Types of strategies and their characteristics. Functional strategies for enterprise development
Functional Strategies- strategies that are developed by functional departments and services of the enterprise on the basis of corporate and business strategy. This is a marketing strategy, financial strategy, production strategy, etc.
The purpose of a functional strategy is to find effective behavior of a functional unit within the framework of overall strategy.
In other words, a functional strategy is a plan for managing the current and core activities of a separate division or key functional area within a certain area of business (R&D, production, marketing, customer service, distribution, finance, human resources, etc.). For example, a company's marketing strategy may represent a management plan to capture market share in a particular activity.
The functional strategy is narrower than the business strategy and specifies individual details in the overall development plan of the organization by defining approaches and practical steps to ensure management of individual business units or functions.
The role of functional strategy is to support the business strategy and competitiveness of the organization.
The significance of a functional strategy is to create management guidelines for achieving the intended functional goals of the organization. For example, a functional strategy in manufacturing is a production plan that contains the necessary activities to support the business strategy and achieve the organization's production goals and mission.
Responsibility for forming a functional strategy usually rests with the heads of functional departments. When implementing the strategy, the head of the department works closely with his deputies and often discusses key issues with the heads of other departments. If functional leaders pursue their strategy independently, this encourages the creation of uncoordinated or conflicting strategies. Coordination of functional strategies is best done at the discussion stage. Thus, all functional strategies must be interconnected, and not just pursue their own rather narrow goals.
There is a two-way interaction between business strategy and functional strategy. On the one hand, coordination of functional strategies is carried out in order to avoid focusing only on one’s rather narrow goals. At the same time, a narrower functional strategy compared to a business strategy allows you to detail individual provisions of the business strategy. Strategic unity and coordination across functional areas strengthens business strategy.
Table 4.1
Types of functional areas
Functional strategies specify the chosen development trajectory of the enterprise within the functional area and are developed by the relevant departments of the enterprise (organization).
Due to their purpose and the specifics of their activities, various services of the enterprise have their own vision of achieving the set goals. Therefore, the strategies they develop do not always fit together, and sometimes simply contradict each other. The art of business management is to force functional units to balance and coordinate the strategies they develop. This can be achieved in two main ways: firstly, the heads of functional services of the enterprise (organization) participate in the justification and development of the basic strategy of the enterprise; secondly, the process of developing the final enterprise development strategy must be multi-stage, including the stage of agreement and coordination. As a rule, an enterprise should develop the following main types of functional strategies:
Marketing strategy;
The term "functional strategy" refers to the management plan of action for a specific division or key functional area within a specific area of business. Functional strategies are strategies that are developed by functional departments and services of an enterprise on the basis of corporate and business strategy. This is a marketing strategy, a financial strategy, a production strategy, etc. The purpose of a functional strategy is the allocation of department (service) resources, the search for effective behavior of a functional unit within the framework of the overall strategy. The main role of functional strategies is to support the general business strategy.
Depending on the characteristics of the functioning of the enterprise, the following functional strategies can be developed: marketing, innovation, production, financing, etc.
1.Marketing strategy.Marketing strategy involves developing a set of measures and specific actions to ensure the achievement of the company’s goals and maintaining a sustainable long-term competitive advantage commercial products using a variety of methods. The main goals marketing strategy usually are: an increase in sales volume (including an increase in customer flow or an increase in the number of orders); increase in profits; increasing market share; leadership in its segment. Goals must be consistent with the company's mission and the strategic goals of the business as a whole. The development of a marketing strategy is based on forecasts regarding the long-term prospects for market development and the potential capabilities of the enterprise.
2.Innovation strategy– an interconnected set of technical, technological and organizational actions aimed at ensuring the competitiveness of the enterprise and its sustainable development. The basis for developing an innovation strategy is theory life cycle product, the market position of the company and its scientific and technical policy (strategy for the creation, development of new products and improvement of their quality; strategy for the introduction of advanced technology, mechanization and automation of production; strategy for the development of a management system; resource-saving strategy for the enterprise; feasibility study innovative projects, their agreement)
3.Production strategy– is a set of interrelated measures for the selection of products (services), technology and organization of production, allowing for sustainable effective development of the enterprise. In order to realize the goals of the enterprise, ensure the competitiveness of products (services) and thereby achieve success, it is necessary to organize highly efficient production. This strategy reflects what future products and production should be like. It also discusses what equipment will be used with new technologies and what financial resources this will be required.
4.Funding strategy- Financial strategy represents the general direction and method of using funds to achieve the set goals of managing the finances of an enterprise. This method corresponds to a certain set of rules and restrictions for decision making. Strategy allows you to concentrate efforts on solution options that do not contradict the adopted strategy, discarding other options.
The basis for developing a financial strategy is the analysis of factors for the effective use of financial resources in the long term and the goals set. Goals in in this case may be: maximizing profits while minimizing costs, optimizing the structure of the enterprise's assets, ensuring the financial stability of the enterprise in the foreseeable future.
The concept of functional strategies. Types of functional strategies. The relationship between the general strategy and functional strategies of the company. Production strategies: TQM, Six Sigma model, just-in-time system. Marketing strategy. Financial strategy. Human resource management strategy. Innovation strategy.
Functional Strategies – strategies of the company's functional divisions.
The enterprise's strategy is developed and implemented as a single entity market economy. However, each enterprise is a complex multifunctional system, therefore the strategy of the enterprise, which can otherwise be called a corporate strategy, is detailed with the help of functional strategies that reflect specific ways to achieve the specific goals of the enterprise facing its individual divisions and services. Otherwise, these strategies can be called working strategies. Each functional strategy has a specific object to which it is aimed.
Types of functional strategies.- marketing strategy;- financial strategy;- innovation strategy; - production strategy; - strategy of organizational changes and personnel.
Marketing strategy- this is a way of acting in the market, guided by which an enterprise selects goals and determines the most effective ways to achieve them. Purpose sets boundaries and scope market activity(competitive advantages, mastering a new market, etc.). Ways to achieve set goals are formed through the choice of strategic directions of development and strategic zones management. Accordingly, a set of marketing tools (product, price, advertising, etc.) is developed. The development of a marketing strategy is based on forecasts regarding long-term prospects for market development and the potential capabilities of the enterprise.
Financial strategy represents the general direction and method of using funds to achieve the set goals of managing the finances of an enterprise. This method corresponds to a certain set of rules and restrictions for decision making. Strategy allows you to concentrate efforts on solution options that do not contradict the adopted strategy, discarding other options.
The basis for developing a financial strategy is an analysis of factors for the effective use of financial resources in the long term and the goals set. The goals in this case may be: maximizing profits while minimizing costs, optimizing the structure of the enterprise's assets, ensuring the financial stability of the enterprise in the foreseeable future.
HR strategy- this is a priority, qualitatively defined direction of action developed by the organization’s management, necessary to achieve long-term goals of creating a highly professional, responsible and cohesive team and taking into account the strategic objectives of the organization and its resource capabilities.
The strategy allows us to link numerous aspects of personnel management in order to optimize their impact on employees, primarily on their work motivation and qualifications.
Basic features of the HR strategy:
– long-term in nature, which is explained by the focus on developing and changing psychological attitudes, motivation, personnel structure, the entire personnel management system or its individual elements, and such changes, as a rule, require a long time;
– connection with the strategy of the organization as a whole, taking into account numerous external and internal environment, since their change entails a change or adjustment of the organization’s strategy and requires timely changes in the structure and number of personnel, their skills and qualifications, style and management methods.
HR strategy as a functional strategy can be developed at two levels: for the organization as a whole in accordance with its overall strategy; for certain areas of activity (business).
Innovation strategy. Innovation strategy can be defined as an interconnected set of technical, technological and organizational actions aimed at ensuring the competitiveness of an enterprise and its sustainable development. The basis for developing an innovation strategy is the theory of the product life cycle, the market position of the company and its scientific and technical policy.
Organizational change strategy(development) – a multi-level system of transformations aimed at the medium and long term and envisaged changes organizational structure, working methods and corporate culture.
Production Strategies:
TQM Total Quality Management is an organizational philosophy that is based on the pursuit of quality and management practices that lead to total quality. TQM is a comprehensive system focused on continuous improvement of quality, minimization production costs and deliveries just in time. The basis of the integrated quality management system is to guarantee the suitability for use of both semi-finished products (entering the next stage of the technological process) and finished products.
The basic philosophy of TQM is based on the principle that there is no limit to improvement. In relation to quality, the goal is zero defects, for costs - zero unproductive costs, and for deliveries - just on time. At the same time, it is realized that it is impossible to achieve these limits, but one must constantly strive for this and not stop at the achieved results.
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The strategic management process covers three main levels: corporate, divisional (level of business units), functional level. Based on this, we distinguish:
· corporate strategies for enterprise development (what kind of business should we develop?);
· business strategy (how can we compete in this business?);
· functional strategies (what to change in the functional areas of the enterprise?).
The main types of strategies are presented in Fig. 3.1. Let's look at them.
Corporate development strategies businesses are designed to achieve the mission and overall goals of the enterprise.
They reflect the main directions of the company's development and ways of implementing the mission. Corporate strategies are distinguished by their focus on global competitive advantages.
Corporate strategies include:
1. Growth strategy.
The growth strategy assumes a significant increase in the level of short-term and long-term goals above the level of indicators of the previous period. It is used in dynamically developing areas with rapidly changing technologies. This strategy is used by firms that seek diversification. Growth can be:
· internal, by expanding the range or creating new products that are in increasing demand (intensive growth);
· external – in the form of vertical, horizontal integration or diversification.
2. Limited growth strategy (stabilization strategy).
The stabilization strategy is used by most enterprises. This strategy is characterized by setting goals based on what has been achieved, adjusted for inflation. A limited growth strategy is used in mature industries with static technology if the organization is generally satisfied with its position. This is the easiest, most convenient and least risky way to achieve your goals.
3. Reduction strategy(strategy of last resort).
With this strategy, the level of goals is set lower than what was achieved in the past. Within this strategic alternative, there may be three options:
· liquidation through the complete sale of inventories and assets and liquidation of debt;
· cutting off excess involves the company abandoning unprofitable divisions or certain types of activities;
· reorientation (turnaround strategy) involves reducing some activities in order to increase the profitability of others.
Conditions for applying reduction strategies:
· if the company's performance continues to deteriorate;
· if the company was unable to achieve its goals;
· if the company is one of weak competitors in area;
· if the company needs some internal reorganization.
4. Combination strategy represents a combination of any of three strategic alternatives. It is followed by large firms that are active in several areas.
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The basic law of evolution states that nothing is more fickle than success. Paradoxically, the most successful companies today may be the most vulnerable tomorrow. For example, many consider Microsoft's position in computer world immutable, but its founder and president, Bill Gates, says he is constantly haunted by the fear that his organization will relax and allow itself to be overtaken by nimble competitors. To ride the wave of success, managers need to constantly improve their business strategy.
Business strategies are strategies for managing a portfolio of business areas. They ensure the achievement and maintenance of competitive advantages in a specific area of business.
The business strategies of the enterprise include:
1. Product and market strategy is aimed at determining the types of specific products and technologies that the company will develop, areas and markets for the sale of goods. Serves as the basis for developing an enterprise marketing strategy. In order for an enterprise to function and develop, it is necessary to produce (sell) some product, which it must sell at competitive market. Therefore, it is logical to begin the development of business strategies for an enterprise with a product and market strategy. This strategy sets a certain direction in the development of both individual private strategies and the overall strategy of the enterprise as a whole.
2. Competitive strategy– a set of strategic decisions that determine the competitive behavior of an enterprise. Based on the general competitive strategies described by Porter.
The choice of competitive strategy is influenced by the following factors (competitive forces):
· threat from market newcomers;
· bargaining power of buyers(depends on the level of awareness of buyers, the possibility of switching to another seller);
· bargaining power of suppliers. The influence of suppliers is determined by their concentration in this region;
· threat of substitute products. Competition depends on the extent to which one type of product can be replaced by alternative products. For example, the increasing popularity of sugar substitutes has had a negative impact on the level of demand for sugar.
· intensity of competition in the industry.
3. Foreign investment strategy involves the creation of own production enterprises abroad.
4. Export strategy involves the development of measures to assess the possible benefits from increasing exports. This strategy is used by large firms that produce complex equipment, as well as small and medium-sized firms that produce the latest small-sized products (watches, photographic equipment, household electrical goods).
5. Strategy for managing a set of industries involves determining the relative level of capital investment based on calculations of production volume, individual types of products and the activities of the company as a whole. This strategy determines the directions of investment and redistribution of capital.
Functional Strategies determine the directions for achieving goals in functional areas organizations: finance, marketing, production, R&D, personnel, etc. Their purpose is to ensure that tasks set at the corporate and business level are solved with the highest possible efficiency. The main difference from corporate and business strategies is the intra-company focus. Functional strategies include:
1. R&D strategy(innovation strategy, innovation strategy). This strategy involves obtaining competitive advantages through the creation of fundamentally new products or technologies, new management methods, and a new organizational management structure.
Table 3.1 - Kinds innovation strategies.
| Strategy type | Main content | Possible results |
| Traditional | Improving the quality of existing products on the existing technological base | Gradual lag in technical and technological, and then economic terms |
| Opportunistic | Product focus – market leader that does not require high R&D costs | Possible gain due to monopoly dominance in the market. |
| Imitation | Purchase of licenses with minimal costs for in-house R&D | Possible success due to constant support of the achieved level |
| Defensive | Keep up with others without claiming dominance | Effective for small firms |
| Offensive | To be the first in the market due to a high level of innovative potential | The benefits of a leading position, but there are also risks associated with it |
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Undoubtedly, the experience of Japanese companies in gaining competitive advantages through the active use of innovative strategies deserves attention. If we consider the automobile market as an example, we can note that while the world's leading manufacturers (General Motors) continued to consider the car primarily as a means of transportation, the Japanese defined the car for themselves as a complex high-tech product. Two areas that have fully justified themselves have become key for the Japanese: the widespread introduction of electronics into cars and the use of new structural materials. Nissan was the first to automotive world I installed an electronic carburetor. In another direction - the use of new materials - the share of steel in Japanese cars is only 70%, and 20% is plastics and ceramics. It should be especially emphasized here that a reduction of 100 kg. mass provides 10% fuel savings. Consumers all over the world appreciate the technical level, comfort, and quality of Japanese cars.
Main strategic decisions of the R&D strategy
1. R&D development:
1.1. Basic fundamental research.
1.2. Applied developments.
1.3. Design and technological preparation of production.
2. Increasing the technical and economic level of the enterprise’s production potential.
3. Creation of new products and improving the technical and economic level of those that are already being produced.
4. Improving management, organization of production and work.
5. Saving and environment, rational use natural resources.
2. Marketing strategy involves flexible adaptation of the company's activities to market conditions on the basis of a properly developed marketing mix.
3. Production strategy aimed at increasing the efficiency of the production process. This strategy consists of actions aimed at using and developing all production capacity enterprises in order to achieve a competitive advantage. The production strategy involves making strategic decisions aimed at balancing resources (material, technical, labor, financial) and the volume of production; ensuring flexibility of production processes; taking into account possible consumer requirements regarding the quality of the products being created.
There are 3 basic production strategies:
· Full satisfaction of market demand, that is, the company produces the amount of goods that the market needs. With this strategy, inventories in warehouses of finished products are minimal, and the costs of their production can be quite high due to constant changes in production volume.
· Production of products with a focus on future demand. At the same time, intra-company stocks of certain goods can accumulate, and the real needs of the market are satisfied through this accumulation.
· The production of goods is carried out taking into account the actual minimum demand(pessimistic strategy). It is used if competitors are active in the market. The marketing strategy needs to be adjusted.
Main strategic decisions of the production strategy:
1. Mastering the production of new types of products.
2. Improving production quality.
3. Introduction of advanced technologies.
4. Modernization, reconstruction, technical re-equipment.
5. Improvement of production management systems.
6. Cooperation, concentration and integration of production.
7. Diversification and conversion of production processes.
4.Financial strategy reflects the processes of formation and use of financial resources, financing of capital investments and current costs.
The financial strategy of the company should be based on the results of a comprehensive economic analysis and the financial condition of the company (assessment of the efficiency of resource use, solvency of the company).
The following substrategies of the company's financial strategy are distinguished:
· Strategy of accumulation and consumption involves forecasting and justifying the optimal ratio between the amounts of income that are used to form these two special funds.
· Lending strategy provides ways to obtain the necessary loans and find means of repaying them.
· Strategy for financing other functional strategies and investment projects provides justification for the allocation of necessary funds for the entire period of their implementation.
· Dividend strategy provides for payment of dividends (increased, reduced, termination of payment of dividends).
Main strategic decisions of the financing strategy:
1. General financial strategy.
1.1. Financial and market securities management.
1.2. Inventory management.
1.3. Lending strategy.
1.4. Dividend strategy.
2. Financial forecasts regarding capital expenditure, other receipts and disbursements.
2.1. Project financial balance sheet.
2.2. Financial plan external financing.
3. Mechanism for analyzing and monitoring the financial condition of the enterprise.
5.HR strategy developed with the aim of increasing work productivity and creating a favorable psychological climate in the enterprise. It involves improving the qualification structure of personnel; ensuring the interest of staff in the affairs of the company; improving working conditions for all categories of personnel.
Main strategic decisions of the HR strategy:
1. Selection, placement and promotion of personnel.
2. Personnel assessment.
3. A reward system that provides adequate compensation and motivation for staff behavior.
4. Formation labor relations, which ensures staff participation in management.
5. Management development, which creates mechanisms for staff development and promotion.
Strategic set is a system of strategies different types, developed by an enterprise for a certain period of time, which reflect the specifics of the functioning and development of the enterprise, as well as its place and role in the external environment.
Strategic Recruitment Requirements:
· focus on achieving real interrelated goals;
hierarchical nature (deployability of strategies);
· flexibility and dynamism of strategic recruitment;
· balance between profitable and cost-intensive strategies.
The concept and essence of functional strategies of the organization.
The term “strategic management” was introduced into use at the turn of the 60s and 70s. twentieth century in order to indicate the difference between management in top level from current production management. “Strategy” as a concept is taken from the art of war as the theory and practice of preparing to wage war. In an economic sense strategy- This general plan actions of the organization, determining the priority of strategic objectives, resources and the sequence of steps and strategic goals. The main task strategy is to move the organization from its present state to the future state desired by management.
Any enterprise adheres to a certain business strategy, which in turn is based on the strategy of functional areas. Functional areas– these are the areas of activity of the organization, i.e. independently represented by a structural unit that specializes in performing certain functions and ensures the effective operation of the organization.
The term "functional strategy" refers to the management plan of action for a specific division or key functional area within a specific area of business. A company's marketing strategy, for example, may be a management plan to capture market share in a particular activity. A corporation needs such a strategy for each major production unit or part of the business: R&D, production, marketing, customer service, distribution, finance, human resources, etc.
The functional strategy, although narrower than the business strategy, specifies individual details in the overall development plan of the enterprise by defining approaches, necessary actions and practical steps to ensure the management of individual business units or functions. The role of functional strategy is to support the overall business strategy and competitiveness of the organization. In addition, the importance of functional strategy lies in supporting the overall business strategy and competitiveness of the company. In addition, the importance of a functional strategy lies in the creation of management guidelines for achieving the intended functional goals of the company. Thus, a functional strategy in manufacturing is a production plan containing the necessary activities to support the business strategy and achieve the company's production goals and mission.
The main responsibility for the formation of functional strategy usually rests with department heads. When implementing the strategy, the head of the department works closely with his deputies and often discusses key issues with the heads of other departments.
Coordination of functional strategies is best done at the discussion stage. If uncoordinated functional strategies are submitted to management for final approval, it is the manager's responsibility to identify the discrepancies and correct them.
Marketing strategy involves the development of a set of measures and specific actions to ensure the achievement and maintenance of a sustainable long-term competitive advantage of commercial products using a variety of methods that take into account the specifics of a situational nature. For example, one might recognize the strengths of an outlandish brand that is popular with customers and then develop a strategy to exploit its relative weaknesses. The marketing strategy involves development and includes:
* justification of product distribution schemes and organization of their implementation;
* organizing pre- and post-sales services for products on terms favorable to customers, taking into account their specific interests and real needs;
* flexible pricing systems taking into account market conditions and market situations;
* effective methods stimulating sales targeted at the social and age characteristics and capabilities of buyers;
* action programs to form public opinion about the company’s brand and product.
Production strategy The enterprise is developed by the head of the production area (usually the chief engineer or deputy director for production), who is responsible for its development and implementation. This strategy reflects what future products and production should be like. This functional strategy describes further relationships with suppliers. This includes independence from one supplier, the availability of substitutes, and lead times for orders. It also examines what equipment will be used with new technologies and what financial resources will be required for this. Thus, a production strategy is a description of the production future of the enterprise.
The production strategy focuses on the organizational aspects of the material and technical supply system (room layout, equipment composition, calculations of material resources, energy, water and heat supply, calculations of power, production volumes). This strategy also includes the organization of work on environmental and technical safety production, product quality control.
Financial strategy designed to highlight the financial consequences of the chosen enterprise strategy. Ideally, the forecast should be made for 3-4 years. A forecast for a shorter period is rarely sufficient, but for some unstable sectors of the Belarusian economy it is now acceptable.
The financial strategy includes information on proposed capital investments and their distribution, profit and loss statements for the planning period broken down by year, a balance sheet at the beginning of planning, and traffic forecasts. Money. All figures are compared with industry figures (they must correspond to reality).
When doing strategic financial planning, it is important to remember that the planning system must be optimal. Planned indicators should include only those indicators that can and should be managed. The cumbersome nature of the financial planning system reduces its effectiveness.
Research and development strategy does not exist at all Belarusian enterprises, but only at those that use this work in their activities, have an appropriate production base and sufficient financial resources to carry out this work. If a company is not a leader and enters the market with new products that have already won a significant number of buyers, then R&D is not a factor in developing a strategy. If an enterprise is a leader in a given industry and its business strategy involves continuous improvement of products, then the enterprise must develop an R&D strategy. As a rule, the chief engineer of the enterprise develops this strategy and is responsible for its successful implementation.
It is important to remember that all functional strategies are interrelated and must complement and support the overall strategy chosen by the enterprise. If functional area managers pursue their strategy independently of each other or the business unit manager, this opens the door to uncoordinated or conflicting strategies. Coordinated and complementary strategies are needed to successful implementation business strategy. Simply put, marketing strategy, production strategy, financial strategy and personnel strategy must be interconnected, and not just pursue their own rather narrow goals.
Analysis of existing functional strategies using the example of a machine-building enterprise.
JSC "Avtogidrousilitel" is currently a leader among automotive equipment enterprises and has a well-known trademark and high sales volume. The plant's developments in the field of production of automotive equipment and manufacturing technologies have been taken into account and used by other enterprises.
Strategic priorities are constant growth, ensuring the highest possible quality, maintaining a reputation as a skillful and high-quality manufacturer, large production volumes and promoting products on the market. The strategy of ASU OJSC includes the following functional strategies.
R&D strategy. Create new automotive components of improved quality using improved technologies. For this purpose, the company created a new workshop for small series, which has at its disposal new computerized equipment and highly qualified personnel. Here the plant widely uses the principle of additional benefit.
Assortment strategy . The company constantly strives to expand the range of products by introducing changes to those already produced, and offers repair and maintenance services in addition to products. "AGU" carries out serious testing of components and materials for the manufacture of products in order to ensure High Quality manufactured goods.
Production strategy. The JSC sets strict requirements (standards) for products, builds its relationships with suppliers on a mutually beneficial production basis in order to be confident in the supply of materials of the highest quality. AGU develops production systems and technological processes that improve product quality and save time, which leads to additional profits.
Strategy for recruiting and training personnel. OJSC regularly pays wages to its employees, encourages workers financially (various bonuses and financial assistance, tourist trips at the expense of the plant) and morally (exhibiting gratitude, a plaque of honor, notes in the factory newspaper), and offers the opportunity for career growth. "Autohydrousilitel" hires employees with good production skills, having, in addition to vocational education additional knowledge (PC knowledge, etc.). The plant regularly conducts advanced training.
Social strategy. As part of this strategy, various supporting measures are carried out for working students (financial assistance, provision of work places for practical training), provision of loans to employees, assistance with renting housing, sanatorium and resort treatment for employees and their children. The enterprise is conducting recycling waste.
