Introduction
Are you struggling to effectively align your organization’s functional strategy with the overall business strategy to ensure success?
Are you struggling with determining the common challenges faced by organizations in developing and implementing effective functional strategy?
Have you ever wondered how functional strategy can be used to gain a competitive advantage in the marketplace and differentiate yourself from competitors?
In this blog, you will learn about functional strategy and its meaning. It plays a vital role in shaping and executing functional strategy in today’s digital age. A functional strategy is adaptable to changing market dynamics and customer demands. You will also see why functional strategy is important for an organization and what role it plays in gaining a competitive advantage with some examples. There are many types of functional strategy in an organization.
Meaning of Functional Strategy
A functional strategy is a set of plans and actions formulated to achieve specific objectives within a specific functional department of an organization. It determines how different departments of an organization, such as marketing, operations, finance, human resources, or research and development, contribute to the overall objectives and goals of the organization. There are various types of functional strategy, and you will learn all of them later in this blog.
Why is Functional Strategy Important?
The aim of the functional strategy is to improve the effectiveness of an organization’s operations within different departments. Working of all the functional departments together in the same direction helps the organization achieve its goals and objectives. So basically, functional strategy is responsible for aligning the strategies of different departments as much as possible with the goals and objectives of the organization. Some of the main responsibilities of functional strategy are:
- Supporting goals and objectives of the organization.
- Allocation of resources to the employees as per their interests and skills.
- Helps in the integration of activities.
- Creates an action plan for achieving departmental goals.
Also Read: Understanding KRA and KPI: Definition, Importance, and Tips| DT Evolve
Types of Functional Strategy with Examples
The main types of functional strategy are:
Financial Strategy
The financial strategy of an organization involves the gathering and utilization of funds for the organization. It mainly focuses on the management of financial resources, the effective allocation of funds, and long-term financial sustainability.
For example, the financial strategy of Apple includes maintaining a strong cash position, investing in research and development, and making strategic acquisitions to ensure growth and innovation.
Marketing Strategy
The marketing strategy focuses on promoting the products or services of the organization, understanding their customer needs, and creating a competitive advantage in the market. These strategies are developed for taking decisions regarding the 4 Ps, that is, product distribution, place, pricing, and promotion.
For example, the marketing strategy of Coca-Cola is to create emotional connections with its customers through its iconic branding and storytelling.
HR Strategy
The human resource strategy involves attracting and retaining talented employees while also aligning the workforce with the goals and objectives of the organization.
For example, Google’s strategy to attract talented employees includes offering innovative employee perks, fostering a culture of creativity, and providing opportunities for career growth.
Production Strategy
The production strategy involves the decisions regarding the procurement of raw materials, supplies, etc. This strategy mainly focuses on the optimization of the production process. The main areas of concern for production strategy are capacity planning, production methods, technology adoption, quality control, and inventory management.
For example, the Toyota Product System (TPS) is one of the best examples of production strategy. It focuses on the principles of lean manufacturing to reduce waste, improve efficiency, and enhance product quality.
Research and Development Strategy
The research and development strategy includes investment in research and innovation to formulate new products, technologies, etc. When an organization is planning to launch a new product, it must be well-researched.
For example, Amazon is focusing its research and development strategy on technologies like artificial intelligence, robotics, and cloud computing.
Operations Strategy
The operation strategy is responsible for the method and place of production of a product or service. It also involves supply chain and logistics activities. The goal of this strategy is to achieve optimum operational efficiency while delivering value to customers.
For example, Starbucks’ operational strategy includes store design and layout. The company focuses on factors such as store location, seating arrangements, and workflow optimization to create a welcoming atmosphere for its customers.
Purchasing Strategy
The purchasing strategy is concerned with acquiring goods, services, and raw materials from suppliers in a cost-effective manner. The objective of this strategy is to obtain high-quality goods and services at the lowest possible price.
For example, the production strategy of Walmart in purchasing, negotiating bulk discounts, and implementing efficient supply chain practices. It offers competitive prices to its customers.
Also Read: 3 A Model for Workplace Success | DT Evolve
Functional Strategy in Strategic Management
Strategic management refers to the management of an organization’s resources in order to achieve organizational goals and objectives. It usually involves an analysis of the internal organization and competitive environment and setting objectives.
A functional strategy has defined tasks, timelines, budgets, resources, and goals for the purpose of strategic management. It helps organizations survive with a sustained competitive advantage. In today’s world, organizations need to fall back on multiple layers of functional areas in order to maintain a competitive advantage.
Also Read: The Nature and Scope of Management – 6 Amazing Styles of Management
Conclusion
In this blog, you learned about functional strategy and its meaning. It plays a vital role in shaping and executing functional strategy in today’s digital age. A functional strategy is adaptable to changing market dynamics and customer demands. You also learned why functional strategy is important for an organization and what role it plays in gaining a competitive advantage with some examples. There are various types of functional strategies that have been discussed in this blog.
Frequently Asked Questions (FAQs)
A functional strategy is a set of plans and actions formulated to achieve specific objectives within a specific functional department of an organization. It determines how different departments of an organization, such as marketing, operations, finance, human resources, or research and development, contribute to the overall objectives and goals of the organization.
The seven types of functional strategies are financial strategy, marketing strategy, HR strategy, production strategy, research and development strategy, operations strategy, and purchasing strategy.
The aim of the functional strategy is to improve the effectiveness of an organization’s operations within different departments. Working of all the functional departments together in the same direction helps the organization achieve its goals and objectives.
Functional strategy contributes to the success of an organization by aligning the functional area with the overall strategic objectives.
The financial strategy of an organization involves the gathering and utilization of funds for the organization. It mainly focuses on the management of financial resources, the effective allocation of funds, and long-term financial sustainability.
The marketing strategy focuses on promoting the products or services of the organization, understanding their customer needs, and creating a competitive advantage in the market. These strategies are developed for taking decisions regarding the 4 Ps, that is, product distribution, place, pricing, and promotion.
The human resource strategy involves attracting and retaining talented employees while also aligning the workforce with the goals and objectives of the organization.
The production strategy involves the decisions regarding the procurement of raw materials, supplies, etc. This strategy mainly focuses on the optimization of the production process. The main areas of concern for production strategy are capacity planning, production methods, technology adoption, quality control, and inventory management.
The research and development strategy includes investment in research and innovation to formulate new products, technologies, etc. When an organization is planning to launch a new product, it must be well-researched.
The operation strategy is responsible for the method and place of production of a product or service. It also involves supply chain and logistics activities. The goal of this strategy is to achieve optimum operational efficiency while delivering value to customers.
The purchasing strategy is concerned with acquiring goods, services, and raw materials from suppliers in a cost-effective manner. The objective of this strategy is to obtain high-quality goods and services at the lowest possible price.