Difference among corporate, functional and operational strategy 1

Difference among corporate, functional and operational strategy Essay 1

Marketing Strategy February 24, 2012

Difference among corporate, functional and operational strategy 2 Difference among corporate, functional and operational strategy Sound strategy starts with having the right goal. Michael Porter This is a good quote to start the essay because it is telling the more important thing when creating a strategy, which is to have a clear goal. Strategy, according to the Merriam Webster Dictionary is a careful plan or method, for our interests this is the plan a company must have in order to effectively achieve success. But a strategy is beyond that, when talking about it one must take in consideration the direction of the company, markets, the advantages of the company or the unique selling proposition, what resources the company has, the external environment, the stakeholders, etc. This would be related to the SWOT Analysis, it helps any organization to have a clearest perspective of where and how they are because as it letters say it covers the internal aspects, strengths and weaknesses, and the external ones, opportunities and threats. It is also important to mention that when creating a strategy it must set goals over the long-term, because it has to be based in where the business is trying to get, besides it wouldnt be beneficial to have it over the short-term because the employees might not fully understand the true meaning of it. Another aspect to mention is its relationship with tactics because every strategy is not complete without them. Tactics are the actions inside the strategy; it is how the strategy would be taken into action and results. For example if a company wants to communicate its new policies about how the employees must go to work, the tactic would be to organize a meeting or to send a memo, just to say something.

Difference among corporate, functional and operational strategy 3 So, why is important to have a strategy? Because without a strategy a company would be running to nowhere and wasting resources for nothing. There are different types of strategies, for example in a large company would be divided in a pyramid form where the base is the operational strategy, the next level would be the functional strategy, then the division level an at the top the corporation strategy or level. (Mktandmgmt, 2005) In this essay would be described corporate, functional and operational strategies and how they differ from each other. First of all would be the operational strategy. The book Operations Management talks about operations strategy and the authors agree that it is a tricky word because Operations are, after all, about the day-to-day creation and delivery of products and services. So how can it be strategic? In fact, the issue is one of distinguishing between two words, which are similar but have different meanings. These are operations and operational. Operations refer to those parts of the business, which are concerned with producing products and services. Operational is the opposite of strategic in the sense that it means short-term and limited in its influence. Other functions of the business such as marketing or finance have both strategic and operational activities. (Slack, Chambers, & Johnson, 1997) This explains very well about the operational strategy because for example in the marketing department one could see the operational strategy in how they manage the prices, the advertising and so on. Operational strategy therefore focuses on resources, people, processes, communications, etc. (Riley, 2011)

Difference among corporate, functional and operational strategy 4 This is why operational strategies are the base of the pyramid because they cover the tactics, which are done day by day. On the other hand and the next level, functional strategy covers all the areas that make a company work such as finance, marketing, research and development, finance and human resources. This type of strategy can be used to back up other business strategies, since is related to all departments of it. Functional strategy is the approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity. (Kumar, Mittal, & Sharma, 2008) The best way of explaining this strategy is to imagine that the entire company has a strategy, then each unit of it has its own business strategy, then each unit has its own set of departments and these departments have their own functional strategy. An example of each department strategy could be for marketing market development, research and development could be product innovation, human resources could be if hiring new employees and financial could be if making a costs reduction plan. The corporate strategy is like an overall scope, is to define the goals the whole entity has to reach and to adapt. The managers of the company, the CEO and other high positions create the corporate strategy. Primarily the decisions in this strategy are about the product scope, geographical scope and vertical scope that mean the vertical integration of departments and activities of the company. So it can be understood that a corporate strategy is the set of management decisions designed by whoever are the final decision makers in the organization. An easy

Difference among corporate, functional and operational strategy 5 example of it would be that a company wants to open 100 stores in other country so it can grow internationally. However beautiful the strategy, you should occasionally look at the results. Winston Churchill Strategy is a serious necessity because it is the process of making decision about the future of your business or department that are going to lead to success or failure in the medium to long-term, although as I already said it is better to have a long-term strategy. What you decide today is going to come back and haunt you or please you, when it is too late to change. Because at the end the strategy is a tool a company can use to know where they are in the present, where they want to be in the future and how are they going to get there. Think of all the things in your personal life that you would like to change now, but can no longer. You could have made the changes a few years back, but the opportunity to change has passed already and by now you live with the "if only... That is what strategy is all about, not having to live with "if only", because you made the right choices back then and that is the same to all companies. I mentioned a quote by Winston Churchill, the reason is that besides making the good choices it is really important to always stay connected to the strategy by looking at the immediate and the expected results, because in that way the organization would be conscious of how well is the strategy they put into action.

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References Kumar, A., Mittal, A., & Sharma, K. (01 de 12 de 2008). SlideShare. Recuperado el 23 de 02 de 2012, de Funtional Strategies: http://www.slideshare.net/suresh.singh/functional-strategies-presentation Merriam-Webster, Incorporated 2012 http://www.merriam-webster.com/dictionary/strategy Mktandmgmt. (05 de 06 de 2005). Utep. Obtenido de www.mktgandmgmt.utep.edu/smanagement/chap05.ppt Slack, N., Chambers, S., & Johnson, R. (1997). Operations Management. UK: Pearson Education. Riley, J. (15 de 04 de 2011). Tutor2u. Recuperado el 23 de 02 de 2012, de management: http://tutor2u.net/business/strategy/what_is_strategy.htm