Functional ImplementationFunctional implementation is carried out through functional plan and policies in five different areas.

Marketing Financial Operation Personnel Information management

Functional StrategiesFunctional 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 FitThe 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 policyIn 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 plansFunctional 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.

DevelopmentWhen 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 plansOrganizations 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 mixThe 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 SegmentationMarket 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 PositioningProduct 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.

BrandingBrand 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.

PricePrice 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 FixationThe 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 ChangeThere 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 channelsEvaluation 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_______________________________Custom

ers

Producer________Retailer________________Customers

Producer___Wholesaler___Retailer________Customers

Producer__Wholesaler__Jobber__Retailer___Customers

Evaluation of ChannelOnce 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.

PromotionPromotion 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 BudgetPromotion 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 spendFixing certain percentage of sales revenuesDetermining 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 ManagementCRM 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.