Presentation

On

Functional & Operational

Implementation

Ch. 1-1
 FUNCTIONAL IMPLEMENTATION
 Functional implementation is carried out through functional
plan and policies in five different areas.
 All organizations irrespective of the size, nature and scope of
business must perform the functions like:

• Marketing
• Finance
• Production & Operations
• Human Resource Management
• Research & Development etc.

Careful planning, execution and coordination of these functions

are highly essential for effective strategic planning,
 FUNCTIONAL STRATEGIES
• It deals with a relatively restricted plan which provides the
objectives for specific function, for the allocation of resources
among different operations within that functional area and for
enabling a coordination between them.
• Derived from business and corporate level strategies.
• There has to be two type of congruence between strategies.
*Vertical Fit: Congruence between strategies operating at
different levels.( Strategic marketing management, strategic
financial management, Strategic HRM etc)
*Horizontal Fit: Integration between of the operational activities
(Integration between value chain activities which are dispersed
among different functional areas).

Ch. 1-3
Fred R. David
Prentice Hall
 FUNCTIONAL PLANS & POLICIES
• These are framed to with respect to different functions.
• Operate on al level below the business strategies.
• Functional plans are formulated to set a course of action.
• Policies are required to act as guidelines to those actions.
• Functional plan and policies are needed to ensure that:
*The strategic decisions are implemented by all parts of the
organization.
*There is basis available for controlling activities in the different
functional areas.
*The time spent by functional managers on decision making may be
reduced
*Coordination across the different functions takes place where
necessary.
• Process of development of functional plans and strategies may be
formal or informal.
• These are affect by external and internal factors and by the Ch. 1-4
resource allocation.
 FUNCTIONAL LEVEL STRATEGIES

• Marketing Plans & Policies.

• Financial Plans & Policies
• Personnel /HR Plans & Policies
• Operations Plans & Policies
• Information Management Plans &
Policies

Ch. 1-5
 (1)MARKETING PLANS & POLICIES
• Marketing plans and policies have to be formulated and implemented on the basis
of the 4 Ps of the marketing mix.
- Product and Service strategies
- Pricing Strategies
- Place / Distribution Strategies
- Promotion Strategies
• Marketing Plans & Policies at Nirma Ltd.
-Detergent and soap manufacturer. Led by Karsanbhai Patel.
-Focus on business strategies based on selling high- value products at the lowest
possible price.
-Product: Nirma washing powder, Super Nirma, Nirma detergent cake, Nirma lime
fresh, Nirma beauty soap, Nima fragrant soap.
-Pricing: This is the mainstay of Nirma’s marketing policy. Cost leadership price
policies are followed.(Direct distribution channels, sustained and enduring
promotion keep cost low)
-Place: Two types of distribution arrangements: one for Nirma brand other for Nima
brand.
-Promotion: Simple and benefit oriented communication, (Wall paintings, mass
 Product Strategies
• Product denotes the goods and services that an
organization offers.
• Plans related to product and services are formulated
and implemented on the basis of characteristics,
such as, quality, features, brand name, packaging
and so on.
• E.g. growth strategy of Bajaj Auto has depended on
the quality of its vehicles as a prominent factor.
• Apollo Hospitals India’s first corporate hospital
venture , came up with an idea for market expansion
by creating the Apollo Clinic Enterprise. It adopted
the idea of franchising route to leverage the power of
its brand name.
Ch. 1-7
 Pricing Strategies
• Price denotes the money that customer pay in
exchange of goods and services.
• Represents return to sellers.
• Price characteristics, such as, discount, mode of
payment, payment period, credit terms etc affect
pricing plans and policies.
• Policy of setting high or low prices is used as a
competitive tool.
• E.g. Nirma has consistently followed a low price policy
to compete with HUL.
• HCL claimed a better price performance for it’s
copiers to compete with Modi Xerox.
Ch. 1-8
 Place / Channel of Distribution Strategies

• Place(Distribution) is the process by which goods or services

are made available to customers.
• Distribution plans and policies address themselves to issues ,
such as, the channels to be used, transportation, storage
inventory management, coverage of markets etc.
• This strategy depends upon whether the company wants to
sell directly or outsource its distribution function.
• Most of the companies still prefer to distribute their products
through market intermediaries
• Hence channel differentiation can be a distinctive competitive
advantage
E.g. BSNL’s success is due to location of pay phones/STD
outlets even in corners of small towns and villages
throughout India by appointing agents.
 Promotion Strategies

• Promotion deals with the marketing communication intended

to convey the company’s and it’s product’s/ services image to
prospective buyers.
• This promotional mix includes advertising, personal selling
and sales promotion and publicity.
• Companies should have large advertising budgets during
product introduction stage in order to create customer
acceptance.
• Companies spend more on promotion in a highly competitive
environment.
• Nature of product/industry also determine choice of
promotional tool. E.g. Eureka Forbes adopted a sales
promotion policy of door-to-door selling and demonstrations a
exhibitions for its home improvement products.
 FINANCIAL PLANS & POLICIES
• Finance is a fundamental resource for starting and
conducting of a business
• Financial strategies are centered around acquiring capital,
reducing cost of capital etc.
• It covers three main aspects: Sources of Funds, Usage of
Funds, Management of Funds.
• Also making complex investment decisions through
- capital budgeting
- financing and dividend decisions
- capital structure
- working capital strategies in terms of accounts
receivables, inventories, cash flow management etc.
 Sources of Funds
• Plans and policies related to the sources of funds deal with
financing or capital mix decision.
• Plans and policies have to be made for the following major
factors: capital structure, working capital borrowings, reserve
and surplus as source of funds and relationship with lenders,
banks and Financial Institutions.
• Capital can be equity capital and loan capital / debt capital
• Equity capital provides security and free from paying interest
and financial risk
• Debt capital although requires the payment of fixed interest
regularly, it provides huge surplus during business boom
• Companies thus decide to have both equity and debt capital
 Usage of Funds
• Plans and policies related to usage of funds deal with
investment or asset mix decision.
• Important factors that are relevant here are: capital
investment, current assets, fixed assets, dividend policy.
• This is to decide the amount of profits to be distributed to he
shareholders after retaining certain amount of profits as a
surplus
• This is for the future investment of the company and earning
benefit to the shareholder
• In turn this enables the company ton generate the capital for
future investment purpose which involves the least cost of
capital as well as risks.
 MANAGEMENT OF FUNDS
• It basically deals with systematic
aspects of financial management.
• The major factors for which plans and
policies related to the management of
funds have to b made are: accounting,
budgeting, management control system,
cash, cash management, cost control
and reduction etc.

Ch. 1-14
 Human Resource Plans & Policies

• HR plan and policies relate to personnel system, organization and

employee characteristics and industrial relations.
• HRM is managing the functions of employing, developing, compensating
and utilizing human resources
• This results in development of human and industrial relations which would
shape the future policies and practices of human resource management .
• It is very important to align HR policies to strategy.E.g A V Birla group has
taken the following steps to align their personnel policies to strategy:
*Involving top management in the HR initiatives of training and
development activities.
*Setting up of a Rs. 16 crore training and self-development centre.
*Secondment abroad of of high-potential employees to provide
international exposure.
*Designing performance appraisal system for managerial employees of
the level of general manager and above in order to track high potential
talent.
*Developing managers for leadership role.
 Objectives of Human Resource Management

• To create and utilize an able and motivated workforce and to

accomplish the basic organizational goals.

• To establish and maintain sound organizational structure and

desirable working relationships among all members of the
organization.

• To secure the integration of an individual and groups within the

organization by co-ordination of the individual and group goals
with those of the organization.

• To create facilities and opportunities for an individual or group

development so as to match it with the growth of the organization.

• To satisfy individual and group needs by providing adequate and

equitable wages, incentives, employee benefits and social security
 PERSONNEL SYSTEM

• Plans and policies related to personnel system deal with

factors like manpower planning, selection, development,
compensation and appraisal.
ORGANISATIONAL AND EMPLOYEE CHARACTERISTICS
• Plans and policies in this area deals with factors, such as, the
corporate image, quality of managers, staff and workers,
perception about the image of the organization as an
employer, availability of development opportunities for
employees, working conditions ad so on.
INDUSTRIAL RELATIONS
• Plans and policies related with industrial relations deal with
issues such as union management relationship, collective
bargaining, safety, welfare and security, employee
satisfaction and morale etc.
 OPERATIONS PLANS & POLICIES
• The plans and policies for operations are related to the
production system, operational planning and control, and r & D.
• The strategy adopted affects the nature of product/service, the
markets to be served, and the manner in which the markets are
to be served. All these collectively influence the operations
system.
Strategy

Nature of product Nature of market to be served Manner in which market

to be served

Operations system structure Operations system objectives

Operations plan & Policies Ch. 1-18

 PRODUCTION SYSTEM

• It is concerned with the capacity, location, layout, product or

service design, work systems, degree of automation, extent of
vertical integration and other such factors.
• E.g. at Lakshmi Machine Works, the operations policy related to
product range aimed at successive enlargement of its textile
machinery range. This was done through the policy of
mastering the process of production by absorption of
technology, adaptation to customer needs.
OPERATIONS PLANNING AND CONTROL
• Plans and policies related to operations planning and control are
concerned with aggregate production planning, material supply,
inventory, cost, and quality management; and maintenance of
plant and equipment.
• KSB Pumps Ltd. Laid a great emphasis on quality aspect. To
implement its strategy of stable growth , KSB Pumps build up a
solid reputation for is quality products.
Ch. 1-19
 RESEARCH AND DEVELOPMENT

• Plan and policies for R & D deal with product

development, personnel and facilities, level of
technology used, technology transfer and absorption
technological collaboration and support and so on.
• R & D is he foundation of strategy implementation
and used as a competitive strategic tool.
• E. g. Chennai based Amara Raja Batteries , already
a leader in lead-acid battery segment, consolidated
its position in the competitive automotive battery
segment by entering into I technical collaboration with
Johnson Controls, the world leader in automotive
system, thud creating access to state-of –the-art
technology.

Ch. 1-20
Fred R. David
Prentice Hall
INFORMATION MANAGEMENT PLAN &
POLICIES
• Information capability factors relate to the design and
management of the floe of information from within and
outside into an organization.
• From being a peripheral function dealing with routine
activities like payroll accounting , information
management is now being viewed as a distinct
functional area, which if managed properly, can
augment their capability to develop strategic
advantage.
• Information management plans and policies relate to
acquisition and retention of information, processing
,retrieval and usage of information. It also covers
transmission and dissemination of information and
some integrative and supportive factors. Ch. 1-21
 ACQUISTION & RETENTION OF
INFORMATION
• Plans and policies with regard to the processing and synthesis of
information deal with the factors such as sources, quantity, quality and
timeliness of information; retention capacity and security of information.
• E.g. Reliance Fire and general Insurance Company, a subsidiary of
Reliance Industries, laid stress on the use of IT in its operations. Apart
from the complete networking of its area offices and service centers,
the insurance agents of the company were provided with palmtop
computers to provide timely and instant service to customers and
enable quick sharing of information.
PROCESSING & SYNTHESIS OF INFORMATION
• Plans and policies formulated for processing and synthesis of
information deal with factors such as database management, computer
systems, software capability, and ability ti synthesis information.
• E.g. Corporation Bank applies CAPS(Collection and payment Service),
It is a computerized software based system which enables the
branches of bank to collect payment from dealers and retailers all over
the country and make payments to the client company at its designated
Ch. 1-22
bank branches.
 RETRIEVAL & USAGE OF INFORMATION

• It deals with factors such as availability and appropriateness of information formats, and the capacity to
assimilate and use information.
• E.g. HPCL has a nationwide distribution network, and transportation costs are crucial to the company in
situations where there is a mismatch between regional demand and the refinery’s product mix. In order
to get over this problem, HPCL had installed ERP software to improve communication across the
company to enable its managers to make instant retrieval and usage of information.
TRANSMISSION & DISSEMINTION
• The plans and policies with regard to dissemination and transmission of information deal with factors,
such as, speed, scope, width and depth of coverage of information and willingness to accept
information.
• E.g. Madura Garments had been able to increase its turnover by about 2.5 times by increasing the
speed of information dissemination just by 20%..
• It was able t do so by putting in place an information system that enabled individual managers to
receive inputs from peers and perform their jobs more efficiently at a fast speed and greater accuracy.
INTEGRATIVE, SYSTEMATIC AND SUPPORTIVE FACTORS
• It includes IT infrastructure, its relevance and capability to organizational needs, up gradation of
facilities, willingness to invest in state-o-f the –art systems, availability of computer professionals and
top management support.
• Industries where customers population is informed and demanding such as, consumer durables must
have an information system designed in a way that the customers are provided with satisfactory and
timely responses.
• E.g. WIPRO has a wide clientele spread all over the country. The organizational need is clearly to be in
touch with customers. This is done through the establishment of business call centres.This require vast
 INTEGRATION OF FUNCTIONAL PLANS &
POLICIES
• Functional areas in a business organization are the
result of segregation of key activities.
• But what has been segregated will have to be brought
together, since all activities are performed to achieve
overall objectives of an organization.
• Integration of Functional plans and policies provides a
means for such an aggregation.
• Strategist have to arrange some mechanism for this like
committees.
• Considerations in integration:
*Need for inter consistency.(Different areas don’t work a cross purpose)
*Relevance to development of organizational capability.(synergistic effect)
*Making trade-off decisions.(Minimize aberrations)
*Determining of intensity of linkage.(between specific departments) Ch. 1-24

*Timing of implementation of plans and policies.(High tech product/strong R & D)