Functional Strategy

FUNCTIONAL STRATEGY

Functional strategy is the approach, a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a company and business firm with a competitive advantage. The orientation of the functional strategy is dictated by its parent business unit’s strategy.

Eg: A business unit following a competitive strategy of differentiation through high quality needs a manufacturing functional strategy that emphasizes expensive quality assurance process over cheaper, high-volume production.

A HR functional strategy that emphasizes the hiring and training of a highly skilled but costly workforce and a marketing 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, however a different set of functional strategies would be needed to support the business strategy. Functional Strategies may need to vary from region to region.

Eg: When Maggi Noodles expanded into India, it was marketed as a snack food and not as a main course meal. Since Indians prefer a heavy breakfast, they preferred to eat noodles in the evening as a fast to cook and ready to serve evening meal, especially to children.

Any functional strategy will be successful if it is built around core competence and distinctive competence. When a firm does not have distinctive competence in any functional area, it is preferable to opt for outsourcing.