Functional Level Strategy – Definition, Types & Examples

By | January 5, 2022

How do you achieve your annual organizational goals? Have you just set an annual figure and started chasing it blindly? Or, do you set your milestones semi-annually, monthly, weekly, or even daily? Which is the right way to achieve your long-term goals? Obviously, setting short-term goals is a better approach to achieving larger targets.

In addition, you will also need a strategy for managing these routine or day-to-day functional level tasks. In business terms, you need a functional level strategy. Want to know more about it, its types, importance, and real-life examples? Well, if you do, keep reading!

What is a Functional Level Strategy?

A functional-level strategy is a plan of action to achieve short-term, routine, or day-to-day business goals to support  enterprise and  business- level strategies . Basically, a functional level strategy helps a business to manage its daily or routine operational activities.

It is important to note that a functional level strategy involves several operational or functional areas such as marketing, HR, production, R&D, sales, etc. In addition, each functional unit generally develops its own functional strategy.

A functional level strategy should have the following ingredients:

  • This should reflect the company and business level goals/goals.
  • This should ensure optimal allocation of resources across all functional areas/units.
  • Last but not least, functional level strategies need to maximize coordination between all functional areas to optimize their results.

Why is Functional Level Strategy Important?

Functional level strategy is important for any organization for the following reasons;

  1. It serves as a stepping stone to achieving enterprise and business level goals.
  2. Functional level strategies help in developing layouts for performing daily/routine business operations.
  3. It acts as a binding force in any business; integrate various functional/operational departments such as HR, marketing, sales, R&D, production, customer relations , etc.
  4. Functional level strategies are more pragmatic/practical and help in dealing with every practical scenario at the micro level (within an organization).

Functional Strategy Features

Following are some of the important features of a functional level strategy:

  • Compared with the  strategy of  the business or  enterprise , functional level strategies are short term.
  • It lays out the layout of what the business must do to make the grand strategy work.
  • The basic goal of any functional level strategy is to ultimately pursue the company’s strategy.
  • It deals with the departments, functions, and divisions of the organization.
  • Functional level strategies also address sub-functional areas (if any).
  • Each functional unit or department develops its functional strategy based on higher-level guidelines.
  • Functional-level strategies are at the end of the hierarchy. They support a business-level strategy, which in turn supports a corporate-level strategy.
  • The functional level strategy mainly focuses on  the external environment .
  • Functional level strategies may vary for the same organization in different locations. i.e. different business units/ franchises in different regions/cities/states.
  • The functional strategy of each functional unit must have  a  strong integration between each other to meet the overall company goals.

Functional Level Strategy Factors

Alignment

As we have already mentioned, functional level strategies must align with business and corporate level strategies. If the company’s goal is to increase profits, then business and functional level strategies are very suitable for it.

Integration

It is mandatory to apply the functional level strategy horizontally. This helps in integrating different functional units to produce better efficiency.

Existing Resources

Each department, division, or functional unit must have sufficient resources such as capital, labor, etc., for the implementation of the functional level strategy.

Progress

Measuring the effectiveness  of functional strategies can be very challenging due to information overload. Therefore, it is very important how and what kind of data should be tracked to evaluate whether there is progress or not.

Types of Functional Level Strategies With Examples

There are main types of functional level strategies, including;

Marketing strategy

Marketing has developed as one of the most important functional units in any organization. Although marketing is a broad field in itself, it basically focuses on identifying the needs of the target audience and then offering products or services to fulfill those needs. A marketing strategy consists of different parts, but the marketing mix (product, price, place, promotion) is arguably the most important.

Today there are several marketing techniques, including  relational marketing, social marketing, place marketing, people marketing, direct marketing, etc.

Now, if an organization’s enterprise-level strategy focuses on Quality, Delivery, and Efficiency, here’s how the different departments of the organization respond.

Example

QualityOffer useful posts.
DeliveryReact timely to changing seasonal customer requirements.
EfficiencyTarget the right audience for your upcoming/next marketing campaign.

Financial Strategy

Financial strategy relates to each section/area that is under financial management. This strategy mainly focuses on planning, acquiring, using, and controlling the company’s financial resources. If we dig deeper, financial strategy has to do with issuing/raising capital, asset acquisition , investment, budgeting, working capital management, fund implementation, dividend payment , etc.

Example

QualityEntering information and passing it on to other functional units with minimal or no errors.
DeliveryEnsure real-time data access.
EfficiencyAutomation of accounting /financing processes .

Production Strategy

The production strategy regulates everything related to the production process. This process includes a system of manufacturing , management of the supply chain, logistics, and planning and operational control. The core objectives of the production strategy are

  • Maximize quality.
  • Minimize the total cost of production .
  • Increase quantity.

Example

QualityImproving the quality of the production process.
DeliveryMinimize time wastage.
EfficiencyControlling/minimizing delays in the production process.

Human Resources Strategy

Human resource strategy in an organization relates to every aspect related to the organization’s workforce. The core function of any HR department is to work for the development of employees and assist them with suitable working conditions and growth opportunities so that they can contribute to the goals of the organization. In addition, HR includes recruitment, training, motivation, development, and employee retention.

Example

QualityRegular training program for skills improvement
DeliveryEnsure timely recruitment and recruitment processes to meet the organization’s workforce needs.
EfficiencyMinimize the cost of the recruitment/recruitment process.

Research & Development Strategy

The R&D strategy mainly focuses on two things;

  • Innovation; develop new products
  • Making improvements to the current product

A business needs to continuously introduce  new products  and improve existing ones to implement   different business strategies such as  market penetration ,  concentric diversification , and product development. In general, there are three R&D approaches for implementing these strategies;

  1. Be an innovator; introduce a product like never before
  2. Produce  low-cost products
  3. Be a smart and innovative follower; adding more features and launching similar but better products than competitors.

Example

QualityDevelop innovative products for a better customer experience.
DeliveryApply parallel design techniques to minimize time to market.
EfficiencyMake the R&D process simpler.

Examples of Functional Strategies

Yahoo- Marissa Mayer Fails To Understand The Functional Level Of The Company

History

Yahoo (an industry giant in the past) hired a famous and successful Google executive, Marissa Mayer, hoping that she would change fate to “fight” Yahoo. Initially, investors strongly believed that he would be able to get the company out of the “dark hole”. However, what happened was completely against everyone’s expectations.

Of the many mistakes, Marissa’s biggest blunder was a total misunderstanding of the corporation at the functional/operational level. He did make proposals for different changes but downplayed resistance to these changes from lower-level Yahoo employees.

Results

After all his efforts were in vain, he finally proposed the best solution; sell Yahoo. Verizon acquired Yahoo (which was once a $135 billion company) for just $5 billion.

Conclusion

Yahoo eventually saw its downfall as the company failed to integrate its functional-level strategy with the corporate strategy proposed by Mayer.