Functional Level Strategy: Explained with Examples and Types

Functional-level strategy refers to a functional area’s approach to achieving corporate and business unit objectives and strategies by maximizing resource productivity. This is generally considered to be the tactical level of the strategy that addresses specific operations within the functional areas of an organization, such as marketing, production, human resources, research and development, and finance.

Each functional area within an organization has its operational and strategic objectives, and the functional level strategy helps each department reach its goals using a planned and coordinated approach. Here are a few examples:

1. Marketing: In this area, the functional strategy could be something like “increase market share by 5% over the next 12 months through a targeted digital marketing campaign.”
2. Finance: For finance, an example could be “reduce operational expenses by 7% over the next financial year by implementing a new budgeting system and process.”
3. Human Resources: In human resources, it might be something like “improve staff retention by 10% over the next two years by implementing a comprehensive staff training and development program.”

The key to effective functional strategy is aligning these functional goals and approaches with the overall business and corporate strategies, ensuring all parts of the organization work together effectively towards the same overall objectives.

Types of Functional level strategy

Functional-level strategies are categorized based on the various functions within an organization. Some common types of functional-level strategies include:

1. Marketing Strategy: These strategies focus on identifying target audiences, understanding market dynamics, creating value propositions, and developing marketing campaigns to reach customers effectively.
2. Financial Strategy: This strategy involves financial planning and management, such as budgeting, cost control, cash flow management, capital structure, risk management, and investment decisions.
3. Operational Strategy: Operational strategies focus on improving efficiency and effectiveness in producing and delivering products or services. They encompass supply chain management, production planning, quality control, logistics, and inventory management.
4. Human Resource Strategy: HR strategies include decisions about recruitment, selection, training, performance management, compensation, and employee retention. The aim is to attract, develop, and retain a workforce that can effectively execute business strategies.
5. Information Technology Strategy: IT strategies involve planning for and managing the organization’s technology resources. It could include decisions related to systems, data management, cybersecurity, technology infrastructure, and digital innovation.
6. Sales Strategy: This involves strategies for selling products/services, including setting sales targets, deciding on sales tactics, managing the sales force, and customer relationship management.
7. Research and Development (R&D) Strategy: In certain industries, like pharmaceuticals or technology, R&D strategies are critical. They guide how resources are invested in creating new products, technologies, and services.

Each functional strategy should be integrated and aligned with the organization’s overall business strategy to ensure that each function is working towards the organization’s goals. The specific strategies in each function will depend on the nature of the organization, its industry, its objectives, and the specific challenges it faces.

Examples of Functional level strategy

1. Marketing Strategy: A company like Coca-Cola might have a marketing strategy to strengthen its brand image by associating it with happiness and fun. This could involve launching a global advertising campaign focusing on these themes, local events, and experiences that resonate with this message.
2. Financial Strategy: A startup might have a financial strategy of securing additional capital to fuel its rapid growth. This could involve pursuing venture capital funding, maintaining a lean operational budget to extend their financial runway, and planning for a future initial public offering (IPO).
3. Operational Strategy: Amazon has an operational strategy of fulfilling orders as quickly as possible to improve customer satisfaction. This involves sophisticated supply chain management, including massive, strategically located fulfillment centers and a commitment to continuous process improvements and technological innovation.
4. Human Resource Strategy: Google has a human resource strategy of attracting and retaining the best talent in the industry. They do this by providing a great work environment, excellent compensation packages, opportunities for career growth, and other perks like free meals and employee wellness programs. Talent Management Strategy & Practices
5. Information Technology Strategy: A bank might have an IT strategy of improving its online and mobile banking platforms to provide a better customer experience while investing heavily in cybersecurity measures to protect its customers’ data.
6. Sales Strategy: A B2B software company might have a sales strategy of employing a direct sales force to engage with large enterprise clients while utilizing a web-based self-service platform for smaller customers. How To write a Sales Strategy?
7. Research and Development (R&D) Strategy: A pharmaceutical company like Pfizer might have an R&D strategy focused on developing innovative drugs for high-impact areas like oncology and immunology. This would involve significant investment in scientific research and clinical trials.

These examples can vary widely based on the organization’s specific circumstances, objectives, and industry. The key is that each functional strategy supports and aligns with the company’s overall business strategy.

Case study of Functional level strategy

Let’s examine Apple Inc. as a case study for functional-level strategies:

1. Marketing Strategy: Apple has a clear marketing strategy focusing on creating a powerful brand image associated with innovation, quality, and luxury. This is done through high-impact product launches, minimalist and creative advertising, and cultivating a sense of exclusivity around its products. They also meticulously control their retail environments (both physical and online) to ensure the buying experience is aligned with their brand image. Marketing & Advertising Strategy of Apple: A critical lens
2. Financial Strategy: Apple maintains a very large cash reserve, which gives them significant flexibility in strategic investments, acquisitions, and R&D. Despite their cash holdings, they also use debt financing strategically, taking advantage of low-interest rates.
3. Operational Strategy: Apple is known for its efficient supply chain management. They’ve built strong relationships with suppliers and often secure large amounts of critical components ahead of time. They’ve also invested heavily in proprietary manufacturing processes to produce unique components like their custom chips.
4. Human Resource Strategy: Apple works hard to attract and retain top talent, offering competitive compensation packages, opportunities for career development, and a work environment that is both challenging and rewarding. They also foster a culture of secrecy and urgency around their product development, which helps drive innovation.
5. Information Technology Strategy: Apple consistently seeks to leverage technology for competitive advantage, whether through developing proprietary hardware and software (like their A-series chips and iOS operating system) or using data analytics to understand customer behavior and improve their products and services.
6. Sales Strategy: Apple uses a mix of direct and indirect sales. They have their own retail stores and online platform, where they can control the customer experience end-to-end, but they also distribute their products through third-party retailers and carriers. Their direct sales approach helps maintain their brand image and allows them to capture more of the retail margin.
7. Research and Development (R&D) Strategy: Apple is renowned for its focus on innovation. A significant portion of their budget is allocated to R&D, which leads to groundbreaking products like the iPhone, iPad, and Apple Watch. They’ve created a culture that encourages creativity, exploration, and pushing the boundaries of technology.

In each of these functional areas, Apple’s strategies align with its overall business strategy: to provide superior, user-friendly products that combine technology and design to create a unique, premium experience for customers. This demonstrates the power of effective functional-level strategy in supporting and executing a firm’s larger strategic vision.