Strategic Management: Formulation and Implementation

Functional Strategies

Once corporate level and business strategies are developed, management must turn its attention to formulating and implementing functional strategies.

Functional strategy is the a strategy for each specific functional unit within a business. Functional strategies primarily are concerned with the activities of the functional areas of a business which support the desired competitive business level strategy and complement each other. They describe the means or methods to be used by functional areas of the organization in carrying out the corporate level or business unit strategy.

This chapter deals with the strategic decisions made in this respective functions.

Interrelationships Among Functional Departments

To better understand the role of functional strategies, they must be differentiated from business strategies.

Three basic characteristics differentiate functional and business strategies:

Time horizon covered
The time horizon of a functional strategy is usually comparatively short. Functional strategies identify and coordinate short- term actions, usually undertaken in a year or less.
A functional strategy is more specific than business strategy. The business strategy provides general direction. Functional strategies give specific guidance to managers responsible for accomplishing annual objectives.
Participation in the development
Different people participate in strategy development at the functional and business levels. Development of functional strategy is typically delegated by the business-level manager to principal subordinates charged with running the operating areas of the business. Business strategy is the responsibility of the general manager of a business unit.

Firms vary in the organization and responsibilities of their functional areas, but the major functional areas are purchasing and materials management, production/operations, marketing, finance, human resources, research and development, and information systems management.

Moreover, overall strategic success requires that all functional activities be tightly integrated with a business unit's generic strategy. This is shown in Table 10-1.

The entries in the left column represent the generic strategy that a given business unit is following. The horizontal entries to the right indicate the particular strategy that should be used by each of the business unit's functional areas.