundaries in order to provide optimal resource allocation.
Operational excellence is a management approach that aims to implement strategies by using the best practices and technologies in a cost-efficient way. In other words, operational excellence can be thought of as an optimization process through which managers attempt to maximize effectiveness while minimizing costs. The factors involved in this optimization process include, processes, people, technology, knowledge, skills and market conditions.
What is the value of a proposition?
Value proposition refers to the key benefits provided by a business function or service within a company’s value chain. It can be regarded as the function’s contribution to corporate strategy and its reason for existence. A business function has a value proposition when it underpins shareholder value creation by fulfilling market and customer needs better than competing firms, or does so at lower cost to achieve the same results.
In order to apply the concept of value proposition to our topic, we must first establish what types of functional strategies exist.
Frequently Asked Questions
- When we need functional strategy?
The basic function of functional strategy is to achieve the goals in business. Whether the business is small or large the basic purpose is to provide the welfare of employee.
- What are the uses of functional strategy?
Functional strategy is used to set or accomplish the goals of employee. It is very beneficial for anyone.