How do you achieve your yearly organizational goals? Do you just set an annual figure and start chasing it blindly? Or, do you set semi-annually, monthly, weekly, or even daily milestones? Which one is the right way to achieve your long-term goals? Obviously, setting short-term goals is a better approach to achieve bigger targets.
Moreover, you also need a strategy to manage these routine or day-to-day functional level tasks. In business terms, you need a functional-level strategy. Want to know more about it, its types, importance, and real-world examples? Well, if you do, keep reading!
Table of Contents
What Is A Functional Level Strategy?
A functional level strategy is a plan of action to achieve short-term, routine, or day-to-day business goals to support the corporate and business level strategies. Basically, a functional level strategy helps a business to manage operational activities on a daily or routine basis.
It is important to note that a functional level strategy involves multiple operational or functional areas such as marketing, HR, production, R&D, sales, etc., Moreover, every functional unit generally develops its own functional strategies.
A functional level strategy must have the following ingredients
- It should reflect the corporate and business level objectives/goals.
- It must ensure an optimum allocation of resources in all functional areas/units.
- Last but not least, a functional level strategy needs to maximize the coordination between all functional areas to optimize their outcomes.
Why is Functional Level Strategy Important?
Functional level strategy is important for any organization because of the following reasons;
- It works as steppingstones to achieve corporate and business-level objectives.
- A functional level strategy helps in developing a layout to perform day-to-day/routine business operations.
- It acts as a binding force in any business; integrates different functional/operational departments such as HR, marketing, sales, R&D, production, customer relationship, etc.
- Functional level strategies are more pragmatic/practical in nature and help in dealing with every practical scenario at micro levels (in an organization).
Features of Functional Strategies
Here are some important features of a functional level strategy
- In comparison to business or corporate strategies, functional level strategies are short-termed.
- It sets a layout as to what a business should do to make the grand strategy work.
- The basic objective of every functional level strategy is to ultimately pursue the corporate strategy.
- It pertains to the department, function, and division of an organization.
- Functional level strategies also deal with sub-functional areas (if any).
- Every functional unit or department develops its functional strategy on the basis of guidelines from the higher level.
- Functional level strategies fall last in the hierarchy. They support business-level strategy, which finally supports the corporate-level strategy.
- Functional level strategies mainly focus on the external environment.
- A functional level strategy may vary for the same organization in different locations. i.e different business units/franchises in different areas/cities/states.
- Functional strategies of every functional unit must have strong integration between each other to fulfill overall corporate objectives.
Factors of Functional Level Strategy
Alignment
As we have already mentioned, a functional-level strategy must be in alignment with the business and corporate-level strategy. If the corporate objective is to increase profits, then business and functional level strategies much resonate with it.
Integration
It is mandatory to implement the functional level strategies horizontally. This helps in integrating different functional units to yield better efficiency.
Existing Resources
Every department, division, or functional unit must have enough resources such as capital, workforce, etc., for the execution of functional level strategy.
Progress
Measuring the effectiveness of a functional strategy can be very challenging due to excessive information. Therefore, it is vital that how and what type of data should be tracked to evaluate whether there is any progress or not.
Types Of Functional Level Strategies With Examples
There are major types of functional level strategies, including;
Marketing Strategies
Marketing has evolved as one of the most important functional units in any organization. Although marketing is a vast field itself, it basically focuses on identifying the needs of a target audience and then offering products or services to cater to those needs. A marketing strategy consists of different parts, but a marketing mix (product, price, place, promotion) is arguably the most important one.
Currently, there are a number of marketing techniques, including relationship marketing, social marketing, place marketing, person marketing, direct marketing, etc.
Now, if an organization’s corporate levels strategy focuses on Quality, Delivery, and Efficiency, here is how different organizational departments respond.
Example
| Quality | Offering helpful deliverables. |
| Delivery | Timely reacting to the changing seasonal customer needs. |
| Efficiency | Target the right audience for the coming/next marketing campaign. |
Financial Strategies
Financial strategy deals with every section/area that comes under financial management. The strategy mainly focuses on planning, acquiring, using, and controlling a corporation’s financial resources. If we dig a little deeper, a financial strategy deals with issuing/raising capital, assets acquisition, investments, budgeting, working capital management, application of funds, dividend payment, etc.
Example
| Quality | Inputting information and giving it to other functional units with minimum or no errors. |
| Delivery | Ensuring real-time data access. |
| Efficiency | Automation of accounting/financing process. |
Production Strategies
A production strategy manages everything related to the production process. This process includes manufacturing system, supply chain management, logistics, and operational planning & control. The core objective of a production strategy is
- Maximizing the quality.
- Minimizing the total cost of production.
- Increasing quantity.
Example
| Quality | Production process’s quality improvement. |
| Delivery | Minimizing time wastage. |
| Efficiency | Controlling/minimizing production process delays. |
Human Resource Strategies
Human resource strategy in an organization deals with every single aspect related to the organization’s workforce. The core function of any HR department is to work for employees’ development and help them with suitable working conditions and growth opportunities so they can contribute to organizational goals. Apart from that, HR covers recruitment, training, motivation, development, and retention of employees.
Example
| Quality | Regular training programs for skill improvement |
| Delivery | Ensuring timely recruitment and hiring process to meet organizational workforce needs. |
| Efficiency | Minimizing the costs of the recruitment/hiring process. |
Research & Development Strategies
An R&D strategy mainly focuses on two things;
- Innovation; developing new products
- Making improvements in current products
A business needs to keep introducing new products and improve the current ones to implement different business strategies such as market penetration, concentric diversification, and product development. Generally, there are three R&D approaches to implement these strategies;
- Be the innovator; introduce an unprecedented product
- Produce low-cost products
- Be a smart, innovative follower; add more features and launch a similar but better product than competitors.
Example
| Quality | Developing innovative products for a better customer experience. |
| Delivery | Implement parallel design techniques to minimize time to market. |
| Efficiency | Make R&D processes simpler. |
Examples of Functional Strategies
Yahoo- Marissa Mayer’s Failure To Understand Company’s Functional levels
History
Yahoo (an industry giant in the past) hired a prominent and successful Google executive, Marissa Mayer, hoping that she would change the fortunes for “struggling” Yahoo. Initially, the investors strongly believed that she would be able to get the company out of “dark pits.” However, what happened was completely against everyone’s expectations.
Out of many mistakes, Marissa’s biggest blunder was totally misunderstanding the corporation at functional/operational levels. She did make proposals for different changes but underestimated the resistance to these changes from Yahoo’s lower-level employees.
The Outcome
After all her efforts going in vain, she finally proposed the best solution; selling Yahoo. Verizon acquired Yahoo (which was once a $135-billion company) for only $5 billion.
Conclusion
Yahoo ultimately saw its downfall because the company failed to integrate the functional level strategies with corporate strategies proposed by Mayer.
