Chapter 9: FUNTIONAL LEVEL STRATEGIES

All organizations, regarding in their size, nature and scope of their business
performs functions like production/operation, finance, marketing, human
resource and search and development.

 PRODUCTION/OPERATION STRATEGIES
a. Decision-making in Operations
b. Product Design
c. Process Strategies
d. Technology Strategies
e. Plant Location Strategies
f. Facilities Strategy
g. Chase Strategy and Level Strategy in Aggregate Planning
h. Inventory Strategy
i. Quality Strategy

 MARKETING STRATEGIES
a. Product Strategies
b. Place/Distribution Strategies
c. Pricing Strategies
d. Promotion Strategies

 FINANCIAL STRATEGIES

Finance- is the fundamental resources for starting and conducting of a

business.

Acquiring Capital
 Equity Capital – provides security and free from paying interest and
financial risk.
 Debt Capital – requires the payment of a fixed interest regularly,
provides huge surplus during the periods of business boom.

Capital Structure Strategy – is the mix of equity capital, preference capital,

retained earnings and debt capital.

Dividend Strategy – is to decide the amount of profits to be distributed to the

shareholders after retaining certain amount of profits as a surplus for the
future investment of the company and earning benefit to the shareholders.

Long-term Investment/Capital Budgeting Strategy – concerned with the

investment in fixed assets and long-term assets.
Working Capital Strategy
 Gross working capital
 Net working capital

Cash Management – deals with the cash flows into and out of the company.

 HUMAN RESOURCE STRATEGY

Human Resource – is the critical, dynamic and living resource of an

organization unlike other resources.

Job Enrichment – adding duties and responsibilities that will provide for skill
variety, task identity, task significance, autonomy and feedback on the job
performance.

Job Sharing – arrangement of sharing one job by two or more part- time
employees.

Telecommuting – is the use of personal computers, networks and other

communication technology.

Empowerment – enabling a lower level employee to make all the decisions

required/relevant for carrying out his duties or discharge his responsibilities
on his own and implement them.

Strategic Management and Performance Appraisal

 Team Training
 Diversity Training
 Total Quality Human Resources
 Employees Brand

Competency Mapping – process of identification, evaluation of employees

competencies.

e- Business and HRM Strategy

e- Business – is about using the convenience, availability and worldwide

reach to enhance the existing business or to create new virtual business.
Aspects of E- HRM
 e- Job Design and Job Analysis
 e- Human Resource Planning
 e- Recruitment
 e- Selection
 e- Performance Management
 e- Training and Development
 RESEARCH AND DEVELOPMENT STRATEGIES

Research and development include transfer of technology, adjusting

production process to the local raw materials, adopting product ingredients
and features to the tastes and preferences of local customers/target markets.
Strategies improve implementation efforts to:
• enhance product and process improvements
• stress basic and applied research
• become leaders and/or followers in research and development
• develop robotics and/or manual-type process
• spend a high, average or low amount of money and R&D
• perform R&D within the firm or to outsource R&D activities
• use university/college/professional researches.

 INFORMATION STRATEGIES
Management Information System
Management requires accurate and timely information relating to a problem
or an issue to make effective decisions at the right time.
MIS strategies aim at providing accurate, relevant and timely information for
making effective decisions, by eliminating duplication of work. Further, they
aim at:
• Saving time by using more efficient methods;
• Establishing uniform procedures;
• Identifying responsibility for work and performance;
• Improving service, including providing necessary training for all who
operate within the system;
• Promoting acceptance both of the system and of possible changes;
• Addressing the primary needs of management function;
• To contain sufficient and relevant information to minimize
uncertainty in a format that can be easily understood and be usable
without further modification.
R&D Approaches: R&D approaches towards strategy crafting are:
• First Mover: The first mover approach is to be the first company to
market the technology in the industry. This is more or less like the first
mover.
• Imitator: The second approach is imitating the successful technologies
and products. This strategy is like the follower strategy.
• Low-cost Strategy: Under this strategy, once the innovation of
technology/product is successful, the firm concentrates on reducing the cost of
production as the new product’s price normally would be very high.
Integrating the Functional Areas Further
All functional areas must be executed in perfect co-ordination to
implement the generic strategy successfully.

 INTEGRATED FUNCTIONAL STRATEGIES: SUPERIOR EFFICIENCY

Economies of Scale- Increase in the volume of production up to a certain stage

would be possible without the increase in the investment in fixed assets.
Diseconomies- Companies enjoy the economies of scale up to a certain stage
as increase in production beyond that stage results in disappearance of
economies.

Learning effects and efficiency

Organizations become learning organizations, when the employee learn
continuously.

Experience Curve and efficiency

Employee continuously do the same work for a long period.

Superior efficiency and customization

Globalization, liberalization and privatization led to severe competition,
which in turn resulted in customization of production and services.
Superior efficiency and marketing
Companies adopt different kinds of marketing strategies in order to
retain customers as the cost of attracting a new customer is four times more
than that of retaining an existing customer.

Human resource and superior efficiency

Human resource strategies contribute to enhance employee contribution to
organizational efficiency.

Information system and efficiency

Information technology enables the companies to locate the manufacturing
facilities.

Superior Quality
Reliability of the product.

Total Quality Management Total Quality Management

A continuous process and an organization wide approach that focuses on
producing superior quality products and services.
The primary element of TQM are:
 Leadership
 Employee Involvement
 Product/Process Excellence
 Customer Focus

Superior Customer Service

Pre-sales and post-sales customer service assume greater significance in an
integrated approach of all functions and in formulating the overall functional
strategies.

Superior Guarantee
Problems of functioning, quality, etc., occasionally arise and result in less
than acceptable product/services.