Functional Implementation

Functional implementation is carried out through

functional plan and policies in five different areas.

Marketing
 Financial
Operation
 Personnel
 Information management
Functional Strategies
Functional strategies deals with a relatively restricted
plan which provides the objective for a specific function
area and for enabling a coordination between them for an
optimal contribution to the achievement of the business
and corporate level objective.
 Functional strategies are derived from business and
corporate strategies and are implemented through
functional and operational implementation
Suppose a firm adopts a cost leadership strategy for one
of its businesses. All activities and resources should now
be focused on developing a low cost structure and
reducing costs. When all the functional areas of
marketing, finance, operations, personnel and
information management contribute, in their own
special ways, to the objective of the development of a low
cost structure and cost reduction then the business
strategy of cost leadership can be successful.
A key task of strategy implementation is to align or fit
the activities and capability of an organization with its
strategies.
 Strategies operate at different levels and there has to be
congruence and coordination among these strategies.
Such a congruence is the vertical fit.
Then there has to be congruence and coordination
among the different activities taking place at the same
level. This is the horizontal fit.
 Vertical Fit
The consideration of vertical fit leads us to define
functional strategies in terms of their capability to
contribute to the creation of a strategic advantage for the
organization.
1) Strategic marketing management:- It means focusing
on the alignment of marketing management within an
organization with its corporate and business strategies
to gain a strategic advantage.
2) Strategic operation management:- It implies focusing
on the alignment of operation management with in an
organization with its corporate and business strategies
to gain competitive advantage.
3) Strategic human resource management

4) Strategic financial management

5) Strategic information management

 Horizontal Fit
 The consider of horizontal fit means that there has to be
an integration of the operational activities undertaken to
provide a product or service to a customer. These have to
take place in the course of operational implementation.
 Operational implementation is the approach adopted by
an organization to achieve operational effectiveness.
When an organization performs value-creating activities
optimally and in a way which is better than its
competitors, it result in operational effectiveness.
Functional planes and policy
In an organization, policy and plans are prepared in
each functional area. The number of such functional
areas depend on the type of business carried out by
the organization. For determining this number,
criticality of an area should be taken into account, that
is , what kind of contribution a particular functional
area makes in achieving organizational objectives.
 A functional policy is a kind of statement that
provides a functional manager guidelines about what
criteria he should use in making functional decisions.
 A functional plan which is of short term nature
consists of various activities that should be performed
during the planning period.

 Functional policies and plans play the following roles

in strategy implementation:-
1) functional policies and plan specify the manner in
which things can be done and limit discretion for
managerial action. Thus top management of the
organization can rest assured that all personnel of the
organization will direct their efforts in a way relevant
for strategy implementation.
2) functional policies and plans provide basis for control
in respective areas as policies lead to consistent pattern
of behavior. This, in turn, acts as basis for controlling.
3) functional policies and plans provide coordination
across different functions. Coordination among
different functions is very important for strategic
implementation. All functions of an organization are
interdependent and interrelated. Therefore what is
happening in one function has its relevance for other
functions. All functions can contribute positively when
they are performed in a coordinated way.
Development of functional
policies and plans
Functional policies and plans are developed by
respective functional managers within the overall
guidelines provided by higher level management. Such
guidelines are required to ensure that functional policies
and plans are in tune with strategy requirements.
The volume of functional policies and plan in the formal
sense may vary with the size and complexity of the
organization. If the organization is small only a few
functional p0lices and plans are sufficient.
 Development
When functional policies and plans are developed,
these are judged on the following criteria:-
1) Do functional policies and plans exist in the areas
critical to implemented of the strategy?
2) Do they reflect present or desired practices and
behavior?
3) Are they clear and explicit leaving no scope for
misinterpretation?
4) Are they practical in given existing or expected
situations?
Marketing policies and plans
Organizations come into existence and grow as a result of
their ability to satisfy the needs of their customers
through exchange process. This is the basic content of
marketing function.
However this exchange process is not simple but very
complex and involves a verity of activities . Due to this
reason, marketing function has received considerable
attention from the organization.
The concept of marketing has undergone a change over
the time, from selling concept to the present marketing
concept which holds that the key to organization success
lies in determining the needs of the customers.
 Cont…….
From strategy implementation point of view, we may
take the marketing aspects as type of products, price of
the product, product distribution, product promotion
and customer relationship management.

Product
product include goods and services that may
offered by an organization to its customers. The major
issues for policy decisions for products are product mix,
market segmentation, product positioning, and
branding.
 Product mix
The choice of product mix depends on the strategy itself
by which the organization defines its business. The
product mix that an organization may offer should aim
at meeting three possible objectives:
a) improving profitability , b) securing stability in face of
sales variability and, c) raising the growth rate of sales.

Product mix decision has two dimension

 Product mix breadth
 Product mix length
The organization should make provision to prune the
product line and items therein specially when the
width or length is very high: it should add if the new
product item is likely to strengthen the existing
product mix. For example, Hindustan Unilever has
decided to prune its dairy products and animal feeds:
at the same time it is going to add new products within
the overall product lines.
 Market Segmentation
Market segmentation refers to the act of dividing a
market into different groups of buyers who might
require separate product. Market segmentation is
necessary as an organization cannot serve the needs of
entire market. It helps the organization to concentrate
its efforts on target market.
 Product Positioning
Product positioning refers to offering of a product in a
manner that customers perceive it to be distinct from
other competing products. A product can be
differentiated from other competing products on the
basis of product characteristics like features,
performance, conformance , durability, etc.
 Branding
Brand is a name, term, symbol, or design or a
combination of these intended to identify the goods
and services of one seller or group of seller and to
differentiate them from those of competitors.
Policy decision regarding branding revolves around
three aspects:-
1) decision to sell the product with or without brand
2) types of brand to be selected
3) brand extension
The first issue relates to the decision about having a
brand or not. Usually organizations engage in
commodity business do not require brand name
because of lack of product differentiation based on
brand such as petro-products, steel, generic
pharmaceutical products, etc.
In consumer products, and certain industrial products
brand’s name is important. Therefore the question is
what type of brand name should be selected . In this
context an organization have a number of alternatives.
1) brand name may be selected on the basis of the
organization’s name like Nirma Ltd has nirma brand of
laundry soaps and detergents.
2) if the brand name is not chosen on the name of
organization sometime it is not possible because of
large number of brands. For example Hindustan
Unilever has 110 brands. In such cases the brand name
chosen should convey meaning specific to the product
as HU chose the brand name “Annapurna” for its
staple foods like rice, salt, atta, etc.
The last issue relating to brand name is extension, that
is a particular brand is used as the prime with some
prefixes or suffixes like Rin and Rin Shakti, Lifeuboy
and Lifeuboy Plus, Lifeuboy Gold, and so on. The basic
advantage of this policy is that extended brands get
quicker response if the prime brand is well extablished
one.
 Price
Price denotes the money that customers pay in exchange
for goods and services. Price is important both for the
organizations as well as for customers. For the
organizations price determines the quantum of returns
for their efforts and for the customers it is the valued
assigned to the satisfaction of needs. What price should
be charged depends on a variety of factors though returns
and value are the prime factors. Pricing policy involves:
1. How should a price be fixed for a product for the first
time?
2. How and when should there be changes in price?
 Price Fixation
The variables that affect the determination of price.
1) Value for money:- the price of product must match its
value which customers attach to it. Every customers wants
to have greater value from the product than what he spends
for it.
2) Competitors’ price:- a company may have three options in
this context
 Fixation of higher than competitors’ price if the product
can be positioned to be of better quality like Gillette India
Ltd.
 Fixation of lower price than competitors’ price for the
product perceived to be similar for market penetration
 For example price of Top Ramen’s noodels of Marico
Industries was fixed lower than its competing brand
Maggi noodles of Nestle
 Fixation of price similar to the competitor’s price

3) Cost plus price:-

Cost plus price policies indicates
that final price would be cost of production of the
product plus desired level of profit. Usually this
pattern is more commonly adopted unless external
forces compel to do otherwise.
 Price Change
There may be a need for price change over the period
of time because of the change in any factors affecting
price. There may be upward revision or downward
revision of price.
Upward revision in price is required if there is any
increase in cost of production either because of
increase in the price of inputs, or increase in taxes
levied on the product such as excise duty, sales tax or
any other taxes.
Downward revision is required when the company is
not able to sell its product at the predetermined price.
Such a situation may arise if
There is excess capacity creation or there is slack
demand because or recession in a particular industry.

The market leaders has reduced its price either to

eliminate the competition or its cost structure has
become more favorable.

There has been any invention which reduce the cost of

production substantially.
 Distribution
After the decision about the product and its price has
been made, the question arises as to how the product will
reach to its ultimate user : directly from producer to the
customer or through a series of middlemen. This involves
the decision about distribution or marketing channels.
Policy of marketing channels involves :
 Identification of channels
 Evaluation of these channels
 Selection of these channels
Identification of Channels:- usually a product flows
from the producer to ultimate customer in the
following ways.

Producer_______________________________Customers

Producer________Retailer________________Customers

Producer___Wholesaler___Retailer________Customers

Producer__Wholesaler__Jobber__Retailer___Customers
Evaluation of Channel
Once the alternative marketing channels are identified
the company has to evaluate which channel fits its
strategy implementation. Evaluation of suitability or
unsuitability of a channel may be based on three criteria

 Economic criteria

 Control criteria

 Adaptive criteria
 Channel Selection
Selection of marketing channels by a company is
determined by a variety of factors such as location of
customers, product characteristics, organization
capabilities ,etc.
1) Location of customers:- If the customers for the
product are few or located at few places and purchase the
product in high volume then it is better to have zero level
channel as it saves distribution costs. For example
Reliance sells it linear alkyl benzene directly to its
customers as they are few in number.
2) Product characteristics :- Bulky products with low unit
value require lesser middlemen in order to avoid the cost
of handling at different points.
Products of high unit value are sold either directly or there
may be one level channel for example computers and air
conditioners .

3) Organizational capabilities :- organization capabilities

in terms of its product mix and financial areas, affect the
choice of a marketing channel and also the control the
particular companies can exercise on chain of
distribution. For instant HU has a wide product mix,
adopts to level channel with wide control on middlemen.
 Promotion
Promotion consist of activities through which a
company communicates to its potential customers about
itself and its products and to induce them to buy the
products.
The total activities related to promotion are known as
promotion mix.

Promotion mix
 Advertising
 Sales promotion
 Personal selling
 Promotion Budget
Promotion expenses range from a significant proportion
to insignificant proportion of the sales revenues for
different companies depending on the types of the
product offered, geographical areas covered,
organizational financial capabilities and organizational
strategies to penetrate and increase market share.
Usually a company can set its promotion budget on the
basis of:
 What it can afford to spend
 Fixing certain percentage of sales revenues
 Determining marketing objectives to be achieved by the
promotion.
For example HUL spends about 6.5 percent of its sales
revenues on promotion.

ITC which is engaged in cigarettes, hotels and agro

products spends 6 percent of its sales revenue.

Reliance Industries Ltd which is engaged in

manufacturing textiles spends 0.3 percent of its sales
revenue.
Customer Relationship Management
CRM is a comprehensive process of acquiring, retaining
and partnering with selective customers to create
superior value for the organization and the customers.
The basic objective of CRM is to increase marketing
efficiency and effectiveness through cooperative and
collaborative process that help in reducing transaction
costs and overall development of the organization.

In CRM there are three type of programmes

1) Continuity Marketing :-
It aims at retaining customers
and enhancing their loyalty. The basic premise in this is
that of offering long term special services with
potentiality of increased mutual value. For end users in
mass markets, attempt is made to offer rewards to
customers by way of membership and loyalty cards as
well as other services like discount coupons and cross
purchased items.
2) One-to-one marketing :-
It is also known as individual
marketing aims at meeting individual customer’s needs
by offering uniquely customized products or services.
In mass market information on individual customers
becomes the basis of customer interactions and
attempt is made to fulfill the unique needs of each
customer as well as developing interactive marketing
and after sales programmers for high yielding
customers. For those customers who use an
organization’s product as inputs, the organization
offers expert advice based on its knowledge from
across different markets and also resources to build
the distribution network.
3) Partnering:-
Partnering of co-marketing involves
partnering relationship with customers through
different types of arrangements. In mass markets, such
arrangements may be in the form of co-branding
partnering and affinity partnering.
Co-branding partnering involves two marketers
combining their resources and skills to offer innovative
products to mass markets.
Affinity partnering involves marketers taking recourse
to endorsement of each others product for cross
selling.