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What Is The Difference Of Functional And Business Strategy?

What Is The Difference Of Functional And Business Strategy?

Business strategy and functional strategy are two different levels of strategy in an organization, each with unique purposes and scopes.

Here’s a breakdown of the key differences between functional strategy and business strategy…

  1. Scope
    • Business Strategy – Business strategy, also known as corporate strategy, is concerned with the overall direction and scope of the entire organization. It involves making decisions about which businesses the organization should be in, how it should compete in those businesses, and how it can achieve sustainable competitive advantage across its portfolio of activities. Business strategy addresses questions such as market positioning, growth opportunities, diversification, and resource allocation at the corporate level.
    • Functional Strategy – Functional strategy, on the other hand, focuses on a specific functional area or department within the organization, such as marketing, finance, operations, human resources, or technology. Functional strategy involves setting objectives, priorities, and action plans that support the overall business strategy and contribute to the achievement of organizational goals. It addresses questions related to how the function can best support the organization’s overall strategic objectives and competitive priorities.
  2. Level of Detail
    • Business Strategy – Business strategy tends to be more high-level and conceptual, focusing on broad decisions that impact the organization as a whole. It involves setting long-term goals and objectives, defining the organization’s mission and vision, and identifying strategic initiatives and priorities that will shape its future direction. Business strategy provides a framework for guiding decision-making and resource allocation across the entire organization.
    • Functional Strategy – Functional strategy is more detailed and specific, focusing on the day-to-day operations and tactical activities within a particular functional area. It involves translating the broader objectives and priorities of the business strategy into actionable plans and initiatives that are relevant to the specific needs and challenges of the function. The functional strategy addresses questions such as how the function can improve efficiency, effectiveness, and performance to support the organization’s strategic goals.
  3. Alignment with Business Goals
    • Business Strategy – Business strategy sets the overarching goals and objectives for the organization and defines the strategic direction it should take to achieve competitive advantage and sustainable growth. Functional strategies should be aligned with and supportive of the broader goals and priorities established at the business level.
    • Functional Strategy – Functional strategies are designed to support and contribute to the achievement of the organization’s overall strategic objectives. Each functional area plays a unique role in executing the business strategy, and functional strategies should be coordinated and integrated to ensure alignment and synergy across the organization.

In summary, while business strategy focuses on the overall direction and scope of the organization, functional strategy addresses the specific objectives, priorities, and action plans within individual functional areas. Both levels of strategy are necessary for organizational success and should be aligned to ensure coherence and effectiveness in achieving the organization’s goals.