Chapter 7 Functional Unit Level Strategy 1
Learning Objective To understand the importance of Functional Strategy To assess the need for cross functional collaboration To understand the different functions and responsibilities To evaluate the strategic management process To understand the role of stakeholders in formulating functional level strategy 2
Introduction to Functional Unit Level Strategy After formulation of corporate and business unit level strategies, strategic managers need to formulate Functional unit level strategies Functional strategies work in areas like marketing, sales, production, finance, human resources, supply chain, customer service etc Organisations have a central team called cross functional team represented by key members from different functions / departments 3
Marketing Strategies Process that allows organisation to concentrate its resources on the optimal opportunities with the objective of increasing sales Needs to take a long term view Helping to stimulate effects of strategy on Customer acquisition Revenue per customer Churn rate 4
Marketing Dominance Strategies Leader leading with vision and ability to execute the vision, characterised by high innovation Challenger has ability to challenge the leader and potential to become leader through introduction of new products and services Follower Company replicates the products and services of the leaders Nicher focuses on unique concept and concentrate their efforts on specialised products or services 5
Marketing Strategies Shaw Eric Introduction Marketing strategist has two principle strategies to choose from penetration or niche Growth marketing manager may choose from two additional alternatives segment expansion or brand expansion Maturity sales growth slows, stabalises and starts to decline. Firm maintains or holds a stable marketing mix 6
Marketing Strategies Shaw Eric Decline strategies this stage decline in sales approaches and then begin to exceed costs. Harvesting strategy becomes unprofitable and divesting strategy becomes necessary 7
Marketing Mix Modelling Often used to help determine the optimal marketing budget Helps marketing function to allocate resources to achieve the strategic goals Models help allocate spend across a portfolio of brands and manage brands to create value 8
Marketing Mix Modelling The marketing mix broadly consists of seven dimensions most commonly referred as seven Ps Product Price Promotion Place People Process Physical evidence 9
Finance Strategy Financial strategy of business needs to address factors related to managing cash flow Raising capital and making investments Business that pursue low cost strategy pursue financial strategies that are intended to minimise their costs Characterised by clearly measurable metrics and financial ratios 10
Human Resource Strategy Underlying strategy is to develop its human resource by unlocking their wisdom and compassion Ensures employees are empowered to serve their customers Strategic HR Function seeks to build an employee work force that enables the organisation to achieve its goals Strategic needs may include Learning and development, performance management inter alia 11
Production Strategy Production strategies determine What capital expenditure would be required Whether new machines are required Whether to work overtime or extra shifts What the sequence and scheduling of the production will be Ensuring that the production run is monitored to be on proper time Organisation gains economies of scale and looks for capital labour substitution, explores business process re-engineering 12
Quality Management Strategy Consists of organisation wide efforts to install and male permanent climate in which organisation continuously improves Organisation position quality as a marketing strategy to differentiate their products and services Organisations adopt quality management for operations excellence aims at improving Quality, Performance and Efficiency 13
Six Sigma Key roles played in the organisation for successful implementation Executive Leadership - Responsible for serring up a vision for six sigma Champions Take responsibility for six sigma implementation across the organisations Master black belts Acts as an in-house coach on six sigma 14
Six Sigma Key roles played in the organisation for successful implementation Black belts Focus on project execution and special leadership Green belts take up implementation along with their other job responsibilities 15
Research and Development Strategy The investment strategy in R&D is to foster innovation and leadership in products and the services that organisation is planning to provide in the market place for the present and future Organisations might face risk in product and services innovation as the new products or services that were envisaged may not generate the level of demand sufficient to justify the R&D investment 16
Supply Chain Strategy In supply chain management, many organisations look at reducing costs, improving time to market, enhance distribution system and optimisation of business processes The various facets of supply chain management those need to be dealt with are procurement, materials management, distribution, inventory management etc. 17
Information Systems Strategy Information systems play a very crucial role in enabling the business. Hence, it is crucial that each function in an organisation can be mapped and integrated by various IT systems to support the automation and function of that department While the company, as an IT strategy, invests heavily into hardware and software systems, the objective is to enable the organisation s ability to improve its market presence, production, inventory, sales, profitability and customer experience 18
Summary Strategic managers must align their activities in the functional areas to ensure that the various departments are well coordinated Ensure that departments collaborate with each other for success Functions in an organisation increasingly looking at an integrated strategy to exploit the advent of new technologies 19