The Nature of Functional Units Every formal organization has various departments, divisions, or units mandated to do specific tasks or jobs contributory to the overriding goal of making profits. Every functional unit has its own mandate or role to play in the business organization President Executive Vice President Vice President Marketing Vice President Manufacturing Vice President Administration Vice President Finance Marketing Manager Manufacturing Manager Administrative Manager Finance Manager Fig. 28. Functional Organization Chart . On the other hand.Functional Responsibilities vs Functional Strategies Functional responsibilities refer to those tasks. functions or activities that a given operating unit is duty-bound to do by the very nature of its functional category. functional strategy is the approach taken by a functional area or unit to achieve its objectives and duties by way of maximizing the use of its resources and in light of strategic direction as well as prevailing market competitions. The Role of Functional Strategies Provide support activities considered strategically important to the stated corporate or business level objectives . Functional units must also be developed taking into account commonality as vision-mission among various functional and operating units. managers must be aware that departmental functions are interrelated.Harmony Using Functional Strategies When formulating functional strategies. Personnel in each functional area tend to view operations introspectively and independently of other functions resulting to incoherent strategies. . Inconsistent functional strategies will not only deter achievement of strategic goals but will also likely result to customer dissatisfaction. interrelationship among functions . 29.Operations Management Finance Human Resource Management Purchasing and Materials Management Marketing Research and Development Management Information System Fig. 30.Fig. All functional strategy must contribute to a shared vision. pProduction VisionMission Marketing Finance . It provides a supportive role to the business level strategy. activity. functional strategies highlight the role of every department or unit in terms of: 1. It defines the contribution of firm¶s overall mission. It is a game plan for a strategically-relevant function. 4. Moreover. It specifies how functional objectives are to be achieved. 2.Nature and Characteristics of Functional Strategies 1. It provides the direction which department needs to pursue. 3. . 3. 2. or business process. Role and scope of activities of each department or unit. It provides details how key activities will be managed. Examples of Functional Objectives 1. creating high performance teams. Corporate Security ³to provide services for the protection of corporate personnel and assets through preventive measures and investigations.´ .´ 2. Human Resource Strategy ³To contribute to organizational success by developing effective leaders. and maximizing the potential of individuals. Tasks are usually done at ground level with more precise details.Operating Strategies Tasks that are more specific compared to functional strategies. . Narrower strategies for managing grassroots activities and strategicallyrelevant operating units. Add detail strategies. to business and functional .Concerns of Operating Strategies 1. and 2. inventory stocking strategy allows 99% of all orders to be completely filled without backordering any item. recruitment manager develops selection process designed to weed out all but best-qualified candidates. Improving Delivery and Order-Filling i. Compensation manager devises improves compensation plan. Information technology manager devises ways to use technology to all but best-qualified candidates. and iv. Boosting Worker Productivity I. 2.Examples of Operating Strategies 1. Staffing strategy of maintaining workforce capability to ship any order within 24 hours. iii. ii. . Purchasing manager obtains new efficiency-increasing tools and equipment. and ii. Operations Strategy Framework Strategy Process Example Customer Needs More Product Corporate Strategy Increase Organization s Size Operations Strategy Increase Production Capability Decisions on Process and Infrastructure Build New Factory .Fig. 32. Flexibility. Dependability. and Price Enterprise capabilities Operations and Supplier Capabilities R and D Technology Systems People Distribution Financial Management Support Platforms Human resource management Fig. Operations Strategy framework Information management .Customer Needs New product: Old Product Competitive dimensions and requirements Quality. Speed. 32. . Market Development-seeks to explore additional market share by developing other markets in other geographical areas using the same line of products or services. Market Penetration-pursuing concentrated and vigorous efforts to push a product or service using a variety of marketing strategies or took generally focused on promotional efforts.Strategic Business-Level Options 1. Product Development Option-a research and development option that seeks to develop a new product or service resulting to a variety of products or services the company can offer thereby accessing other market segment or sectors. 3. 2. strong . better-quality 4. 2. and 5. 3. When an organization competes in a high-growth industry. When major competitors offer products at comparable prices.Situations Favoring Product Development 1. When an organization has successful products that are in the maturity stage of the product life cycle. When an organization competes in an industry that is characterized by rapid technological developments. When an organization has especially research and development capabilities. When an organization¶s basic industry rapidly is becoming global in scope. inexpensive. 4. . 2. When new channels of distribution are available that are reliable. When an organization has the needed capital and human resources to manage expanded operations. when an organization has excess production capacity. and of good quality. When an organization is very successful at what it does. 6. When new untapped or unsaturated markets exist.Situations Favoring Marketing Development 1. 5. 3. When increased economies of scale provide major competitive advantages. When the market shares of major competitors have been declining while total industry sales have been increasing.Situations Favoring Market Penetration 1. 3. 2. 4. 5. When current markets are not saturated with a particular product or service. When the usage rate of present customers could be increased significantly. When the correlation between dollar sales and dollar marketing expenditures historically has been high. . .Generic Performance Improvement Strategies Any option that may have to be taken is a matter of justifying the efforts taking into consideration the stated vision-mission and the level of data or information available to the top management at the time the strategy was crafted. Under any circumstance. the desire to improve the performance of the business is a generic consideration. 33.Fig. Generic Performance Improvement Strategies Market penetration Product Development Market Development Forward Integration Increase sales volume Improve Performance Increase Yield Reduce Costs Reduce Investment Intensity Vertical Integration Selectivity/Focus Improve profitabili ty .