Funct
ional
Strate
gy 
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 ADVERTISEMENTS:
‘A
functional
strategy is
the short-
term game
plan for a
key function
al area
within a
company’. I
t is the
approach a
functional
area takes
to achieve
corporate
andbusiness
unit
objectives
and
strategies b
y
maximizing
resource pr
oductivity. I
t deals with
a relatively
restricted
plan that
provides the
objectives fo
r a specific
function, for
the
allocation
of resources
among
different op
erations
within that
functional
area and for
facilitatingc
oordination
between
them for an
optimal
contribution
to
theachievem
ent of the
business
and corpora
te-level
objectives.
 ADVERTISEMENTS:
 According
to Gareth R.
Jones,
“Functional
strategy is a
plan of
actionto
strengthen
an
organizatio
n’s
Functional
and
organizatio
nalresource
s, as well as
its
coordinatio
n abilities,
in order to
create
corecompete
ncies.” Corp
orate and
Business
strategies
give birth to
functional
strategies,w
hich are
implemente
d in the
organizatio
n through
functional
andoperatio
nal
implementa
tion.This
strategy
refers to
single
function
operation
and the
activitiesinv
olved in it.
This is
an operatin
g level of
strategies.
The
decisionstak
en at this
level are
referred as
tactical
decisions.Th
e main
purpose of
functional
strategy is
to achieve
the
corporatean
d business
level
objective in
specific
functional
area by the
 

optimum
allocation of
the
resources
available to
maximize
the profitab
ility.
 ADVERTISEMENTS:

Learn
about:-
1.
Introduction
to
Functional
Strategy 2.
Meaning of
FunctionalSt
rategy 3.
Definitions
4. Concept
5. Need 6.
Features 7.
Importance8
. Types 9.
Developmen
t. 10.
Managerial
Aspects of
ManagingFu
nctional
Strategy 11.
Consideratio
ns 12.
Functional
Implementat
ion13.
Functional
Strategies in
Different
Functional
Areas.
Functio
nal
Strategi
es in
Strategi
cManag
ement
 

Function
al
Strategy –
 

Introduct
ion to
Functiona
lStrategy 
 According
to Gareth R.
Jones,
“Functional
strategy is a
plan of
actionto
strengthen
an
organization
’s Functional
and organiza
tionalresour
ces, as well
as its
coordination
abilities, in
order to
create
corecompete
ncies.”
Corporate
and
Business
strategies
give birth
tofunctional
strategies,
which are
implemente
d in the
organization
through
functional
and
operational
implementat
ion.
 ADVERTISEMENTS:
This strategy
refers to
single
function
operation
and the
activitiesinv
olved in it.
This is
an operating
level of
strategies.
The
decisionstak
en at this
level are
referred as
tactical decis
ions. The
main
purposeof
functional
strategy is to
achieve the
corporate
and business
levelobjectiv
e in specific
functional
area by the
optimum
allocation of
theresources
available to
maximize
the
profitability.
 

 When all
the
functional
departments
of
any organiza
tion either it
ismarketing,
finance,
human
resource,
operations,
legal, supply
chain
orinformatio
n
technology,
work
together in
same
direction to
cover
the business
level
objectives,
and hence
by doing so
achieve the
corporatelev
el goals,
then only
the basic
purpose
behind
functional
levelstrategi
es can be
fulfilled.Eac
h functional
department
carries out
its own
functionalre
sponsibility
by executing
short and
medium
term plans
to play
itsrole in
meeting
overall
corporate
objectives.
For example,
inmarketing
strategy; the
process may
focus on
selecting the
targetmarket
, developing
a market
plan that
may satisfy
the overall
needs ofthe
target
customers.I
n human
resource
strategy, the
functions
may deal
with
recruitmenta
nd selection
of the
employees,
their
retention,
training
anddevelop
ment,
evaluation,
and
remuneratio
n part.
Financial str
ategymay go
with issues
of funding,
shares, debt
financing, de
preciation
etc.
 ADVERTISEMENTS:

The
functional
strategies
relate to the
operating
divisions
and
thusconnect
to business
processes
and value
chain.
Higher-level
strategiesde
pend upon
these
strategies as
they provide
input to the
businessleve
l and
corporate
level
strategies.
Once the
higher-level
strategiesare
formulated,
the
functional
units
translate
them into
the course
ofaction
plan, which
each
department
is supposed
to complete
within adue
course of
time for the
success of
the
strategy. An
organization
with multi-
units dealing
in several
businesses
at asame
time, create
a business
strategy for
each
business and
each busines
s with
separate sets
of
departments
constitute
their
ownfunction
al strategies
for each
department.
For example,
if
anorganizati
on decides
to go for
differentiati
on strategy,
all
the activities
of each
department,
must be
focused on
fulfilling
that purpose
only.
 

The strategy
may be
focused on
providing
customized
products,
focuson
value
creation of
the product,
charging hig
h prices and
providinginn
ovative and
improved
products by
going
through
research
anddevelop
ment. The
whole idea
behind the
formulation
of
thesestrategi
es is to gain
competitive
advantage
and maximiz
ing
resourcepro
ductivity in
terms of
increased
cost-
effectiveness
.It is very
important
to understan
d the
significance
of alignment
amongthe
corporate,
business and
functional
level
strategies.
The
corporatelev
el strategy
will not be
effective if
the business
and
functional le
velstrategies
do not go
in consistenc
y with it.
Thus,
confirming
thereliability
of business
and
functional
level
strategies,
which
supportthe
grand
strategies for
the
organization
, is as
important as
picking
upthe right
strategy for
the
corporate
level.
Functional
level
strategieslab
el the
support
function of
the business.
 ADVERTISEMENTS:

Functional
strategy
deals with
developing
and
nurturing a
distinctiveco
mpetence in
a functional
area in order
to maximize
resourcepro
ductivity.
Functional
strategy
contributes
to business
level
strategyand
corporate
strategy as
well. It also
helps to
develop
competitivea
dvantage. A
corporation
consists of
several busi
ness units
and
each busines
s
unitconsists
of several
departments
and
functions.
Each
business
unitadopts
its own
business
level
strategy and
its own
functionalstr
ategies. The
orientation
of functional
strategy
mainly
depends on
its business
level
strategy. If
the unit
follows a
business
level strateg
y ofcost
leadership, a
set of
functional
strategies
would be
needed
tosupport
cost
leadership
strategy.
 
Function
al
Strategy –
 

Meaning
of Functi
onal
Strategies
 

Functional
strategies
are at the
heart of
competitive
advantage
of anyfirm.
These
strategies
are a great
help to the
implementat
ion
ofintegrated
business
strategy of
the firm.
They are as
basis
for attaining
the strategic
intent of the
firm. Functi
onal
strategies
are formed
incorrelation
with the
changing
competitive
environment
.Every
business
firm is built
around
certain basic
functions
such
asproductio
n,
marketing,
finance,
human
resources,
informations
ystem,
operational
research and
development
, etc. Many
otherfunctio
ns are
supporting
activities
which are
significant
for
the business.
Melvin J.
Stanford say
s that for a
firm to fulfill
its
purposesand
progress
towards it
objectives,
strategic
alternatives
within each
of these
functional
areas must
be developed
, selected
and
implemente
d by
management
.
 ADVERTISEMENTS:

Functional
strategies
are the
collective
activities of
day-to-
daydecisions
made by
respective
functional d
epartment
heads who
areresponsib
le in creating
and adding
value to the
product or
service.They
are involved
in designing
product,
raising
finance,man
ufacturing
the required
product,
delivering
product to
customers,a
nd support
product or
service of
each
business
within the
corporatepor
tfolio.These
activities are
carried out
by efficient
utilisation
of availabler
esources and
capabilities;
and
integrating
the activities
within thefu
nctional area
as, for
example,
coordinating
among
research
inmarketing,
purchasing,
inventory
control,
promotion,
advertising
andshipping
in
production.F
unctional
strategies
are derived
from
business
level
strategy.Re
member the
three generic
strategies-
low
cost leadersh
ip;differenti
ation and
focus
strategy. For
example,
take a firm
pursuinglow
cost
leadership
strategy.
When the
strategy is
implemente
d, all
thefunctiona
l areas have
to be
focused on
low cost
structure.
 
 According
to
Thompson
and Strickla
nd, strategy
making is
not just
atask for
senior
executives.
In large
enterprises,
decisions
about
what busines
s approaches
to take and
what new
moves to
initiate
involvesenio
r executives
in the
corporate
office, heads
of business
units
andproduct
divisions,
the heads of
major
functional
areas within
a business or
division
(manufactur
ing,
marketing
and sales,
finance,hum
an
resources,
and the
like), plant
managers,
product
managers,di
strict and
regional
sales
managers,
and lower-
level
supervisors.
Indiversified
enterprises,
strategies
are initiated
at four
distinctorga
nisation
levels-
 ADVERTISEMENTS:
These are
as follows:
1. Corporate
Strategy – It
is a strategy
for the
company
and all of
its businesse
s as a
whole.2.
Business
Strategy – It
is a strategy
for each
separate
business
thecompany
has
diversified
into.3.
Functional
Strategy –
Then there
is a strategy
for each
specificfunct
ional unit
within a
business.
Each
business
usually has
aproduction
strategy, a
marketing
strategy, a
finance strat
egy, and
soon.4.
Operating
Strategy –
And finally,
this is a still
narrower
strategy
for basic
operating
units —
plants, sales
districts and
regions,
anddepartm
ents within
functional
areas.
 

Function
al
Strategy –
 

Definitio
ns
The
activities
and
processes—
such as
human reso
urce
management
,research
and
development
, finance,
production,
and
marketing —
constitute
the strategic
functions of
an organisati
on.
Strategies
 

designed to
enact these
strategic
functions
are referred
to as
functionallev
el strategies.
A functional
strategy is
the short-
term game
plan for akey
functional
area within a
company.
 ADVERTISEMENTS:

It deals with
a relatively
restricted
plan that
provides the
objectives
fora specific
function, for
the
allocation
of resources
among
differentope
rations
within the
functional
area. It
facilitates
coordination 
between
them.
Functional
strategies
contribute to
the
achievement
of business
and
corporate-
level
objectives. A
ccording to
Thompson
and Strickla
nd, “The
term
functional
strategyrefer
s to the
managerial
game plan
for
a particular
functional
activity, busi
ness process,
or
key departm
ent within a
business. A
company’sm
arketing
strategy, for
example,
represents
the
managerial
game
planfor
running the
marketing
part of the
business. A
company’s
newproduct
development
strategy
represents
the
managerial
game planfo
r keeping the
company’s
product
lineup fresh
and in tune
with
what buyers
are looking
for.”Pearce
and
Robinson
define “a
functional
strategy is
the short-
termgame
plan for a
key
functional
area within a
company.
Such
strategiescla
rify grand
strategy by
providing
more
specific detai
ls about how
key function
al areas are
to be
managed
in the near
future.” Acco
rding to
Thomas
Wheelen
and David
Hunder,
“Functionals
trategy is the
approach a
functional
area takes to
achieve
corporatean
d business
unit
objectives
and
strategies by
maximizing 
resourcepro
ductivity. It
is concerned
with
developing
and
nurturing ad
istinctive
competence
to provide a
company or
business
unit with
acompetitive
advantage.
Just as a
multidivisio
nal
corporation
hasseveral
business
units, each
with its own
business
strategy,
each busines
s unit has its
own set of
departments
, each with
its
ownfunction
al strategy.”
 

Thus, a
functional
strategy is a
set
of decisions
and actions
managersma
ke and take
to attain
superior
competency
in business
functions
inaccordanc
e with the
corporate
and
business-
level
strategies.
Oncecorpora
te and
business-
level
strategies
are develope
d,
management
must turn its
attention to
formulating 
strategies for
each
businessunit
’s functional
areas.
 
Function
al
Strategy –
 

Concept
‘A functional
strategy is
the short-
term game
plan for a
key
functionalar
ea within a
company’. It
is the
approach a
functional
area takes
toachieve
corporate
and business
unit
objectives
and
strategies
bymaximizin
g resource
productivity.
 ADVERTISEMENTS:

It deals with
a relatively
restricted
plan that
provides the
objectives
fora specific
function, for
the
allocation
of resources
among
differentope
rations
within that
functional
area and
for facilitatin
g
coordination 
between
them for an
optimal
contribution
to the
achievement
of
the business
and
corporate-
level
objectives.F
unctional
strategies
clarify
corporate
and business
strategies
byproviding
more
specific
details about
how key
functional
areas to
bemanaged
in the near
future.Funct
ional
strategy is
concerned
with
developing
and
nurturing ad
istinctive
competence
to provide a
company or
business
unit with
acompetitive
advantage.F
unctional
strategy, as
is suggested
by the title,
relates to
a singlefunct
ional
operation
and the
activities
involved
therein.
Decisions
atthis level
within the
organization
are often
described as
tactical.
Suchdecisio
ns are
guided and
constrained
by some
overall
strategiccon
siderations.
 

In terms of
the levels of
strategy
formulation,
functional
strategiesop
erate below
the SBU or
business-
level
strategies.
Within
functionalstr
ategies there
might be
several sub-
functional
areas.
Functionalst
rategies are
made within
the higher
level
strategies
and
guidelinesth
erein that
are set at
higher levels
of
an organizati
on.Example
– Marketing
strategy, a
functional
strategy,
can besubdiv
ided into
promotion,
sales,
distribution,
pricing
strategies
witheach
sub-
functional
strategy
contributing
to a
functional st
rategy.
 ADVERTISEMENTS:

Parent
business
unit’s
strategy
dictates the
orientation
of
thefunctiona
l strategy.
For example,
a business
unit
pursuing
acompetitive
strategy of
differentiati
on by
offering high
quality
productor
service
requires an
operation
functional
strategy that
emphasizesq
uality
assurance
processes
than
a cheaper,
high-volume
production.S
imultaneous
ly, a human
resource
functional
strategy
emphasizes
thehiring
and
training of a
highly
skilled, but
costly
workforce.
Amarketing
functional
strategy that
emphasizes
distribution
channel“pull
” using
advertising
to increase
consumer
demand over
“push”using
promotional
allowances
to retailers.If
a business
unit were
to follow a
low-cost
competitive
strategy,how
ever, a
different set
of functional
strategies
would be
needed
tosupport
the business
strategy.
Functional
strategies
must be
developedin
the key areas
of
marketing,
finance, pro
duction/ope
rations,
R&D,and
human
resources.
They must
be
consistent
with long-
termobjectiv
es and grand
strategy.Fun
ctional
strategies
help in
implementat
ion of grand
strategy
byorganizing
and
activating
specific subu
nits of the
company to
pursuethe
business
strategy in
daily
activities. In
a sense,
functionalstr
ategies
translate
grand
strategy into
action desig
ned to
accomplishs
pecific
annual
objectives.
 

For every
major
subunit of a
company,
functional
strategies
identifyand
coordinate
actions that
support the
grand strate
gy and
improvethe
likelihood of
accomplishi
ng annual
objectives.F
unctional
strategies
play an
important
role
in implemen
tingcorporat
e and
business
strategy. But
to increase
the
probability
thatthese
strategies
will be
successful,
more specifi
c guidelines
are
neededfor
the
business’s
operating
components.
Thus,
functional
strategiescla
rify the
business
strategy,
giving
specific
short-term
guidance
tooperating
managers.
 ADVERTISEMENTS:

 A major
task of
strategy
implementat
ion is to
align or fit
the activities
and
capabilities
of an
organization
with its
strategies.
Strategiesop
erate at
different
levels and
there has to
be
congruence
andcoordina
tion among
these
strategies.
Such
congruence
is the
verticalfit.
Then there
has to be
congruence
and coordin
ation among
thedifferent
activities
taking place
at the same
level. This is
the
horizontalfit.
 

Function
al
Strategy –
 
Reasons
why Func
tional
 

Strategies
are
Needed
Functional
strategies
tell the
functional
managers
what to do
in theirareas
to achieve
business
objectives.
Glueck and
Jauch have
describedthe
following
reasons to
point out
why
functional
strategies
areneeded.
The
reasons
why
functional
strategies
are needed
can
beenumer
ated as
follows:
i. Aimed at
making the
strategies
formulated
at the top
management
level
practically
feasible at
the
functional
level.
 

ii. Provide
flow of
strategic
decisions to
the different
parts of
anorganizati
on.iii. The
basis for
controlling
activities in
the different
functional
areas.
 ADVERTISEMENTS:

iv. The time

spent by
functional
managers
in decision-
making
isreduced as
–a. Plans lay
down clearly
what is to be
done, and b.
Policies
provide the
discretionar
y framework
within which
decisionsnee
d to be
taken. v.
Help in
bringing
harmony
and
coordination
as they
remain
animportant
part integral
part of
major
strategies. vi
. Similar
situations
occurring in
different
functional
areas
arehandled
in a
consistent
manner by
the
functional
managers.
Functional
strategies
play two
important
roles:
i. They
provide
support to
the overall
business
strategy.ii.
They spell
out how
functional
managers
will work so
as
to ensure bet
ter
performance
in their
respective
functional
areas.
 

Function
al
Strategy –
20
Importan
t
 

Features
Some
important
features of
functional
strategy
are asfollo
ws:
1. The time
span of a
functional
strategy,
as compared
to a
business-
level
strategy, is
short.
 

2. It focuses
attention on
what needs
to be done
now to make
thegrand
strategy
work.3. It is
more
specific and
action-
oriented
because it
clearly
outlines wha
t should
be done in
each
functional
area so as to
achieve
thecorporate
objectives.4.
Functional
strategy
pertains to
the
function, de
partment,
division
of the
enterprise.5.
It has to be
in pursuance
of the overall
corporate
strategy.6. It
acts to
achieve
corporate
and business
unit
objectives
bymaximizin
g resource
productivity.
7. It is the
game plan to
manage a
principal
subordinate
activity
withina
business.8.
Functional
strategy is
concerned
with
developing
and
nurturing ad
istinctive
competence
to provide a
company or
business
unit with
acompetitive
advantage.9.
The
orientation
of the
functional
strategy
is dictated
by its
parent busin
ess unit’s
strategy.10.
Functional
strategy is
narrower
in scope
than
business
strategy.
Itcontains
relevant
details of the
overall
business
game plan
by settingout
the actions,
approaches
and
practices
which are to
be employed
inmanaging
a particular
function.11.
It may differ
from region
to region.12.
Functional
strategies
should be in
sync rather
than
serving their
own
narrower
purposes.
They should
be in
coordination
andconsiste
ncy with
long-term
objectives
and grand
strategy.13.
These
functional
strategies
have to be
related to
each other
and tothe
overall
corporate
strategy.
 

14.
Implementat
ion of these
strategies
involves a
wide range
of
policydecisio
ns to be
made
relating to
the
functional
areas.15. The
focus of
these
functional
strategies is
often
towards
externalenvi
ronment.16.
Functional
strategies
help in
implementat
ion of grand
strategy.The
se translate
grand
strategy into
action.17.
There might
be several
sub-
functional
areas within
functionalstr
ategies.18.
Functional
strategies
are made
within the
guidelines
that
have been
set at higher
levels.19.
These are
detailed
statements
of the
“means” or
activities
that will be
used to
achieve
short-term
objectives
and establis
h
competitivea
dvantage.20.
A functional
strategy
supports
business-
level
strategy,
which inturn
supports
corporate-
level
strategy.
Function
al
Strategy
– Importa
nce
Today, every
firm faces
challenges in
optimizing
resources
such
asfinance,
production
facilities,
technology,
and
marketing
opportunitie
sin
functional
areas.
Functional
managers
need
strategies to
make the bes
t of
opportunitie
s and to
identify
avenues for
growth.
They
needstrategi
c focus on
their
decisions
in their
fields.
The
importanc
e of
functional
strategies
is pointed
out
underthe
following
headings:1
. Help in
Operation
of
Business
Functions:
 

Functional
strategies
provide
operational
help in the
conduct
of various
functional
activities.
For example,
a finance
manager has
tonecessarily
take
decisions on
funding
opportunitie
s,
deployingpr
ojects,
reducing
capital costs,
or
acquiring an
other firm.
In
addition,he
has to decide
on strategic
options
to manage
working
capital,
whichmay
be used to
decide the
various
aspects of
receivables
management
,factoring,
payables
management
, inventory
strategy, and
treasuryman
agement.Si
milarly, to
manage
human
resource
function, a
number of
strategiciniti
atives can be
deployed by
a firm.
Managers
need
strategic foc
us
on various
functions.
The
production
and
operations
management
function also
involves a
number of
strategic
issues.
2.
Manageria
l Road
Map:
Thompson
and
Strickland
write, “A
company
needs a
functionalstr
ategy for
every major
business
activity and
organisation
al
unit.Functio
nal strategy,
while
narrower in
scope than
business
strategy,add
s relevant
detail to the
overall
business
game plan.
It aims
atestablishin
g or
strengthenin
g specific
competencie
s calculated
toenhance
the
company’s
market
position.
Like
business
strategy,func
tional
strategy
must
support the
company’s
overall
businessstra
tegy and
competitive
approach. A
related role
is to create
amanagerial
road map for
achieving
the
functional
area’s
objectives
andmission.
”
3. Help in
Implement
ation of
Grand
Strategy:
Pearce and
Robinson
state that
“functional
strategies
must
bedeveloped
in the key
areas of
marketing,
finance,
production,
R&D,and
personnel.
Functional
strategies
help in
implementat
ion of
grandstrateg
y by
organising
and
activating sp
ecific
subunits of
the
companyto
pursue the
business
strategy in
daily
activities.”
4.
Decisional
Guides to
Action:
 

Functional
strategies
guide and
translate
thought into
action
designedto
accomplish
specific
annual
objectives.
Thus,
functional
strategiesma
y be
regarded as
decisional
guides to
action that
make
thestrategies
work. They
clarify many
conflicting
issues and
problems,giv
ing specific
short-term
guidance
to operating
managers
andemploye
es.
5.
Improves
Effectivene
ss and
Efficiency
and
Creates
SuperProfi
tability:
It should be
noted that
functional
strategies
aim
at improving
theeffectiven
ess of a
company’s
operations
and thus its
ability to
attainsuperi
or efficiency,
quality,
innovation,
and custome
r
responsiven
ess.It is
important to
keep in
mind the
relationships
of
functionalstr
ategies,
distinctive
competencie
s,
differentiati
on, low
cost, valuecr
eation, and
profitability. 
We can note
that
functional-
level
strategies
can
build resour
ces
andcapabiliti
es of a firm
that enhance
superior
efficiency,
quality,inno
vation.
These in
turn, create
low cost,
value and
superiorprof
itability.
6. Builds
Competitiv
e
Advantage
:
Functional
strategies
can improve
the
efficiency,
reliability
(quality),and
consumer
responsiven
ess of its
service.
Thus, they
can be used
to build a
sustainable
competitive
advantage.
Functional
strategies
canincrease
efficiency of
activities
and thereby
lower their
cost
structure.In
fact,
functional
strategy
is concerned
with
developing
and
nurturinga
distinctive
competence
to provide a
company
or business
unit with
acompetitive
advantage.
Other
Benefits of
Functional
Strategies:
i. They give
operating
personnel a
better
understandi
ng of their
role inthe
firm’s
mission.
 

ii. The
process of
developing
them
becomes a
forum for
raising
andresolving
conflicts
between
strategic
intent and
operational
reality.iii.
They
provide a
basis for
developing
budgets,
schedules,
triggerpoints
, and other
sources of
strategic
control.iv.
They can be
powerful
motivators,
especially
when
connected to
thereward
system.
 

Function
al
Strategy –
 
Types:
Marketin
g
Strategy,
 

Financial
Strategy,
Operatio
ns
Strategy
and Hum
an
 
Resource
Managem
ent
Strategy 
Let us now
discuss
these
functional
strategies
in
detail:Type
# 1.
Marketing
Strategy:
The
definition of
marketing
strategy can
be given, as
– “A
marketingstr
ategy is a
practice
that allows
an
organization
to focus on
theavailable
resources
and turn the
opportunitie
s into
productivity
toincrease
sales and
achieve
justifiable
competitive
lead.”
Marketingst
rategies
provide
detailed
information
to the
necessary
plans to
betaken, to
carry out the
marketing
program.By
using an
effective
marketing
plan an
organization
may go
forcapturing
a large share
of
existing mar
ket, develop
a new
market forits
current
products, or
develop new
products for
its existing
market
oreven go
for total
diversificatio
n strategy
that mean
developing
a newproduc
t for an
entirely new
market.The
marketing
strategy
based on
building an
organization 
thatrevolves
around
customer
satisfaction
helps the
organization
inachieving
fast growth
rate. It
describes
how the
organization 
is goingto
engage
customers,
identify the
prospects,
and the
competition
inthe
market.

It derives
from the
broader
corporate
strategies
and
corporate
goals.
A strategy
consists of
range of
refined
thoughts
and
organized se
ries
oftactics. It
is not
possible to
implement a
marketing
plan, if it is
not based
upon sound
strategy
formulation.
Marketing
strategy
includes the
successful
understandi
ng of
internaland
external
environment
. Internal
environment
factors
include
theanalysis
of marketing
mix,
whereas
external
factors
include
theanalysis
of political,
legal,
economic, so
cial,
technologica
l,
cultural,envi
ronment,
and
evaluation of
customer,
competitors,
and
targetmarket
. Various
analyses can
be
performed
to
understand
the
strategiccon
straints and
focus such
as – SWOT
analysis,
GE/McKinn
ey matrixor
COPE
analysis. As
every unique
business has
unique
features, the
marketing
strategiesof
different
businesses,
also differ in
accordance
with those.
However,
one can
categorize
the
strategies
in four
majorsche
mes given
below:
i. Market
dominance
based
strategies –
It depends
upon the
basis ofthe
market
share, the
firm holds in
the market
or the
dominance
of
anindustry is
required to
make the
basis for
this categori
zation.
Theremay be
three types
of market
dominance
strategies
such as
– Leader,Ch
allenger, and
follower.ii.
Porter
generic
strategies
– It focuses
to the scope
of
marketpenet
ration and
firm’s
sustainable
competitive
advantage. It
can
befurther
divided into
three broad
categories
such as –
cost leadersh
ip,product
differentiati
on, and
market
segmentatio
n.iii.
Innovation
strategies –
It focuses on
the rate a
firm
develops
newproducts
and
innovative
business mo
dels. There
are three
types suchas
–
pioneers, clo
se followers,
and late
followers.iv.
Growth
strategies –
It deals with
the
questions
what should
be
themeasures
, which may
help the
organization
in proper
growth. The
 
most
common
ways may be
horizontal
integration,
verticalinteg
ration,
diversificatio
n, and
intensificati
on.
 A good
marketing
strategy
consist the
following
points:
a. Flexible –
Having an
overall
control is
needed
while
implementin
gany plan
but there
must be
some space
for changes
also, as the
needsand
situations
may keep
altering and
if there is no
possibility
forflexibility
in the plan,
adaption
and
implementat
ion of
change
may become
difficult. b.
Comprehens
ive – Having
a complete
overview is
very
important be
fore going
for
implementat
ion of the
plan, as the
plan may
lead tofailur
e if any
necessary
details have
been
missed.c.
Consistence
– Having
consistency,
is very much
needed in
any
goodmarketi
ng strategy
as there is
no use of the
plan if
it couldn’t
correlate wit
h the other
functional
strategies
and fail in
achieving
the
overallcorpo
rate and
business
level
objectives.
Maintaining
consistency
alsoensures
that
employees
are in
accordance
with what
has
beenmentio
ned in the
functional
strategy.d.
Rational –
Maintaining
rationality
is very
necessary; as
the
planmust
flow in the
logical
manner,
otherwise it
would not
come
up withcorp
orate level
objective.Ma
rketing
strategy
relates to the
formulation
and
implementat
ion
ofmarketing
mix that is
product,
price, place,
and
promotion.
Type # 2.
Financial
Strategy:
The financial
strategy
deals with
the
availability
or sources,
usages,and
management
of funds. It
focuses on
the
alignment of
financialma
nagement
with the
corporate
and business
objectives of
anorganizati
on to gain
strategic adv
antage. It
emphasizes
on the
aspectssuch
as – how
much fund is
required.
When the
fund is
required?
How 
 

the funds
should be
raised? In
addition, by
what are the
means to
useand
manage the
funds?
The
financial
plans and
policies
should
focus on
some
majorpoin
ts:
i.
Determining
the financial
resources,
which are
necessary to
meet
theoperating
program of
the
organization
?ii.
Developing
plans for
obtaining
the
obligatory
external
funds.iii.
Governing
the
allocation
and use
of funds by
founding
andupholdin
g the
financial
control
system.iv.
Formulating
programs,
which max
help in
providing th
e
mosteffectiv
e profit-
volume-cost
relationship. 
v. Analyzing
the
operation’s f
inancial
results. vi.
Reporting
the data to
the top
management
and
planning the
futureoperat
ions of the
firm. A
sound
financial
plan, apart
from cost,
solvency,
and liquidity
andprofitabi
lity, has few
more
prominent
characteristi
cs such as –
it is based on
clear cut
objectives,
it’s simple in
nature,
shows
lessdepende
ncy on
outside
sources, and
is flexible in
nature.
The
financial
plans and
policies
deal with
three
major
issuessuch
as:
a.
Sources, b.
Usages,
andc.
Managemen
t of funds.
The details
are as
follows:a.
The
Sources of
Funds:
 

It refers to
the owner’s
capital,
borrowing fr
om public
through
sharesand
debentures,
and loans
from
financial
institutions.
Financial
plansand
polices are
related with
the
requirement
s of capital,
desiredcapit
al structure,
reserves and
surplus, and
relationship
with
lenders.It is
often the
hardest
part as
raising the
funds is
the first and
the
mostimporta
nt
requirement
for setting
up
any business
.Raising
funds need
careful
planning
and ask the
answers of
fewquestion
s such as
how much
finance is
required?
When is the
financeneed
ed? For how
long is it
needed?
What
security
can be
provided
foravailing
the finance?
Can some
ownership
be given
at the
startup ofthe
business, in
return for
investment?
There may
be some
external
sources
and some
internal
sources,
whichmay
facilitate the
startup
finance. The
internal
sources that
are
from within
the
organization
may
be personal
sources such
as – the
savingsand
inheritance
of the
entrepreneu
r,
borrowings
from friend
andfamily
and credit
cards,
retained
profits, and
share capital
that
isinvested by
the founder.
The
external sou
rces are the
outsideprovi
ders of fund.
It includes,
loan capital,
share
capital,
and venturec
apital.For
instance, the
financial
plan of an
organization
is to raise
50%funds by
borrowing
from public
and
rest 50% by
owned
funds.
Anorganizati
on generally
does not use
the reserves
as funds
because
theyare used
for
investment
and
contingency
purposes.
 b. Usage
of Funds:
It implies
that the
funds can
be used for
making
investments,
givingloans
and
advances,
and offering
dividends to
shareholders
. In short,it
asks the
answer of
‘how the
entrepreneu
r is planning
to spend
thefund or
money?’ The
funds should
be utilized in
an efficient
andeffective
manner.Fina
ncial plans
and policies
allocate
funds to
carry out
variousstrate
gies related
to expansion
of business
and
giving divide
nds to
 

shareholders
. A plan can
be an
expansion
plan, such
as – merger
andacquisiti
on with
another
organization
; whereas a
policy can be
givingminim
um 20% of
dividend
to sharehold
ers.
c. The
Manageme
nt of
Funds:
Help in the
optimum
utilization of
funds. The
plans and
policies at
thislevel
relate to
areas, such
as cash and
credit
management
, tax
planningand
accounting,
and
budgeting.T
hus, the
plans and
policies at
the financial
level are
very importa
ntsince they
determine
the sources,
usage, and
management
of fundsthat
help in the
implementat
ion of
projects.
Type # 3.
Operations
Strategy:
 According
to Slack and
Lewis,
operations
strategy can
be defined
as –“the
total pattern
of decisions
which shape
the long
term capabil
itiesof any
type of
operations
and
their contrib
ution to the
overall
strategy,thro
ugh the
reconciliatio
n of market
requirement
s with
operationsre
sources.”
One must
not be
confused
between two
terms that
are“operatio
ns” and
“operational
”.However,
the words
are similar
but have
different
meaning.‘Op
erations’
refers to
those parts
of business
which deals
withproduci
ng goods
and services.
‘Operational’
means short
term
andlimited
plans. For
example, a
marketing
strategy
defines
theprocedur
es and
approaches
to be used by
an
organization
to positionit
s business in
the
market. Whi
le on the
other hand,
operational
side of
marketing
refers to
theday-to-
day activities
or tactics to
manage
things such
as –
pricing,pro
motion of
product or
service, and
its distributi
on.The
procedure,
which is
used to
formulate
the
operations
strategy,
isknown as
the process
of
operations
strategy,
which
defines the
way‘how to
go for
operations
strategy’?
 

 We can
broadly
describe
two
approache
s for
devising
anoperatio
ns
strategy:i.
Top-Down
Approach:
It
determines
the flow of
directions or
decisions
from the top
level tothe
lower level
in the
organization
al hierarchy.
The top-
levelmanage
ment takes
the decisions
and set the
organization
al
objectivesan
d policies,
and then
those
decisions
and policies
are
implemente
d by the
different
functional
areas of the
organization
such as
marketing,fi
nance, HR.
etc.
ii. Bottom
up
Approach:
It originates
from the
practical
experiences
of the past.
It is
not alwaysfe
asible to
formulate
the strategy
without
knowing the
actualconditi
on of the
internal and
external
environment
. Bottom
upapproach
suggests
forming the
ideas from
their earlier
experience
ofdealing
with
customers,
suppliers,
distributers,
and their
ownprocesse
s and then
invent the
strategies
based upon
these
experiences.
In any
organization
corporate
and business
level
strategies set
the basefor
standing in
market with
competitors
that in turn
affect
the business,
the target
market, and
the manner,
which
defines how
toserve the
market.Thus
, operations
strategy
formulates a
long-range
game plan
for
theproductio
n of goods
and services
of any
organization
and provides
aroad map
for the
production
function
to achieve
the business
level
andcorporat
e level
strategies si
multaneousl
y.
Type # 4.
Human
Resource
Manageme
nt
Strategy:
Human
resource
management
(HRM)
strategy
assists
inimplement
ing the
specific
function of
human
resource
management
toany
organization
. Human
resource
management
strategy
provides a
 

practical
framework
of managing
human
resource in
line with
theorganizat
ion’s
corporate
objectives.
It involves
a four-way
approach:
i.
Developing a
strategic
framework ii
. Generating
HR mission
statementiii.
Applying
SWOT
analysisiv.
Making HR
planning
decisions.Hu
man
resource
management
strategy
focuses on
organization
,culture,
people, and
systems. It
focuses on
the
implementat
ion of
thespecific
functions of
HR, which
includes
policies
on recruitme
nt
andselection
, disciplinary
policies,
reward
policies,
training
anddevelop
ment
policies and
payroll
processes
etc.Thus,
HRM
strategy is
an overall
plan, which
concentrates
onimplemen
tation of
specific HR
functions,
which are
generallyad
ministrative
in nature
and help
in correlatin
g with the
whole busin
ess strategy.
Human
resource
manageme
nt
comprises
of
variouspra
ctices:
i. Human
resource
planningii.
Recruitment
and
selectioniii.
Inductioniv.
Training and
development 
v. Skill
management 
vi.
Remunerati
on
 

 vii.
Performance
appraisal viii
. Personal
administrati
onix. Time
management
x. Payrollxi.
Employee
benefit and
ethical issue
sxii.
Personal
cost
planningxiii.
Labor
relations.Th
e Human
resource
management
typically
talks about
‘best
practices’ wh
ich means
nothing
but the
correlation
between the
HRM
strategyand
the overall
corporate
strategy by
coordinating
the firm’s
personalnee
ds with
organization
’s objectives.
In any
organization
,
personnel’sp
roper
management
is very
necessary, as
it is the
employees
whoimpleme
nt the
policies and
turn the
objectives
into
reality.Empl
oyee
feedback,
continuous
monitoring,
surveys are
all donethro
ugh human
resource
management
policies.
Thus, as a
functionalde
partment
HR plays a
significant
role.
Human
resource
manageme
nt
strategies
include
some
basicfeatu
res, which
are as
follows:a.
Organizati
onal
Manageme
nt:
It refers to
the
management
of an
organization
’s employees
.Contributio
n to
organization
al practices
include
improving
employeeco
mmitment,
maintaining
higher level
of
productivity
through
higherlevel
of skills,
enhancing
quality and
efficiency,
lowering
theabsenteei
sm and
turnover.Th
e idea
behind
organization
al
management
refers that
betterorgani
zational
performance
can be
gained
through the
adoption of
 

some
definite best
practices in
Human
resource
management
.
Thepractices
include
selective
hiring,
training
and develop
ment of
theemployee
s, facilitating
employment
security, free
flow of
informations
haring,
minimizing
difference,
increasing
overall
performance
of
theorganizat
ion, and
motivating
self-
managed
teams.The
organization
al
management
tries to
maintain a
balance
in between
the personal
and
organization
al goals of an
employee
andensures
a close
coherence
between the
HR policies
of the
organization
and the
external
environment
or business.
The overall
idea is to-
support the
organization
by
attracting,
retaining
and
managingem
ployees
effectively to
meet the
corporate
strategic goa
l.
 b.
Personnel
Manageme
nt:
It refers to
the
management
of
individuals
or
employees
who make
upthe
workforce of
an
organization
. The
personal
management
ensuresthe
supply of
the skilled
and
qualified
individuals
and develops
thecapability
of current
workforce.
The basic
idea is to
minimize
thefinancial
risk and to
gain a
maximized
return on
investment
of humancap
ital in the
organization
.It helps in
securing
future
survival
and long-
term success
for
theorganizat
ion. The key
functions of
personal
management
includeresou
rcing
capable
workforce,
their
recruitment
and
selection,em
ployee
record
retention,
training and
development
of
employees,k
eeping track
of local,
state and
central labor
laws, design
anddevelop
ment of the
organization
,
implementat
ion
of changema
nagement,
performance
and
behavioral
management
, job
and workfor
ce analysis,
industrial
and
employee rel
ations,
compensatio
nmanageme
nt, and
employee
motivation.
c.
Industrial
Manageme
nt:
It refers to
the study of
employment
relationship.
It helps in
designingpol
icies related
with the
betterment o
f worker and
employment
relationship.
It avoids the
idea of
treating the
worker as a
mere
 
commodity.
It favors to
treat
workers as
human
being
entitled to
every human
right.Traditi
onally the
field
discusses
with the
fields such
as – trade
unions,colle
ctive
bargaining,
and worker’s
participation
in managem
ent,grievanc
e
management
, industrial
disputes,
labor
laws, rules
and codeof
conduct. Acc
ording to
Lester,
“Industrial
relations
invoke
attempts at
arrivingat
solutions
between the
conflicting
objectives
and values;
between
theprofit
motive and
social gain;
between
discipline
and freedom
; between
authority
and
industrial
democracy; 
between
bargaining
andcooperat
ion and
between
conflicting
interests of
the
individual,
thegroup
and the
community.”
Industrial
relations
include all
the factors
that put
impact
onthe
behavior
of the
people at
work such
as:
i.
Institutions
that
comprises of
the
government,
employers,
tradeunions
labor courts,
union
associations
and other
organization
s
whichinflue
nce the
organization
in direct
or indirect
ways.ii.
Characters
that study
the role of
worker
unions.
It comprises
ofindustrial
relation
officials
or employer’
s federation
officials,med
iators,
arbitrators,
judges of
labor court,
tribunal,
etc.iii.
Methods
that focus on
the
participation
of workers in
industrialrel
ation
schemes,
collective
bargaining,
grievance ha
ndling
machinery,d
ispute
settlements
machinery,
union
reorganizati
on, hearing
of
laborcourts
etc.iv.
Contents
that include
matters
relating to
employment
circumstanc
es such as –
working
hours, pay
issues,
health and
safetyissue,
leave with
wages, lay-
off,
retirements,
social securit
y etc.
 
Function
al
Strategy –
 

Developm
ent of
Function
al
 

Strategies
The
development
of functional
strategies
aims at
formulating
thestrategies
at the top
management
level that is
practically
feasible at
thefunctiona
l level.
Strategies
need to be
segregated
into viable
andunviable
functional
strategies.
Viable
functional
strategies
are
thosethat
are
compatible
with each
other,
thereby
augmenting
thehorizonta
l fit.In this
way, the
functional
managers
can
implement
the
strategies.Th
e process of
development
of functional
strategies
may range
fromthe
formal to the
informal.
Larger and
more
complex
organization
smay have
several
strategies
related to
every major
function.Co
mparatively
smaller
organization
may operate
with fewer
policies,mos
t of which
could be
informal and
understood.
 Vertical
Fit:
The concept
of vertical fit
defines
functional
strategies
in terms
oftheir
capability to
contribute to
the
creation of a
strategic
advantagefo
r the
organization
.
 Viewed in
this way
we can
have the
following
types
offunction
al
strategies:
(1) Strategic
marketing
functional
strategies
focus on the
alignment
ofmarketing
management
within an
organization
with its
corporate
and business
strategies to
gain a
strategic
advantage.
(2) Strategic
financial
functional
strategies
focus on the
alignment
offinancial
management
within an
organization
with its
corporate
and business
strategies to
gain a
strategic
advantage.
(3) Strategic
operations
functional
strategies
focus on the
alignment
of operation
s
management
within an
organization
with
its corporate
and business
strategies to
gain a
strategic
advantage
 
(4) Strategic
human
resource
functional
strategies
focus on
thealignmen
t of human
resource
management
within an
organization 
with its
corporate
and business
strategies to
gain a
strategicadv
antage.(5)
Strategic
information
management
functional
strategies
focus onthe
alignment of
information
management
within an
organization 
with its
corporate
and business
strategies to
gain a
strategicadv
antage.
Horizontal
Fit:
The concept
of horizontal
fit means
that there
has to be an
integrationof
the
operational
activities
undertaken
to provide a
product
of serviceto
a customer.
These have
to take place
in the course
of operation
alimplement
ation.Operat
ional
implementat
ion is the
approach an
organization
adopts
toachieve
operational
effectiveness
. When an
organization 
performs val
ue-creating
activities
optimally an
d in a way
that is better
than
itscompetito
rs, it results
in
operational
effectiveness
.
 
Function
al
Strategy –
 

Manageri
al Aspects
of
Managing
 

Functiona
l Strategy 
Each
business
enterprise
has its own
set
of departme
nts.
Eachdepart
ment has its
own
functional
strategy.
Within the
generalfram
ework
created by
the
corporate
and business
strategies,
each busines
s function
needs
to identify
and
undertake
activities
unique tothe
function.
The
functional
strategies
delineate the
activities to
beundertake
n in each
part of the
business
and usually
include
them as
acore part of
their action
plan.
 A few
manageria
l aspects of
managing
functional
strategyca
n be noted:
 

1. Lead
Responsibi
lity:
The main
responsibilit
y for
conceiving
strategies for
each
of the variou
s important
business
functions
and
processes is
normallydel
egated to the
respective
functional d
epartment
heads and
processman
agers.Thom
pson and
Strickland
think that
“In crafting
strategy, the
managerof a
particular
business
function
or process
ideally
works
closely
withkey
subordinates
and touches
base often
with the
managers of
otherfunctio
ns/processes
and the
business
head. If
functional or
processman
agers plot
strategy
independent
of each other
or the
businesshea
d, they open
the door for
uncoordinat
ed or
conflicting
strategies.”
2.
Coordinati
on and
Consistenc
y:
Thompson
and
Strickland
further point
out that
compatible,c
ollaborative,
mutually
reinforcing
functional
strategies
are essential
for the
overall
business
strategy to
have
maximum
impact.Plain
ly, a
business’s
marketing
strategy,
production
strategy,
financestrate
gy, customer
service
strategy,
new product
development
strategy, and
human
resources
strategy
should be in
sync rather
thanserving
their own
narrower
purposes.
Coordinatio
n and
consistencya
mong the
various
functional
and process
strategies
are
bestaccompl
ished during
the
deliberation
stage.
3.
Strategic
Choice:
 After the
pros and
cons of the
potential
strategic
alternatives 
have been
identified
and
evaluated,
and must be
selected
forimplemen
tation. By
now, it is
likely that
many
feasible
alternatives
willhave
emerged.
How is the
best strategy
determined?
Perhaps
two most
important
criteria
are:
i. The
capability of
the proposed
strategy to
deal with the
specificstrat
egic factors
developed in
the SWOT
analysis.
 
ii. The
ability of
each
alternative
to satisfy
agreed-on
objectives
withthe least
resources
and
the fewest
negative
side-effects.
4.
Developin
g Policies:
The
selection of
the best
strategic
alternative is
not the end
of
strategyform
ulation. The
organisation
must then
engage in
developingp
olicies.
Policies
define the
broad guidel
ines for
implementat
ion.Flowing
from the
selected
strategy,
policies
provide
guidance
fordecision
making and
actions
throughout
the
organisation
.
Policiestend
to be rather
long lived
and can even
outlast the
particular
strategy that
created
them.
Policies can
make the
implementat
ion of
specificfunct
ional
strategies
easier.
5.
Strategies
to Avoid:
Certain
functional
strategies
may prove
very
dangerous.
Hence,
theyshould
be avoided.
For example,
imitating a
leading
competitor’s
strategy
might seem
to be a good
idea, but it
ignores a
firm’s
particularstr
engths and
weaknesses
and the
possibility
that the
leader may
be wrong.
 
Function
al
Strategy –
 

Consider
ation
that Help
 
Strategist
s to
Achieve
Integratio
n
of Functi
onal
 

Strategies
The key
activities
performed
for the
implementat
ion of the
corporatean
d business
strategies
give rise to
functional st
rategies.
Thefunction
al areas in
any
organization
are, therefor
e, based on
thesegregati
on of the key
activities.Bu
t segregated
activities
need to be
brought
together,
since allactiv
ities are
performed
to achieve
the overall
objectives of
anorganizati
on.
Integration
of functional
strategies
provides the
meansfor
such
integration.

Mechanisms
that ensure
integration
can take the
form
of committe
es,consisting
of the top
management
and the
functional h
eads.
Thesecommi
ttees can be
entrusted
the
responsibilit
y of
integrating
thefunctiona
l strategies,
reviewing
strategy imp
lementation,
andsuggesti
ng
modification
s in view of
strategic cha
nges.
There are
certain
considerat
ions that
help strate
gistsachiev
e
integratio
n of
functional
strategies.
Theseconsi
derations
include:
1. Internal
consistency,
2.
Developmen
t of
organization
al
capability 3.
Trade-off
decisions4.
Intensity of
Linkages5.
Timing of
implementat
ion of
functional
strategies
1. Internal
Consistenc
y:
The
segregation
of key
organization
al tasks gives
rise to the
need
forinternal
consistency.
The internal
consistency
in the
various
functionalstr
ategies
ensures that
the different
functional
areas work
for
a singlepurp
ose. Absence
of internal
consistency
may lead to
a sub-
optimalimpl
ementation
of
strategy.For
instance, an
organization
pursuing a
strategy of
rapid
expansionth
rough
differentiati
on may
follow an
aggressive
marketing,
R&Demphas
izes on
operation, a
progressive
HR policy,
and a
conservative
financial
approach to
sources of
funds.
Among these
functional
areas,financ
e may cause
a problem as
a
conservative
use
of sources of
fundsmay
restrict the
options for
the
internal gen
eration of
resources.Th
e strategies
would be
consistent, if
the company
is able to
finance itsra
pid
expansion
through its
internal
sources
alone. But
internalsour
ces remain
inadequate
to finance
rapid
expansion.
Therefore, a
 

conservative
financial
strategy
would be
inconsistent
with
otherfunctio
nal
strategies.
2.
Developme
nt of
Organizati
onal
Capability:
The
development
of
organization
al capability
in terms of
strategic
orcompetitiv
e advantages
is relevant to
the
integration
of
functionalstr
ategies.
Synergies
occur across
functional
areas, and
corecompete
ncies emerge
as a result of
the
concentratio
n of
resources
tothe areas
where an
organization
desires to
create
strategic adv
antage. A
company
may desire
to be a
market
leader, a low
cost
producer,
atechnologic
ally superior
competitor,
or an ideal
employer.
Forachieving
these
objectives,
an
integrated
approach to
functionalstr
ategies
would be
necessary.Fo
r instance, a
company
that aims
to be a
market
leader would
have tooffer
best quality
products at a
competitive
price
through
an efficientd
istribution
network
supported
by an
aggressive
promotion
policy.The
functional
strategies
relating to
other areas
would have
tosupplemen
t these
marketing
strategies.
Thus the
development
oforganizati
onal
capability
depends on
the degree of
integration
offunctional
strategies.
3. Trade-
Off
Decisions:
The
formulation
and
implementat
ion of
functional st
rategies
involvetrade
-off
decisions.
Marketing-
orientation
in functional
strategies
insome way
contradicts
with
operations-
orientation.
For
instance,mar
keting
orientation
would
emphasize
low-volume
specializedp
roduction,
while
operations
would
require
large-
volume
production 
with lesser
product
variations.So
me sacrifice
in some
areas is
necessary
if emphasis
is laid on
otherfunctio
nal areas. In
fact, the
integration o
f functional
strategies
servesto
minimize
aberrations
due to trade-
off decisions
and optimize
theimpleme
ntation of
strategies.
 

4.
Intensity
of
Linkages:
The
intensity of
linkages
between
different
functional
areas is
animportant
consideratio
n in
determining
the level of
coordination 
between
functional
areas. For
instance, a
high capital-
intensive bu
siness with
high
manufacturi
ng costs
needs a
strong
linkage betw
een R&D
and
manufacturi
ng.This will
help in
developing
cost-saving
process
improvemen
ts.Similarly,
a low cost
strategy
would
require a
higher level
ofcoordinati
on between
marketing
and operatio
ns. However,
theintensity
of linkages
may vary
with the
requirement
s of strategy
fromtime to
time.
5. Timing
of
Implement
ation of
Functional
Strategies:
The timing
of
implementat
ion of
functional
strategies
must
bedesigned
so that they
mesh
correctly.
The different
functionalstr
ategies have
to be
implemente
d at the
appropriate
time so that
theycomple
ment each
other.For
instance, a
number of
computer
companies
attempted to
rush
intonew
products
with
marketing
programs
promising
more
than could
bedelivered.
Customers
were
anxiously
awaiting the
arrival of
their
newmachine
s before
production
was capable
of providing
the
necessaryout
put. So lead
times within
each
functional
area need to
beconsidere
d in relation
to one
another
before plans
are
implemente
d.Thus the
strategists
have to
consider the
above issues
to make
theimpleme
ntation of
functional
strategies
effective.
 

Function
al
Strategy –
 
Function
al
Impleme
ntation of
 

Strategies
(Policies)
 

In the
context of
strategic ma
nagement,
by the term
policy we
meanspecific
guidelines
for taking
managerial
actions and
decisions
forsuccessful
implementat
ion of the
corporate
strategy.
FollowingNe
wman and
Logan
(1971), we
may claim
that
a carefully
selectedpolic
y widens the
scope of the
corporate
strategy by
including
clarityin the
concept and
by
adding work
ability to the
system for
takingfuncti
onal
decision in
consistency
with the
overall
means.Buskr
ik (1971),
Thompson
and
Strickland (1
989) and
Alexander(1
983) have
also stressed
upon the
need for
factorization
of
corporatestr
ategy into
functional
policies.
According
to them,
designing
offunctional
policies is
needed to
limit
discretion,
appreciate
uniformityin
handling
similar
activities,
ensure
consistent
pattern ofor
ganizational
behavior,
reduce
uncertaintie
s in
repetitive
problems,dis
pose quickly
the routine
issues, avoid
hasty
decisions
during
theperiod of
transition
from the one
strategic pha
se to
another,
andprovide
a foundation
for superior
performance
.
1.
Productio
n
Policies:M
ajor
issues,
which a
production
policy sho
uld
address
toare the
followings:
(i)
Involvement
of the firm
in the
production
process(ii)
Selection,
installation
and
maintenance
of the
production
process(iii)
Installation
and
variations of
the
production
capacity (iv)
Selection of
plant
location(v)
Arrangemen
ts of new
and
replacement
of the
existing
productionfa
cilities,
and(vi)
Outsourcing.
Involvement
of the firm
in the
production
process has
two extreme
states. One
is the state
of complete
manufacturi
ng in
an integrate
d
 
 way both in
forward and
backward
directions
and
the other is
the stateof
complete
buying with
firm’s
identity
labelled
before
selling.
Twiss(1977)
examined in
details
different in-
between-
states
of productio
n.His
identificatio
n is in terms
of self-
arrangement
of material
inputs,manu
facturing of
standard
parts,
manufacturi
ng of minor
non-
standard
parts,
manufacturi
ng of major
nonstandard
parts,
assemblyope
ration of
components
and external
purchases. A
ccording to
Twiss (1977),
justification
for
investment
in
productionsi
s needed
when the
organization
wants to
make rather
than
buydifferent
parts. The
cost of
manufacturi
ng, the
degree of
dependence,
development
of core
competence
and
special quali
ty
requirement
arethe four
consideratio
ns based on
which the
organization
can
comparethe
make and
buy
alternatives
and decide
about the
degree of its
directinvolve
ment in the
production
process.Som
e
organization
s start with
selling the
externally
purchased
items. After
being able to
enjoy
a sizeable
market, they
start doing
theassembly
operation of
the
externally
purchased
components.
Furtherexpa
nsion of
their activity
leads to
manufacturi
ng of non-
standardmaj
or
components.
In this way,
these
organization
s start
increasing th
eir
independenc
eand
develop core
areas of
operation.
This
backward
movement,
in thenext
state, leads
to making of
minor
special comp
onents.
Someorganiz
ation even
goes for
manufacturi
ng standard
parts
whereecono
mies of scale
can be
enjoyed.
There are
product
fields
wherearrang
ement of
materials
draws the
attention of
production
planners.Pro
ducers of
edible oil
may take
interest in
growing see
ds
throughown
managed
cultivation,
and of fruit
canning firm
s may like
tomaintain
own
orchards.
Similarly,
metal manuf
acturers may
operatemine
s to extract
ores by
themselves.
The polar
opposite
situations
also arise.
For example,
someorganiz
ations start
with dealing
in
different ma
terials.
Realizing
theneed for
value
addition,
and
developing
the requisite
financial and
 

skill base,
they go for
manufacturi
ng standard
parts where
the
keyfunction
is
production
rather than
marketing. T
hese
organization
s basically
move in the
forward
direction
and may, at
the end,
startdoing
the rest of
the work.
When
the capacity
restriction
leads
torefusal of
customers’
demand,
they go for
external
purchases.T
hus, there is
no hard and
fast rule
of increasing
or
decreasing
one’sinvolve
ment in the
production
process.
Depending
on the
nature ofthe
product field
and the
position of
the firm, it
may decide
its
ownproducti
on policy.
One may
also think of
both
contractual
and self-
manufacturi
ng to ensure
timeliness,
independenc
e and
corecompete
nce
(COSMETIC
).In this type
of
integration, t
he concepts
of both
making and
buyinghave
been
propounded.
Such firms
are in favor
of
an ideal/opti
malmix of
make and
buy
decisions for
every stage
of productio
n.COSMETI
C
integration
can offer
better
coordination
,
qualityassur
ance and
cost
management
, greater
independenc
e and
lesserdegree
of
uncertainty.
Further, it
provides
with scopes
for
retention ofe
xternal
relationship
and
maintenance
of standards
for
externalnego
tiations and
internal
evaluations.
Choice of
production
process
mainly
includes
choice of
technology
andchoice of
facilities. For
some
industries,
this choice is
very limited.
Butfor a few
others,
alternative
technologies
do exist and
the firm
has tomake
the proper
selection. It
is also
important
to decide on
factorintensi
ty and
degree of
automation.
At the time
of taking the
latterdecisio
n, planners
have to take
into
consideratio
n response
of
theexisting
workforce.
Many of the
automation
moves have
failed in
thepast due
to
incomplete
communicat
ion from the
top and
resistancefro
m the
bottom.The
problem of
capacity
planning
gives rise to
several
policy
issues.One
has to
estimate the
normal
period
requirement
s and the
peakperiod
requirement
s, keep
provisions
for future
growth in
demand
andarrange
for balanced
facilities.
There are
two types of
policy
decision –
 

one is to
minimize,
if not
eliminate
adjustments
in capacity
and theother
one is to
adjust
capacity
as per
market
demand.In
the former
case,
keeping of
output stock,
refusal of
demand,allo
wing
customers to
be in the
waiting line,
and allowing
the price
to vary or
any
combination
of these four
policies
may be
preferred
tomaintain a
near
constant
rate of
production.
To
accommodat
e variations
in capacity,
one
may resort
to additional
productiont
hrough
overtime
works,
subcontracti
ng, buying
or any
combination
of these
three
approaches.
Selection of
plant
location
assumes
importance
when an
organization
opts for
internal
growth
strategy but
its existing
facilities
cannotsuppo
rt the
increased
rate of
production.
This
problem of
choice
oflocation is
very
important
for
transnationa
l companies
who may
preferto
carry out
manufacturi
ng only at
a few places
having
locationalad
vantages and
transhift the
products to
all the global
markets.Cos
t of
production
and
transportati
on are
important o
bjective
factorsthat
regulate the
strategic
choice of
plants.
Besides,
there
aresubjectiv
e factors
governing
the choice of
location.
For example,
availability
of skilled
hands,
prevailing
wage rate,
politicalenvi
ronment,
absenteeism
etc. are the
key
subjective
factors,influ
encing plant
choice.Select
ion,
maintenance
and
replacement
of
equipment
and
otherproduc
tion facilities
are
important
policy
decisions
that
canstrengthe
n the long-
term ability
of a firm to
compete in
the
marketand
realize the
corporate
objectives.
Quality of
the
processingeq
uipment can
help in
gaining com
petitive
advantages
and should
betaken note
of. It is the
quality of
the
equipment,
which gets
reflected
inthe quality
of the final
product.Furt
her,
equipment
must be cost
effective and
should be
based on
thepresent
State-of-
Art.
Maintenance
of
equipment,
if
properly don
e,
canincrease
the lives of
the
equipment
and their
performance
s. Preventive
 

maintenance
can increase
machine
availability
time, and
minimize
the bottlenec
ks in
assembly lin
e balancing,
arising out
of sudden
failures. Ano
ther key area
where
attention
should be
given is
outsourcing.
Choices
about the
vendors and
their
development
s are
importantde
cisions,
which goes
beyond cost
and
availability.
It is
essential
tomaintain
close
relationship
for mutual
benefit.
Related
issues are
themode of
transportati
on (by rail,
road or air),
the speed of
delivery
andthe lead-
time.
2.
Marketing
Policies:
Following
Lazer and
Kally (1962),
one can
identify
three
categories
ofmarketing
decisions.
Firstly, we
are
concerned
with product
mix andor
service mix
along with
the complete
package
of offer.
Secondly,
weare
concerned
with either
the
distribution
mix in terms
of channels
ofdistributio
n and actual
physical
distribution.
Lastly, we
are
concerned
with the
communicat
ion mix
covering
alltypes of
promotional
communicat
ion for
creating
awareness
andfacilitati
ng
penetration.
According to
McCarthy
(1964),
decision vari
ables are
expressible
in terms four
P’s namely
Product,
Price,
Placeand
Promotion
and a
combination
of
strategic dec
isions on P’s
isknown as
marketing
mix of the
firm.If the
marketing
mix of
the firm
does not
support and
is
not supporte
d by other
functional
policies like
production
and financial
policies,
thenthe
corporate
objectives
cannot be
met. It
is therefore
important
tointeract
with other
functional
areas for
arriving at
the
marketing
mix.Marketi
ng head
should
specify
which
products are
to be
expanded.
Butthis
requires
views of the
R&D wing,
in case the
product
concept is
anew one,
and the
views of the
production
wing, in case
expansion
incapacity is
needed. On
many
occasions,
expansion in
volume
ofoperation
may reduce
the profit. A
clearance is,
therefore,
neededfrom
finance wing
of the firm
for operating
at super
optimal
level.
 

 According
to Frain
(1981),
the four P’s
concept of
McCarthy is
anoversimpl
ification of
the
marketing
operation.
Depending
on the
nature of
the
product
field, it
may
presentthe
key issues
of the
marketing
operation
as follows:
(i)
Marketing
research,(ii)
Production
planning
and
development
including
packaging
and brandin
g,(iii)
Pricing
decision,(iv)
Distribution,
(v)
Marketing
communicat
ions
including
personal
selling,
advertisinga
nd sales
promotion,
and(vi) After
sales
service.Mixi
ng these
ingredients
within a
policy
framework,
to achieve
thecorporate
objective,
gives rise to
marketing
policy. It is
easy to
notethat the
nature of the
product will
influence the
balancing of
theingredien
ts. Further,
the concept
of a mix
suggests that
the
relative weig
htage of
different
ingredients
may vary
from time to
timedependi
ng on the
changes in
the external
environment
and internal
capabilities.
Thus, the
marketing
policy must
be dynamic
and
notstatic.In
case of
production
policy, we
have already
seen that a
relativelystat
ic policy is
preferred. In
this sense,
marketing
policy
formulation
isdifferent
from that of
production
policy
formulation.
The
dynamicity
of marketing
policy
stresses
upon the
need
forcontinuou
s marketing
research.
Under
marketing
research,
the
organizati
on is
interested
infinding
answers to
a number
of queries
as listed
below:
 

(i) Who are

the current
users of
our product?
Who are the
potentialuse
rs?(ii) From
where do
they buy the
product, and
when do
they buy
theproduct?
(iii) What is
the size of
the total
market?
What is our
market
share?(iv) Is
the market
growing,
static or
shirking in
size?(v)
What is the
degree of
customer
satisfaction?
(vi) If
customers
are not
satisfied, can
we improve
the product
fortheir
satisfaction?
(vii) What
new
products can
be
introduced?
(viii) How
can the
customers
be informed
about the
products?
Howcan we
motivate
them to buy
our
products? Al
l these
questions
may not be
relevant.
Depending
on the
type ofcorpo
rate strategy
adopted by
the firm, one
has to
modify the
abovelist
and work
out the
marketing
policy based
on the
answers
received.Ma
rketing
communicat
ion typically
comprises
advertising, 
salespromoti
on and
publicity.
Mass
communicat
ion is
needed for
massselling.
Personal
selling needs
two- way
communicat
ions. The
functionof
personal
selling is to
get sales
orders.
But this is an
exception
thanthe rule
for mass
selling. For a
rapid turnov
er consumer
product,mar
keting
communicat
ion should
receive the
highest
attention of
thepolicy
makers and
its priority
should be
significantly
higher than
thatof
personal
selling.For
durable
consumer
products,
the nature of
attention
and
priorities wil
l be similar.
However, for
the former
case
continuous
marketingre
search
assumes lot
of
importance
and for the
latter case
continuous
marketing
research is
not so
important.
For
industrial
consumptio
ngoods,
personal
selling
draws
maximum
attention.
 

But
marketing
communicat
ion becomes
a non-issue.
So is the
case formark
eting
research.
For
industrial
durable
products,
personal
sellingis
having the
highest
priority.
Marketing re
search and
marketingco
mmunicatio
n also
receive due
attention.In
case of
advertising
as a method
of
communicat
ion, crucial
policydecisio
n relates to
choice of
media.
While
economies
of media is
animportant
factor, the
type of
people using
the media
and the
conditionun
der which
the media is
used are also
very
important
for
making acho
ice.Magazine
s,
televisions,
outdoor
media,
radio,
cinema,
national pre
ssand
regional
press are the
basic media
that one can
opt for in a
pure
ormixed
form. The
extent of
repetition,
and the
number of
insertions
etc.are the
decision
problems
that follow
the choice of
media
decision.In
case of
personal
selling, face-
to-face
communicat
ion,
electronicma
il
communicat
ion,
telephonic
communicat
ion and
communicat
ionthrough
corresponde
nce are the
alternative
modes of
operation. It
can be
carried out
on the
organization
’s own
premises, on
the
clients’premi
ses or in
exhibition
selling.
While cost of
personal
selling
ishigher
than
advertising,
the
information
feedback is
worth
paying
theadditiona
l
amount.The
other
important
policy
decision
relates to
choice of
channels.Uti
lity of place
and utility of
time of a
product or a
service are
provided by
this physical
process of
distribution.
From
place and
time
utilities,one
can identify
the
transportati
on element
and
warehousing
elementof
decision
making.
Storage
often makes
up
for economi
es
inproduction
and takes
care of
uncertainty
and
seasonality
of
demand.For
some items,
storage
improves the
quality of
product
(e.g.,
cheese, wine
, timber).For
rapid
turnover con
sumer
products,
availability
should
preferably b
e made
through a
variety of
retail
outlets. For
durable
consumergo
ods,
specialist
outlets are
needed
where
specialized
information
about the
products
and after
sales service
are available
to the users.
 

For
industrial
consumptio
n goods,
there can be
numerous
ways
ofensuring
distribution.
There may
be direct
distribution
via
engineers’m
erchants and
suppliers,
and through
dealers. For
industrial
durableprod
ucts, direct
distribution
to the users
is in
practice. It
is preceded 
by lengthy
negotiations
on
specification
and
performance
.Thus,
channel
choice is
dependent
on the
nature of the
product
andthe size
of the
market. It
is also
dependent
on the
distributiona
lemphasis
given by the
organization
. Some
organization
s may
beinterested
in limited
coverage
and some
others may
be interested
inlarge-scale
penetration,
i.e., wide
coverage.Th
e concept of
multiple
channels or
dual
distribution
is also
gettingappre
ciation in
today’s
competitive
market. By
dual
distribution
wemean two
or more
channels for
two or more
grades of the
sameproduct
. For
premium
items, there
may be
exclusive
and
limitedcover
age, and for
items in the
lower
range of
price
bracket,
there may be
penetration
type of
distribution.
This is so
because the
superior
grades are
meant for
a small
marketsegm
ent and the
inferior
grades are
meant
for mass
market.
Asomewhat
similar is the
concept of
parallel
channels.
Parallelchan
nels, like
multiple
channel or
dual
distribution,
use
multipledistr
ibution
networks.
But these
networks are
meant for all
the
grades.They
run parallel
to each
other. For
example,
one may use
traditionaldi
stribution
channels,
and along
with that,
establish
own sales
centresat
selected
geographical
regions. Ade
quacy of
the sales
force in
respect of
size and skill
is to
beexamined
before
entering into
a new
market or
for operating
in anexisting
market with
greater
emphasis or
for offering a
new product
inthe
market.
Number of
sales
persons
should be
neither more
nor less.It
should be
just
sufficient to
implement
the sales
policy of
theorganizat
ion.They
need to be
properly
skilled and
trained so
that they can
alsounderta
ke that non-
sales
activity.
Other than
merchandisi
ng function,
 

sales person
has to keep
liaison with
technical
personnel,
participatein
value
analysis
programmes
, collect
market
information
and act
ascustomers’
business
advisory.
They are the
persons who
link
the benefits
of the
product to
the needs of
the buyers
and carryout
the vital
strategic
function.
3.
Financial/
Accountin
g Policy:
 According
to some
experts,
starting
point of an
organization
is moneyand
the end
point of that
organization 
is money
again. They
are atleast
partially
correct. No
organization
can run the
existing
business wit
hout cash in
hand. Furthe
r, generation
of
additional fu
nd can
onlypromote
a new
expansion
project.
Following
is a list of
some
standard
questions,
which are
to be
examined
by the
financial
planners
for
drawing
the
policy fra
mework:
(i) From
where do we
propose to
get
additional
funds
to grow –
internally or
externally?
(ii) If the
answer is
internal sour
ce, will this
affect the
performance
ofthe
existing
business?
(iii) If the
answer to
question
(i) is
external
source, how
do we
proposeto
mobilize
that
additional
fund?(iv)
What policy
on capital
structure do
we propose
to follow?
Minimum
debt or
highly
leveraged
structure?(v)
How much
liquid cash
or current
assets do we
propose
to keep
inhand?(vi)
What will be
the effect of
growth
on cash
flow?(vii)
What
accounting
system and
policy do we
like to use?
 
(viii) What
austerity
measures
are to be
undertaken
for
generatingm
ore funds?
(ix) What
financial
measures
are to be
taken
against loss
makingunits
?(x) To
whom we
propose to
sell the loss
making
units?
And how? W
hile most of
the question
s are
meaningful
for growth
or
stablegrowth
strategy, a
few
questions
are related
to
turnaround
andretrench
ment
strategies.
Mainly, one
is concerned
with
generation
ofresources,
mobilization
of resources,
structuring o
f
resources,all
ocation of
resources
and proper
utilization of
resources.So
urces of
finance and
capital
structure
are the
important
dimensionso
f financial
policy. The
external
generation
of fund may
arise
out ofowners
hip capital
and or
borrowed
capital. A
Company
may
issueequity
shares and
or
preference
shares for
mobilizing
ownershipca
pital.
Preference
shareholders
, as the
name
stands, enjo
ypreferential
rights in
respect of
dividend
and return
of capital.
Holdersof
equity
shares do
not enjoy
any such
special
right regardi
ng
dividendand
return on
capital.Ther
e are
different
types
of preferenc
e shares like
cumulativec
onvertible
preference
shares,
which are
convertible
into equity
shares betwe
en the end of
the third
year and the
fifth year.
Rate of
dividendpai
d till
conversion
into equity
shares
remains
constant.
Debentureso
n the other
hand, are
issued to
raise
borrowed
capital.
These are
of varying
terms and
conditions in
respect of
interest rate,
conversionin
to shares
and return
of
investment.
Public
deposits, for
a fixed time
period, have
become a
major source
of short and
medium
term
finance.
Organization
s may offer
higher
ratesof
interest than
banking
institutions
to attract
investors
and
raisefund.
The other
sources of
short-term
finance are
overdraft
and
cashcredits,
bill
discounting,
and bank
loan
and trade
credit.
 
 Along with
the
mobilization
of funds,
policy
makers
should
decide onthe
capital
structure to
indicate the
desired mix
of equity
capital
anddebt
capital.
There are
some norms
for debt –
equity
ratio. These
areaimed at
minimizing
the risks
of excessive
loans. For
public
sectorcompa
nies, the
norm is 1:1
ratio and
for private
sector
companies
thenorm is
2:1 ratio. For
capital-
intensive ind
ustries the
proportion
ofdebt to
equity is
much
higher.
Similar
is the case
for high cost
projectsin
priority
sectors, and
projects
in under
developed
regions. Ano
ther
important
dimension
of financial
policy is
investment
andfund
allocation
decisions. A
planner has
to frame
policies
forregulatin
g
investments
in fixed
assets and
for
restraining
of
currentasset
s.
Investmen
t
proposals,
mooted by
different
business
units,may
be divided
into
three grou
ps as
indicated
below:
(i) Proposal
for addition
of a product,
(ii) Proposal
for
increasing
the level of
operation of
an existing
productthro
ugh
increased
capacity,
and(iii)
Proposal for
cost
reduction
and
efficiency
escalation.Pr
oposals are
then
evaluated by
making
within group
comparison
inthe line of
capital
budgeting.
Thus,
project
evaluation
and
projectselect
ion are the
two most
important
jobs of
fund allocati
on
underresour
ce
constraints.
The concept
of Net
Present
Value and or
InternalRate
of Return
can be
employed
for the
purpose of
evaluation.D
ividend
policy is
another
important
area for
making fina
ncial
policydecisio
n. It deals
with the
extent of
earnings
to be
distributed
asdividend
to
shareholders
and the
extent of
earnings to
be retained
inthe firm
for future
expansion of
activities.
From the
point of view
oflong term
funding of
business
expansion,
dividend
may be
consideredas
that pan of
total
earnings, wh
ich cannot
be profitably
utilized by
thefirm.
 

Stability of
the dividend
payment is a
desirable
consideratio
n that
canhave a
positive
impact on
share price.
The policy
of paying a
constantperc
entage of net
earnings
may be
preferable
from the
point of view
offlexibility
and ability
of the firm.
Some
companies
follow a
thirdalternat
ive.They pay
a minimum
dividend per
share and
additional
dividend wh
en earnings
are higher
than the
normal
earnings. In
actual
practice,rein
vestment
opportunitie
s and
financial
needs of the
firm
and theshare
holders’
preference
for dividend
income
against
capital
gainsresultin
g out of
share prices
are
taken into
consideratio
n for
arrivingat
the dividend
policy.
Alternatives
like cash
dividend
and
stockdividen
d are also
examined
and an
optimum
mix is
struck out.
4.
Personnel/
Human
Resource
Policy:
Successful
implementat
ion of
corporate
strategy
requires
ameticulousl
y drawn
personnel/
human
resource
policy.
In fact,
any weaknes
s in
personnel/
human
resource
policy may
weaken
theeffectiven
ess of all the
functional
policies.
Major
policy
issues that
draw the
attention
of the
personnel
planners
are the
followings:
(i)
Recruitment
of personnel,
(ii)
Promotion
and transfer
practices,
(iii) Training
and develop
ment of
employees,
and(iv)
Relationship
with the
employee
unions.Recr
uitment
policy is one
and the most
important
policy
for theorgani
zation as a
whole. There
are two
aspects of
recruitment.
Onedeals
with the size
of the
workforce to
ensure that
the required
size is being
met. Quality
is the other
aspect.
Quality of
the workers,
i.e., theskill
and
competence
of the
workers,
need to be
closely and
thoroughly e
xamined
during the
phases of
recruitment
and training.
 

 According
to Yoder
(1972),
recruitment
policy is a
two Q policy
whereQ1
stands for
quantity of
recruitment
and
Q2 stands
for
qualification
of choice.
Sources of
recruitment
vary from
external
sources
tointernal
sources. The
use of
internal
sources that
is
recruitment 
ofpersons
already
there in the
payroll of
the company
may
motivate
theemployee
s by offering
a brighter
future.This
may reduce
the
employee
turnover,
minimizing t
hereby the
costof
recruitment
and training.
But a
complete
inbreeding is
also notgood
for the
company.
Recruitment
from
external
sources
infuses
newapproac
hes, new
ideas and
new culture.
As a result,
striking a
balance betw
een these
two sources
is very much
needed to
enjoy the
benefit
of both these
sources and
to eliminate
their
respective
limitations.P
romotion
policy of an
organization
should be
based on
both
seniorityand
merit and
should
develop the
career paths
in such
a way
thatemploye
es get
motivated to
remain in
the
organization
.
Exceptional
performers
should also
be allowed
to move
up the
hierarchical
ladderat a
faster rate.In
the context
of
strategic imp
lementation,
which may
requirestruct
ural change,
the scopes of
vertical
promotion
and
horizontaltr
ansfer need
to be very
high. Under
the
leadership
implementat
ion,strategis
ts are
matched
with
strategies. In
a similar
way,
duringperso
nnel policy-
making
employees
are to
be matched
with
bothdivision
al strategies
and
functional
strategies. A
planned
transfer
canenrich
the
experiences
of the
employees
and thereby
increase
theirpotenti
alities.To
bridge the
gap between
the existing
performance
level and
theexpected
performance
level and to
induce
higher skill,
efficiency
andknowled
ge,
organization
s draw plans
for training
and
development
oftheir
employees.
While
training is a
short- term
process
for increasin
gskills of
employees
with a
prefixed
purpose,
development
is a
longdrawn
process
through
which
employees
make
systematic
 

improvemen
t by
acquiring
knowledge
and
experiences
for
generalpurp
oses.The
policies on
employees’
training and
on
management
development
have
different
objectives.
Training
being short-
term process
can benefit
the strategic
implementat
ion
programmes
and there
can
bespecific
training
programmes
for
specific strat
egies. But
management
development
policy works
across
strategies
and strength
ens
thegeneral
capability of
the
organization
.The union-
management
relationship
is a vital
factor that
can influenc
enot only the
functional
policies but
also the
business
performance
s. Ifthe
bargaining
power of the
employees’
union
increases the
role of
themanagem
ent declines
and the
company’s
internal
environment 
becomes a
politicized
one.It is also
not desirable
that the
management
adopts a
hostile
attitudetowa
rds the
employees’
union. This
results
in mutual
mistrust,incr
ease in
industrial
disputes and
reduction
in efficiency.
The
idealrelation
ship is a
straightforw
ard business
relationship
with the
unionleaders
and all
should act
based on
maturity,
rationality
and
solidarity.
Other
Policies:
Research
and
development
policy and
the logistic
policy are
the twoother
important
policies that
the
functional
planners
should work
outduring
the stage of
strategic
implementat
ion.
Important
issues for
R & D are
listed
below:
(i) What new
R&
D projects
are
necessary to
facilitate the
growth ofthe
company?
(ii) Should
we assign
some of
these
projects to
outside
groups?(iii)
How much
money
should be
spent on R &
D activities?
Regarding
the
logistics,
crucial
questions
are the
following:
 

(i) What
should be
the
categorizatio
n of items
consumed
by
thecompany
during its
operation?
Should it be
based
on annualco
nsumption
value or
technical
importance
or speed of
movement?
(ii) What
should be
the ordering
policy for
the non-
critical low
costitems?
What should
be the
ordering
policy for
the
critical high
valueitems?
What should
be the policy
for in-
between
items?(iii)
What
criterion
should be
followed by
the company
for
vendorselect
ion?(iv)
What should
be the role of
the company
in vendor
development
?
 

Function
al
Strategy –
In
 

Different
Functiona
l
Areas:Ma
rketing,
Finance,
Operation
s and
Human
Resource
1.
Functional
Strategies
in
Marketing:
The
marketing
function
plays a
significant
role of
profitably
bringingabo
ut the sale of
products/ser
vices in
target
markets for
theachievem
ent of
business’s
goals.
Functional
strategies in
themarketin
g area
should guide
this effort in
a manner
consistent
withthe
basic
strategy and
other
functional
strategies.Ef
fective
marketing
strategies
guide
marketing
managers
indetermini
ng who will
sell what,
where,
when, to
whom, in
whatquantit
y, and how.
Marketing
strategies
must
therefore
entail
fourcompon
ents-
products,
price, place
and
promotion. 
A marketing
functional
strategy for
the product
component
shouldclearl
y identify
the customer
needs the
firm seeks to
serve with
itsproduct
and/or
service. An
effective
functional
strategy for
thiscompone
nt should
guide
marketing
managers in
taking
decisionsreg
arding
features,
product
lines,
packaging,
accessories,
warranty,qu
ality, and
new
product deve
lopment.
 
This strategy
should
facilitate
a comprehen
sive
statement of
theproduct/
service
concept and
the target
market(s)
the firm
aims
toserve.
This, in turn,
develops
consistency
and
continuity
in the day-
to-day
activities of
the
marketing
area.The
functional
strategy for
the place
component
clarifies
where,
when,and by
whom the
product/serv
ices are to be
offered for
sale. The
mainconcer
n here is the
channel(s)
of
distribution
that ensure
consistency 
with the
total
marketing
effort.The
promotion
defines the
manner in
which the
firm
willcommun
icate with
the target
market.
Functional
strategy for
thepromotio
n should
provide
basic
guidelines
for the
appropriate
use andmix
of
advertising,
personal
selling, sales
promotion,
and
mediaselecti
on. The
promotion
effort must
be
consistent
with
othermarket
ing strategy
components,
and closely
integrate
with
financialstra
tegy Functio
nal strategy
concerning
the
price compo
nent is
perhaps
themost
important
consideratio
n in
marketing.
The Price
functionalstr
ategy
influences
directly the
demand
and supply,
profitability,
consumer
perception,
and
regulatory
response.
The
approach
topricing
strategy may
be cost,
market, or
competition
oriented.
Withthe
competition
oriented
approach,
pricing
decisions
center
aroundthose
of the firm’s
competitors. 
While with a
cost-
oriented app
roach,
pricing
decisions
center on
totalcost and
usually
involve an
acceptable
markup or
target price
ranges.Prici
ng is based
on consumer
demand
when the
approach is
marketorien
ted. While
one
approach
may
predominate
in a firm’s
pricingstrate
gy, the
strategy is
always
influenced
to some
degree by
the
otherorienta
tions also.
2.
Functional
Strategies
in Finance:
 While most
operating
strategies gu
ide
implementat
ion in
theimmediat
e future, for
financial
functional
strategies
the time
frame
 

 varies
because
strategies in
this area
direct the
use of
financialreso
urces in
support of
the business
strategy,
long-term
goals,
andannual
objectives.Fi
nancial
operating
strategies
with longer
time horizon
provideguid
elines to
financial
managers in
long-term
capital inves
tment, useof
debt
financing,
dividend
allocation,
and the
firm’s levera
gingposture.
Operating
strategies
designed to
manage
working
capital
andshort-
term assets
have a
more immed
iate
focus.Long-
term
financial
strategies
usually
guide capital
acquisition
in thesense
that
priorities
change
infrequently
over time.
The desired
levelof debt
versus
equity
versus
internal
long-term
financing of
businessacti
vities is a
common
issue
in capital
acquisition
strategy. An
other
financial
strategy of
major
importance
is capital
allocation.Gr
owth-
oriented
grand
strategies
generally
require
numerous
majorinvest
ments in
facilities,
projects,
acquisitions,
and
/or people.
Theseinvest
ments
cannot
generally be
made imme
diately, nor
are
theydesired
to be.Rather,
a capital
allocation
strategy sets
priorities
and
timing for
theseinvest
ments. This
also helps
manage
conflicting
priorities
amongopera
ting
managers
competing
for capital
resources.St
ability or
retrenchmen
t generic
strategy
often
requires
a financialstr
ategy that
focuses on
the
reallocation
of existing
capital
resources.Th
is may
require
pruning
product
lines,
production
facilities,
orpersonnel
to be
reallocated
elsewhere
in the firm.
The
overlappingc
areers and
aspirations
of key
operating
managers
develop
anemotional
setting.
3.
Functional
Strategies
in
Operations
:
Operations
management
is the core
function in
the business
firm. It isthe
process of
converting
inputs
into value-
added
output.
Thisfunction
is most
easily
associated
with
manufacturi
ng firms.
However,
 
it applies
equally to all
other types
of
businesses
including
service
andretail
firms.Operat
ions
functional
strategies
must guide
decisions
concerning
the basic
nature of the
firm’s
operations
system,
seeking an
optimum bal
ance
between
investment
input and
operations,
output
andlocation,
facilities
design and
process
planning
on a short-
term
basis.The
facilities and
equipment
component
of
operations
strategyinvol
ves decisions
regarding
plant
location,
size,
equipmentre
placement,
and facilities
utilization
that should
be
consistent
withgrand
strategy and
other
operating
strategies.Th
e purchasing
function is
another area
to
be addressed
in
theoperation
s functional
strategy that
answer
questions
relating to
thenumber
of suppliers,
the criteria
to be used
in selecting
vendors,
thepurchase
s made in
terms of
volume and
delivery
requirement
s tosupport
operations.
If such
answers are
critical
to the
success of
agrand
strategy,
functional
strategy
guidelines
improveimpl
ementation.
Operations
functional
strategies
provide
guidelines
for
ongoingoper
ations and
encourage
efficient
organization
of
operationalr
esources to
match long-
range overall
demand.
Often this
componentd
ictates
whether
operations
will be
demand
oriented, inv
entoryorient
ed, or
subcontracti
ng
oriented.If
demand is
cyclical or
seasonal, the
operations
strategy
must
ensurethat
operations
processes
are
efficiently
geared to
this pattern.
Ifdemand is
less cyclical,
a firm might
emphasize
producing
toinventory,
desiring a
steady level
of
production
and
inventories.
Whendeman
d
fluctuations
are less
predictable,
many firms
subcontract
tohandle
sudden
variations in
demand
while
avoiding idle
capacity
andexcess
capital
investment.
Thus an
operations
strategy
should guide
in decisions
relating to
theappropri
ate
inventory
level,
purchasing
procedure,
and level of
quality 
 

control,
trade-off in
emphasizing
cost versus
quality in
operations,
thecritical
level of
productivity,
the
production
schedule
and the
criteriafollo
wed in
adding or
deleting
equipment,
facilities,
shifts, and
people.Oper
ations
functional
strategies
must be
coordinated
with
marketingstr
ategy if the
firm is to
succeed.
Careful
integration
with
financialstra
tegy
components
such as
capital
budgeting
and
investmentd
ecisions and
the
personnel
function are
also
necessary.
4.
Functional
Strategies
in Human
Resource:
Organization
s have
responded
with
different
strategic
measures
toadapt to
the changing
external
environment
. Now it is
widely
acceptedthat
integration
of HR
strategy with
business
strategy is
significant
fororganizati
onal success.
HR strategy
that is
embedded in
businessstra
tegy of the
organization
not only
serves
to achieve
theorganizat
ional
objectives
but also
grows up as
a key
resource
forcompetiti
ve
advantage.F
undamental
changes in
the business
environment
have created
asudden
shift in focus
of HR
function.
These
changes
include:
a. Rapid rate
of business
change
resulting
high uncerta
inty  b.
Raising
costs,
increasing
competitive
pressures
and
marginsc.
Rapid
technologica
l change:
increasing
demands for
new
skillsthroug
h
resourcing,
education
and
retraining.d.
Flatter,
leaner and
more flexible
organization
se. Changing
demographi
cs, limited
labor
availability f.
Responding
to external
forces:
legislation
and
regulation,
litigation,uni
on relations
and union
avoidance
etc.