STRATEGIC MANAGEMENT

MODULE NO : 5
FUNCTIONAL & OPERATIONAL IMPLEMENTATION
Q1 Explain the nature and types of functional strategy.

INTRODUCTION TO FUNCTIONAL STRATEGY

Functional strategy involves managing specific functions within a company to achieve its overall strategic objectives. For an
organization to succeed, effective management of all functional areas is crucial. Hence, each area, such as Production,
Marketing, Finance, R&D, etc., requires a well-defined strategy. These individual functional strategies are extensions of the
organization's main business strategy. The respective heads of each functional area formulate and execute these strategies,
aligning them with the overall goals of the company.

TYPES OF FUNCTIONAL STRATEGY

1. FINANCIAL STRATEGY: Involves managing funds for the business, including decisions on equity or debt financing,
borrowings, and asset acquisition.
2. MARKETING STRATEGY: Focuses on the four Ps - Product, Place, Pricing, and Promotion, to identify customer needs,
develop products, pricing, distribution, and promotion.
3. HR STRATEGY: Concentrates on workforce management, covering recruitment, motivation, training, compensation,
and rewards.
4. PRODUCTION STRATEGY: Optimizes production processes and materials management, including capacity utilization
and maintenance.
5. R&D STRATEGY: Emphasizes innovation and product development through research.
6. OPERATIONS STRATEGY: Determines the best production methods, supply chain, and logistics management.
7. PURCHASING STRATEGY: Deals with procuring raw materials and supplies from various sources.
8. LOGISTICS STRATEGY: Concerns the flow of goods and services from manufacturing to customers.
9. INFORMATION SYSTEMS STRATEGY: Tailors technology use to gain a competitive advantage.
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Q2. What is the significance & limitation of functional strategy.

SIGNIFICANCE OF FUNCTIONAL STRATEGY (NEED):

 Focused Approach: Functional strategies provide clear direction and focus to each department, ensuring efficient goal
achievement.
 Coordination and Integration: These strategies promote synergy and enhance performance by aligning goals across
different functional areas.
 Resource Optimization: Functional strategies tailor resources to specific needs, improving productivity and cost-
effectiveness.
 Adaptability to Change: Functional strategies can be adjusted promptly, allowing quick responses to market changes.
 Performance Evaluation: Functional strategies set clear objectives, facilitating evaluation of departmental
contributions to overall success.

LIMITATIONS OF FUNCTIONAL STRATEGY:

 Lack of Overall Perspective: Functional strategies may lead to narrow focus, neglecting the organization's broader
strategy.
 Potential Conflicts: Conflicting objectives among functions can create internal tensions.
 Silo Mentality: Functional strategies may foster isolated working environments, hindering collaboration.
 Time and Resource Constraints: Developing and executing multiple functional strategies require significant time and
resources.
 Market Dynamism: Rapid changes can make functional strategies obsolete, demanding constant adaptation.
Q3.Explain process of strategy implementation. What are aspects of strategy implementation?

Strategy Implementation Process

1. Creating an Execution-Focused Organization
Aspects of Strategy Implementation

2. Allocating Strategy-Supportive Budget

Project Implementation

3. Establishing Internal Administrative Support Resource Plans

4. Implementing Rewards and Incentives Behavioural Implementation

5. Shaping Corporate Culture Procedural Implementation

Organizational Structure
6. Exercising Strategic Leadership
PROCESS OF STRATEGY IMPLEMENTATION:
1. Creating an Execution-Focused Organization: Building an organization aligned with the strategy's goals and
ensuring employees understand their roles in achieving them.
2. Allocating Strategy-Supportive Budget: Providing adequate financial resources that align with the strategic
priorities.
3. Establishing Internal Administrative Support: Putting an efficient system in place to coordinate activities, monitor
progress, and overcome obstacles.
4. Implementing Rewards and Incentives: Motivating employees through appropriate recognition and rewards for
contributing to strategy execution.
5. Shaping Corporate Culture: Cultivating a culture that promotes innovation, collaboration, and adaptability, in line
with strategic objectives.
6. Exercising Strategic Leadership: Providing clear vision, inspiring employees, and managing changes during
execution.

ASPECTS OF STRATEGY IMPLEMENTATION:

1. Project Implementation: Breaking the plan into actionable projects with clear timelines and milestones.
2. Resource Plans: Allocating necessary resources, including finances, human resources, and technology.
3.Behavioural Implementation: Encouraging desired behaviors among employees to align with the strategy.
4.Procedural Implementation: Defining processes and procedures for consistency and efficiency.
5.Organizational Structure: Designing a structure supporting strategy execution and facilitating communication and
collaboration.
Q4 How strategy implementation & strategy formulation interrelated?

Strategy Formulation (Logical) Strategy Implementation (Operational)

• Analytical and Planning Stage • Execution and Action Stage
• Involves decision-making • Involves putting decisions into practice

• Focuses on setting objectives • Focuses on achieving set objectives

• Identifies opportunities and risks • Implements measures to manage risks

• Considers internal and external factors • Translates strategies into actionable steps

• Develops strategies and action plans • Aligns resources and tasks with strategies

• Evaluates various strategic options • Coordinates activities and tasks

• Aims to achieve competitive advantage • Engages employees and stakeholders

• Requires top management involvement • Involves all levels of the organization

• Is the conceptual phase • Is the execution phase
Q5 Discuss the policies & plans in functional implementation and their dimensions

FUNCTIONAL IMPLEMENTATION involves the crucial role of policies and plans in guiding the actions of various
functional areas within an organization. Policies provide broad guidelines for specific actions, while plans are detailed
roadmaps for achieving objectives.

The dimensions of policies and plans in functional implementation include:

• Operational Plans and Policies: Focus on day-to-day activities for operational efficiency, defining actions, tasks, and
timelines.
• Marketing Plans and Policies: Outline strategies for product promotion, pricing, distribution, and market positioning,
including market research and customer engagement.
• Financial Plans and Policies: Involve budgeting, resource allocation, financial controls, cost management, and risk
assessment.
• Personnel Plans and Policies: Address human resource management, including recruitment, training, performance
evaluation, and talent development.
• Information Technology Plans: Leverage technology for operational efficiency, encompassing IT infrastructure,
cybersecurity, data management, and technology adoption.
Q6 Explain the decision areas in operation & financial strategy.

OPERATIONAL STRATEGY DECISION AREAS:

1. Process Design and Improvement: Enhancing efficiency and productivity through streamlined operational processes
and continuous improvements.
2. Capacity Planning: Determining the optimal resource levels to meet current and future demand effectively.
3. Inventory Management: Balancing inventory levels to minimize costs while meeting customer demand promptly.
4. Supply Chain Management: Optimizing sourcing, supplier management, and logistics for efficient input delivery and
product distribution.
5. Quality Management: Implementing quality control measures and continuous improvement initiatives to meet
customer expectations.
6. Technology Adoption and Innovation: Decisions on adopting new technologies and innovations to enhance
efficiency and competitiveness.

FINANCIAL STRATEGY DECISION AREAS:

1. Capital Structure: Balancing debt and equity financing to influence the cost of capital and financial risk.
2. Investment Decisions: Allocating financial resources to projects with the highest returns or strategic significance.
3. Working Capital Management: Effectively managing cash, receivables, and payables for liquidity and meeting short-
term obligations.
4. Dividend Policy: Deciding on the portion of earnings to distribute as dividends versus retaining for reinvestment.
5. Risk Management: Identifying and managing financial risks, such as interest rate, currency, credit, and market risks.
6. Cost Management: Strategies to control costs and improve financial health and profitability.
Q7 What are functional strategies, state their limitations.

FUNCTIONAL STRATEGIES
• Functional strategies are specific plans formulated to achieve objectives within different areas of an organization,
such as marketing, finance, operations, and human resources.
• These strategies are essential for the overall success of the business as they address the unique challenges and
opportunities within each functional domain.

LIMITATIONS OF FUNCTIONAL STRATEGIES:

1. Lack of Coordination: Functional strategies might not be well-coordinated with each other, leading to potential
conflicts and inefficiencies.
2. Narrow Focus: They may have a limited perspective, focusing only on individual areas without considering the
organization's overall goals.
3. Limited Adaptability: Functional strategies may struggle to adapt quickly to changes in the business environment,
affecting their effectiveness.
4. Resource Constraints: Implementing multiple strategies simultaneously can strain resources and impact the
organization's ability to execute them effectively.
5. Communication Gaps: Insufficient communication and collaboration between different functional areas can hinder
the alignment of strategies.
Q8 Explain operations strategy and marketing strategy

OPERATIONS STRATEGY
Operations strategy focuses on maximizing efficiency and productivity through process design, capacity planning, and
inventory management to meet organizational objectives effectively.

DECISIONS IN OPERATIONS STRATEGY

 Process Design: Structuring operational processes for maximum efficiency and productivity by analyzing and
improving workflows.
 Capacity Planning: Determining resource levels to meet demand effectively and handle fluctuations efficiently.
 Inventory Management: Managing inventory to balance costs and timely delivery, ensuring smooth production.

MARKETING STRATEGY:
Marketing strategy aims to create a strong market presence by positioning products, determining pricing strategies, and
planning promotional activities to attract target customers and achieve marketing objectives.

DECISIONS IN MARKETING STRATEGY:

 Product Positioning: Creating a unique and favorable image compared to competitors to attract customers.
 Pricing Strategy: Deciding pricing based on costs, competition, and customer perception to influence buying behavior.
 Promotional Activities: Planning communication to create awareness and generate demand through appropriate
channels.
Q9 State the components of HR Strategies. Mention decision related to HR Strategy

HR STRATEGY involves planning and implementing initiatives to attract, develop, engage, and retain talent in alignment
with organizational goals and values.

COMPONENTS OF HR STRATEGIES:
1. Recruitment and Selection: Attracting the right talent through defined job roles and cultural alignment.
2. Training and Development: Equipping employees with skills and fostering professional growth.
3. Performance Management: Setting expectations, conducting evaluations, and providing feedback for improvement.
4. Compensation and Benefits: Deciding salary structures, incentives, and fair rewards.
5. Employee Engagement: Initiatives for a positive work environment and increased motivation.
6. Talent Retention: Addressing retention through career development and recognition programs.
7. Diversity and Inclusion: Fostering inclusivity and an accepting work culture.

DECISIONS RELATED TO HR STRATEGY:

1. Talent Sourcing: Selecting effective recruitment channels.
2. Training Methods: Choosing suitable training approaches.
3. Performance Metrics: Establishing key performance indicators (KPIs).
4. Compensation Structure: Determining competitive salaries.
5. Employee Engagement Initiatives: Implementing engagement programs and feedback mechanisms.
6. Retention Strategies: Incorporating retention plans and mentorship programs.
7. Diversity and Inclusion Policies: Developing inclusive policies and equal opportunities.
Q10 What is strategic evaluation & technique?. Explain different types evaluation criteria

STRATEGIC EVALUATION:
Strategic evaluation involves assessing the effectiveness and performance of an organization's strategic plans and
initiatives. It helps determine the success of strategies in achieving desired outcomes and guides future decision-making
for improved performance.
Performance Metrics: Using KPIs to measure progress and outcomes in line with strategic goals.
SWOT Analysis: Identifying strengths, weaknesses, opportunities, and threats to assess strategy effectiveness.
Balanced Scorecard: Evaluating performance across financial, customer, internal, and learning & growth perspectives.
Financial Analysis: Analyzing financial data to understand the impact of strategies on the organization's performance.
Stakeholder Feedback: Gathering input from key stakeholders to assess satisfaction and alignment with strategic
initiatives.

Types of Evaluation Criteria:

Effectiveness: The extent to which strategic objectives are achieved.
Efficiency: Optimizing resource utilization to accomplish strategic goals.
Relevance: Ensuring alignment of strategies with the organization's mission and long-term vision.
Feasibility: Assessing the practicality and viability of implementing chosen strategies.
Adaptability: The ability of strategies to respond to changes in the external environment.
Q11 What are the measures for strategic evaluation? Give the nature of strategic evaluation

MEASURES FOR STRATEGIC EVALUATION:

• Financial Performance: Assessing revenue growth, profitability, and return on investment.

• Market Share: Evaluating the organization's market position compared to competitors.
• Customer Satisfaction: Measuring feedback and satisfaction levels to gauge customer experience.
• Employee Engagement: Assessing workforce morale and commitment.
• Innovation and Adaptability: Evaluating the organization's ability to respond to changing market dynamics.

NATURE OF STRATEGIC EVALUATION:

• Ongoing and Iterative Process: Continuous monitoring and assessment of strategic plans.
• Future-oriented: Focuses on identifying strengths, weaknesses, and opportunities for long-term success.
• Data-driven: Relies on performance metrics and benchmarks for analysis.
• Collaborative: Involves key stakeholders for comprehensive evaluation.
• Informing Decision-making: Enables adjustments and improvements for sustainable growth and competitive
advantage.
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Q12 What is assessing suitability? Explain different analytical tools

ASSESSING SUITABILITY

Assessing suitability in strategy involves evaluating potential strategic options to determine their compatibility with the
organization's goals, resources, and external environment. It ensures that chosen strategies align with the organization's
capabilities and market opportunities, increasing the chances of successful implementation.

DIFFERENT ANALYTICAL TOOLS:

1. Life Cycle Analysis: Evaluates the entire life cycle of a product or service, from production to disposal, to identify
environmental impacts and sustainability considerations. It helps assess the long-term viability and relevance of
strategies. This is also called Arthur D Little Matrix (ADL Matrix).
2. Positioning: Analyses the organization's market position and perception compared to competitors. It assists in
identifying unique selling points and opportunities for differentiation.
3. Value Chain Analysis: Examines the organization's activities from raw material acquisition to the delivery of final
products or services. It identifies opportunities for cost reduction and value addition.
4. Business Profile: Assesses the organization's strengths, weaknesses, opportunities, and threats to inform strategic
decision-making.
5. Gap Analysis: Compares the current state of the organization to the desired future state to identify gaps and
formulate strategies to bridge them.
Q13 Describe different categories and steps of conducting Value Chain Analysis
VALUE CHAIN ANALYSIS, introduced by Michael Porter, is a method used to assess a company's capabilities and
resources, identifying its strengths and weaknesses. The analysis aims to determine activities that add value to a
product or service. The greater the difference between the organization's revenue and costs, the higher the value added.
By understanding the degree of value added by each activity, a company can enhance its value delivered to consumers
through re-engineering the entire value chain process. Moreover, a company's value chain interacts with other
organizations' value chains.
There are two categories of value chain activities:

PRIMARY ACTIVITIES:
1. Inbound logistics
2. Operations
3. Outbound logistics
4. Marketing and sales
5. After-sales service

SECONDARY ACTIVITIES:
1. Procurement
2. Technology development
3. HR management
4. Firm infrastructure
 CONDUCTING VALUE CHAIN ANALYSIS INVOLVES SEVERAL STEPS:

STEP 1: IDENTIFICATION OF SUB-ACTIVITIES FOR EACH PRIMARY ACTIVITY

 Direct Activities: Add value directly to the firm.
 Indirect Activities: Support direct activities for proper functioning.
 Quality Assurance: Ensures that direct and indirect activities meet necessary quality standards.
STEP 2: IDENTIFICATION OF SUB-ACTIVITIES FOR EACH SUPPORT ACTIVITY
 Technology development, HR management, and procurement determine sub-activities that create value for each
primary activity. These activities are cross-functional in nature.
STEP 3: IDENTIFY & ESTABLISH LINKS
 Identify relationships or links between value activities to increase competitive advantage. For example, a link may exist
between developing the sales force and increasing sales volume.
STEP 4: LOOK FOR OPPORTUNITIES TO ENHANCE VALUE
 Review all sub-activities and links to identify several ways to enhance the value offered to customers.
 By conducting a Value Chain Analysis, organizations can gain insights into their operations, find areas for
improvement, and develop strategies to create a competitive edge in the market.
Q14 What is Feasibility and acceptability?

FEASIBILITY:
• Feasibility refers to the practicality and viability of implementing a particular strategy or project. It assesses whether
the necessary resources, skills, technology, and capabilities are available or can be acquired.
• A feasibility analysis helps identify potential risks, challenges, and limitations that may hinder the project's success.

ACCEPTABILITY:
• Acceptability assesses whether the proposed strategy or project aligns with the organization's goals, values, and
stakeholders' expectations.
• It considers the level of support and approval from key stakeholders, including shareholders, customers, employees,
and the community. If a strategy is not acceptable to these stakeholders, it may face resistance and undermine its
chances of success.

 Both feasibility and acceptability are crucial in decision-making as they provide insights into the practicality and
alignment of a strategy or project with the organization's objectives and the broader external environment.
 By conducting thorough assessments of feasibility and acceptability, organizations can make informed and strategic
choices that increase the likelihood of successful implementation and sustainable outcomes.
Q15 Write about ADL Matrix.

THE ADL MATRIX also known as the Life Cycle Matrix, was introduced by consulting company Arthur D. Little in the late
1970s. It is a 5x4 matrix that assesses an organization's strategic position based on two components:

1 Industry Maturity (Position of Industry in Lifecycle):

• Embryonic: Introduction stage with high market growth, new technologies, high investments, and low competition.
• Growth: Strong market with improved sales and low competition due to new product development benefits.
• Mature: Stable market with increasing customer base and competition, leading to differentiation attempts.
• Aging: Decreasing demand, leading to market exit and consolidation efforts by firms.

2 Competitive Position (How Strongly the Firm is Strategically Positioned):

• Dominant: Strong market hold with rare entrants, but short-term position.
• Strong: Stable market share in a strong position.
• Favorable: Gained competitive advantage with many competitors present.
• Tenable: Smaller position in the overall market with strong competitors capturing major shares.
• Weak: Declining market share and unprofitable business prospects.
 Industry Maturity
Embryonic Growing Mature Aging
Dominant Invest Hold
Strong Improve
Competitive
position Favourable Selective Harvest
Tenable Niche
Weak Abandon Divest

ADL Matrix

BENEFITS OF ADL MATRX LIMITATIONS OF ADL MATRIX

 Appropriate for All Conditions  Varied Life Cycle Duration

 Applicable to fragmented industries  Inconsistent Industry Behaviour

 High Degree of Adaptability  Inconsistent Lifecycle

 Variable Competition
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