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3.8. Functional Strategies

At the lowest level of the hierarchy of strategies lie functional strategies (Keřkovský, Vykypěl, 2006). Functional strategies offer you the opportunity to develop your long-term strategy in greater detail for your company’s functional areas of business. These usually include:

Marketing
Purchasing
Production and/or Processes
Logistics
Human Resources (HR)
Information Technology(IS/IT)
Research and Development or the lesser known:
Knowledge Management

A Functional Strategy is a strategy which develops the business strategy for a specific SBU in greater detail for the functional area of management for an SBU/corporate strategy (Keřkovský, Vykypěl, 2006).

Given that efficiently defined SBUs should be different enough to warrant separate strategic approaches, it is necessary to consider each SBU separately when setting a functional strategy. There may, however, be some degree of strategic overlapping between different SBUs - e.g. certain marketing aspects of one SBU can be applied to several SBUs at once, or one SBU’s marketing strategy can generate possibilities for another SBU, such as offering clients products from another SBU (cross-selling).

When following our suggested approach, we recommend assessing the strategic aspects (areas) of every functional strategy in terms of the role that separate functional areas play, i.e. what their contents should be.

Flexible functional strategies in small and medium-sized businesses

- It is most likely that it will not be possible or even beneficial to formulate all of the main functional strategies in a small or medium-sized company. We do recommend selecting and setting the most essential ones - e.g. a more detailed (functional) marketing strategy.
- If a company decides that for whatever reason, it is not beneficial or feasible to formulate most of or any of their functional strategies, it may benefit from taking a look at the sub-functional areas that are addressed in our other lessons. Functional strategies can then serve as a comprehensive strategic framework for your company’s operations and also strengthen your company’s ability to systematically build its added customer value across all areas of business.
- Any major conclusions that arise from setting your functional strategy can be worked into your business strategy - e.g. the main points related to your functional marketing strategy can be included in the P (Promotion) variable, points related to HR cab be added to the P (People) variable, aspects of the functional purchasing strategy can be added to the P (Product) variable etc.
- Although we’ve indicated that it is logical to set a separate functional strategy for each SBU (esp. in larger companies, where separate SBUs can involve entirely different lines of business - e.g. the owner of a hotel, SBU1, who also expanded his business in the area of managerial training and courses, SBU2). This may not be necessarily feasible for small and medium-sized businesses. Use your functional strategy as flexibly as possible - e.g. SBUs that are closely interconnected regarding their functional strategy (the same methods, the areas of business are closely related - e.g. a language school has an SBU for private lessons and an SBU for group courses), in which case it is beneficial to formulate only one functional strategy which will include the different methods for multiple SBUs.
- Small and medium-sized business with a single SBU will naturally only formulate one functional strategy of a specific type (in the event that they decide to implement a functional strategy).