Importance Of Functional Level Strategy

FUNCTIONAL LEVEL STRATEGIES (INCLUDING EXPERIENCE CURVE)

Background

The functional level of any organization is the level of the operating divisions and departments. It is the responsibility of the leadership to provide direction to managers at the functional levels regarding the execution of plan and strategies for the successful implementation. The role of functional strategy is very crucial for the existence of any organization.

What is functional-level strategy

A functional-level strategy focuses on the major functional areas of the company and is formulated primarily to support business level strategy. The functional-level strategy is narrower in scope than a business-level strategy because each strategy deals with each of the major

Functional strategies support the overall business and corporate level business.

The success of functional strategy is highly affected by the time factor. Functional strategies have a shorter time span than business-level or corporate –level strategies.

Need for functional-level strategy

Functional strategies outline the action plan and sets the milestones that are needed to be achieved. Functional strategies work as a backbone of the organization. It provides the basic information on resources and capabilities on which the higher level strategy is designed. It involves coordinating the various functions and operations needed to design, manufacture, deliver, and support the product or service of each business within the corporate portfolio. Functional level strategy executes the plan developed at a higher level for the growth and advancement of an organization.

Functional strategies are primarily concerned with:

• Efficiently utilizing specialists within the functional area.

• Integrating activities within the functional area (e.g., coordinating advertising, promotion, and marketing research in marketing; or purchasing, inventory control, and shipping in

Once the higher level strategy or strategic intent is developed, the functional units translate them into discrete action plans that each department or division must accomplish for the strategy to succeed. A good strategist draws a strategy using all the available resources and gets maximum benefits from its resources.

The Experience Curve

What is this

The experience curve is based on the premise that the more you do something, the easier and better you do it. In other words, the more “experience” you have making a product, the faster and cheaper it is to make.

There is a simple rationalisation behind all this: there is a reduction in the average cost of production of a particular product, as a consequence of an increase in the firm’s experience. The time and cost of producing a unit of output will be reduced, as learning economies, economies of scale, economies of scope, etc. appear due to the cumulative output increase and other process related growth.

Implications of Experience