written by | September 28, 2022

What is Functional Level Strategy? Meaning & Examples

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Table of Content


What is your plan for achieving those business milestones? Setting a yearly revenue number and aiming blindly for it doesn't work. Organisations set SMART goals and break up their milestones into smaller, manageable, and achievable goals. A functional level strategy will help you with this and let your brand look forward to hitting those monthly or weekly targets. The key to running a successful business is having a solid business strategy and executing it. And this is precisely where the concept of functional level strategy comes in, although it's neither foreign nor new.

Do you know? Functional level strategies are the goals assigned to various departments that support business strategy and corporate level strategy. 

What is Functional Level Strategy?

A functional level strategy is a plan of action developed by businesses to achieve futuristic long-term and short-term goals. It covers different areas of function such as HR, R&D, sales, manufacturing, production, distribution, marketing, etc.

An excellent functional level strategy will help you manage your day-to-day business affairs and ensure you are performing your routine activities daily. There are no delays or operational concerns, workflows get streamlined, and everyone stays on the same page. Clear communication is another bonus of a functional level strategy, and its importance cannot be underestimated. 

Also read: Upcoming Business Ideas in India for 2022

Common elements of a functional level strategy include (but are not limited to);

  • Cooperation across different departments in businesses
  • Setting business risk appetite, revenue growth milestones, and partnerships
  • Defining corporate objectives and business goals

Functional Level Strategy Types

The major types of functional level strategies are:

  • Marketing 

Marketing is one of the most important categories of functional-level strategies. Different marketing strategy types include social media marketing, relationship marketing, sales marketing, direct marketing, etc.

Marketing identifies the target audience's requirements and aims to address all their pain points. A marketing strategy aims to deliver high-quality products and services, thus improving customer loyalty and retention rates in the process.

  • Research and Development 

Research and Development strategies are keys to improving existing products with the development of new things. It is also associated with cost leadership with differentiation of strategies.

  • Finance

Finance strategy deals with taking steps to manage business capital, expenses, savings, cash flow analysis, and other aspects of financial management. It also involves budgeting, estimating the business's net worth, investing in assets, etc. A good finance strategy raises adequate funds and ensures that the company does not go bankrupt when carrying out its mission.

  • Human Resources

Human resources encompass business alignment, recruitment, employee selection, training, staffing, team building, engagement, and retention.

Example of Functional Level Strategy

Some examples of functional level strategies are:

  1. Fall of Yahoo! with CEO Marissa Mayer

Marissa Mayer was appointed as the CEO of Yahoo! to help the company rise from the dark pits. In 2012, everybody thought that hiring her would be a game changer. In the past, Yahoo! experienced data breaches which wrecked its reputation and the company was failing. Mayer's job was to improve the security of millions of consumers and scale Yahoo! back to its earlier glory days.

But things took an unexpected turn when she failed to understand Yahoo! at its functional and operational business levels. Meyer sent out the wrong business proposals, and after some resistance from lower-level employees, she decided the arrangement wasn't working out. Yahoo!, valued at $135 billion, ended up getting sold to Verizon for just $5 billion. 

  1. Improving Process Efficiency 

An excellent example of a functional level strategy is improving process efficiency in organisations. This can take the form of delivering products at the right time, enabling faster checkouts/shipping, product quality reviews, etc.

  1. HR Services

Human resources manage self-development, recruitment, employee management, motivation, goal setting, and employee retention. Employees are the backbone of every company; without a good workforce, it becomes impossible to grow. Thus, improving the outcomes of HR services is a core component and example of every functional level strategy.

Also read: What Is Quotation in Business? Meaning, Format, Template & Example

Why is a Functional Level Strategy Important for organisations?

A functional level strategy is important for businesses because:

  • It gives a blueprint on how to go about day-to-day activities in the organisation. Every member becomes aware of their responsibilities and role in achieving the company's desired mission statement. It is practical and real and sets expectations along with baselines for performance.
  • Functional level strategies integrate different departments of the business such as HR, marketing, sales, R&D production, customer relationships, etc.
  • It sets business goals, objectives, and backup plans and defines the steps required to implement them. There is no lack of clarity, and every phase of the growth plan is broken down in detail.

How to Design A Functional Level Strategy for Your Business?

If it's your first time developing a functional level strategy for your business, here are the steps:

Step 1: Define Expectations

Clearly define your stakeholders' enterprise goals and mission statement at the meeting. Outline process functions, timelines, core features, and project expected outcomes. Mention your budget and risk appetite to each participant for added insurance.

Step 2: Verify Your Business Vision

This entails defining your organisation's reason for existing and its presence. For example, an electric car manufacturer's vision would be to 'move the world towards using sustainable energy and reduce carbon footprint globally." All their business moves and goals would be catered around that purpose.

Ensure your employees know about your vision and that your company is established around those goals. Be clear about business challenges, priorities, assets, risks, and what effects your decisions could have on future growth and opportunities.

Step 3: Set Goals and Objectives

Your business goals should be specific, innovative, measurable, and have a clear purpose. For example, your next goal could be to improve employee retention rates by 50%. Or to expand your company and open a new branch at a different location within five months from now. You can evaluate the current state of affairs and see if you're working according to your action plan when you set smaller goals. Identify your core business objectives and set your goals accordingly.

Step 4: Build Your Action Plan

Once all discussions and debates are over on the table, this is the blueprint you design. You are now ready to go into detail and assign responsibilities to each member. Your action plan is a formal document summarising the steps required to achieve your objectives. Remember that action plans may change, and you may be prone to unforeseen incidents, so design an appropriate adaptive strategy.

Step 5: Assess Your Limits

Ask your business partners for feedback and collect data on how others perceive your business. Analyze your enterprise capabilities and weaknesses. This will help in setting future expectations and assist in scaling your business accordingly. You should also create an incident response plan and assign priority levels to all your risks.

Make it a point to conduct yearly assessments and address gaps in your findings before they become a priority.

Step 6: Execute and Re-evaluate

Once your enterprise is set in motion, execute your action plan. Be sure to re-evaluate it from time to time—leverage analytics and review all the critical metrics for consistent performance. Monitor your organisation's triggers, eliminate underperforming projects, and push the ones succeeding. If any validations or assumptions are pending about your action plan, clear them out. Lastly, ensure your stakeholders are on onboard with your decisions and, if they are, have suitable reporting measures in place.

Also read: Upcoming Business Ideas in India for 2022

Conclusion

There is no one-size-fits-all approach to designing and implementing a functional level strategy. Every company is different, which is why it's so hard to jump to conclusions immediately. 

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FAQs

Q: What are the factors involved in formulating a functional level strategy?

Ans:

The factors involved in formulating a functional level strategy are - marketing, finance, operations, human resources, research and development, and information systems.

Q: What are the three levels of a functional level strategy?

Ans:

The three levels of a functional level strategy are -Marketing, Finance, Human Resources

Q: What is the difference between a business and functional level strategy?

Ans:

A business strategy aims at supporting the business and setting it apart from its competitors. Its purpose is to acquire more customers and sell products/services. On the other hand, a functional level strategy focuses on the business's longevity and not just the sales/marketing aspect. It sees the company as a whole and evaluates every area or function.

Q: What is the role of a functional level strategy?

Ans:

The role of a functional level strategy is to elevate the business's standing in the industry, increase annual revenue, and set a plan of action for achieving both long-term and short-term goals. A functional level strategy helps an organisation track its daily operations and see if it's on track.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.