Strategic Management: Formulation and Implementation

Functional Strategies - Summary

This chapter deals with functional strategies as the pattern of decisions actually made in the respective function.

Functional strategies describe the means or methods to be used by each functional area of the organization in carrying out the corporate-level or business unit strategy. The functional areas of organizations normally include: product/ operations, marketing, finance, human resources, research and development, and information systems management.

Production/operations management (POM) is the basic function in the business firm. This function of a business consists of all those activities that transform inputs into goods and services. POM must guide decisions regarding: the technical core, quality, capacity, facilities, technology and production planning and control. The need for consistency among these six decisions is highlighted.

Marketing can be described as the process of defining, anticipating, creating, and fulfilling customers' needs and wants for products and services. The major decisions in marketing strategy concern the product/service, price, place/distribution, and promotion/advertising. The key is to strive for consistency among these elements.

Financial management is primarily concerned with two functions: (1) acquiring funds to meet the organization's current and future needs; (2) recording, monitoring, and controlling the financial results of an organization's operations. Therefore, the major decisions in financial strategy concern objectives, profitability, liquidity and cash management, leverage and capital management, asset management, investment ratios, and financial planning and control.

Human resource strategies concern human resource planning, recruitment and selection, training and development, compensation and rewards, employment security, and labor relations. Functional strategies in human resource management should guide the effective utilization of human resources to achieve both the objectives of the firm and the satisfaction and development of employees.

Research and development (R&D) has two basic components: product/service R&D and process R&D. Research and development strategy concerns the relationship of R&D to business strategy. Business units competing with the niche-low-cost and low-cost strategies emphasize process R&D to reduce their operations costs; those the use niche-differentiation or differentiation place greater importance on product/service R&D; and adopters for niche-low-cost-differentiation, low-cost-differentiation, and multiple strategies simultaneously both types of R&D. With the increasing of technological change R&D has assumed a key functional role in many organizations.

An information system which provides accurate, timely, and relevant information for use in the strategic decision process is an important organizational resource

Overall strategic success requires that all functional activities be tightly integrated so that their operation mesh smoothly with one another. In this term, functional strategies are importance tool for effective implementation of a business strategy.