The Nature of Functional Units

Every formal organization has various departments, divisions, or units mandated to do specific tasks or jobs contributory to the overriding goal of making profits. Every functional unit has its own mandate or role to play in the business organization

President Executive Vice President

Vice President Marketing

Vice President Manufacturing

Vice President Administration

Vice President Finance

Marketing Manager

Manufacturing Manager

Administrative Manager

Finance Manager

Fig. 28. Functional Organization Chart

Functional Responsibilities vs Functional Strategies

Functional responsibilities refer to those tasks, functions or activities that a given operating unit is duty-bound to do by the very nature of its functional category. On the other hand, functional strategy is the approach taken by a functional area or unit to achieve its objectives and duties by way of maximizing the use of its resources and in light of strategic direction as well as prevailing market competitions.

The Role of Functional Strategies

Provide support activities considered strategically important to the stated corporate or business level objectives

Harmony Using Functional Strategies

When formulating functional strategies, managers must be aware that departmental functions are interrelated. Personnel in each functional area tend to view operations introspectively and independently of other functions resulting to incoherent strategies. Inconsistent functional strategies will not only deter achievement of strategic goals but will also likely result to customer dissatisfaction. Functional units must also be developed taking into account commonality as vision-mission among various functional and operating units.

Operations Management

Finance Human Resource Management

Purchasing and Materials Management

Marketing

Research and Development

Management Information System

Fig. 29. interrelationship among functions

Fig. 30. All functional strategy must contribute to a shared vision.

pProduction

VisionMission

Marketing

Finance

Nature and Characteristics of Functional Strategies

1. It is a game plan for a strategically-relevant function, activity, or business process. 2. It provides details how key activities will be managed. 3. It provides a supportive role to the business level strategy. 4. It specifies how functional objectives are to be achieved. Moreover, functional strategies highlight the role of every department or unit in terms of: 1. Role and scope of activities of each department or unit. 2. It provides the direction which department needs to pursue. 3. It defines the contribution of firms overall mission.

Examples of Functional Objectives

1. Human Resource Strategy To contribute to organizational success by developing effective leaders, creating high performance teams, and maximizing the potential of individuals. 2. Corporate Security to provide services for the protection of corporate personnel and assets through preventive measures and investigations.

Operating Strategies
Tasks that are more specific compared to functional strategies. Tasks are usually done at ground level with more precise details.

Concerns of Operating Strategies

1. Narrower strategies for managing grassroots activities and strategicallyrelevant operating units; and 2. Add detail strategies. to business and functional

Examples of Operating Strategies

1. Improving Delivery and Order-Filling i. inventory stocking strategy allows 99% of all orders to be completely filled without backordering any item; and ii. Staffing strategy of maintaining workforce capability to ship any order within 24 hours. 2. Boosting Worker Productivity I. recruitment manager develops selection process designed to weed out all but best-qualified candidates; ii. Information technology manager devises ways to use technology to all but best-qualified candidates; iii. Compensation manager devises improves compensation plan; and iv. Purchasing manager obtains new efficiency-increasing tools and equipment.

Fig. 32. Operations Strategy Framework Strategy Process Example

Customer Needs

More Product

Corporate Strategy

Increase Organization s Size

Operations Strategy

Increase Production Capability

Decisions on Process and Infrastructure

Build New Factory

Customer Needs New product: Old Product Competitive dimensions and requirements Quality, Dependability, Speed, Flexibility, and Price Enterprise capabilities Operations and Supplier Capabilities R and D Technology Systems People Distribution

Financial Management

Support Platforms Human resource management Fig. 32. Operations Strategy framework

Information management

Strategic Business-Level Options

1. Product Development Option-a research and development option that seeks to develop a new product or service resulting to a variety of products or services the company can offer thereby accessing other market segment or sectors. 2. Market Development-seeks to explore additional market share by developing other markets in other geographical areas using the same line of products or services. 3. Market Penetration-pursuing concentrated and vigorous efforts to push a product or service using a variety of marketing strategies or took generally focused on promotional efforts.

Situations Favoring Product Development

1. When an organization has successful products that are in the maturity stage of the product life cycle; 2. When an organization competes in an industry that is characterized by rapid technological developments; 3. When major competitors offer products at comparable prices; better-quality

4. When an organization competes in a high-growth industry; and 5. When an organization has especially research and development capabilities. strong

Situations Favoring Marketing Development

1. When new channels of distribution are available that are reliable, inexpensive, and of good quality. 2. When an organization is very successful at what it does. 3. When new untapped or unsaturated markets exist. 4. When an organization has the needed capital and human resources to manage expanded operations. 5. when an organization has excess production capacity. 6. When an organizations basic industry rapidly is becoming global in scope.

Situations Favoring Market Penetration

1. When current markets are not saturated with a particular product or service. 2. When the usage rate of present customers could be increased significantly. 3. When the market shares of major competitors have been declining while total industry sales have been increasing. 4. When the correlation between dollar sales and dollar marketing expenditures historically has been high. 5. When increased economies of scale provide major competitive advantages.

Generic Performance Improvement Strategies

Any option that may have to be taken is a matter of justifying the efforts taking into consideration the stated vision-mission and the level of data or information available to the top management at the time the strategy was crafted. Under any circumstance, the desire to improve the performance of the business is a generic consideration.

Fig. 33. Generic Performance Improvement Strategies

Market penetration Product Development Market Development Forward Integration

Increase sales volume

Improve Performance

Increase Yield Reduce Costs Reduce Investment Intensity Vertical Integration Selectivity/Focus

Improve profitabili ty