What is the importance of an organization’s functional areas to the strategic management process and why must the functional areas be integrated during the four phases of strategic management?
A business's functional areas are the departments, teams or divisions (depending upon the company's management structure) that oversee and implement the major functional areas of business in a company. Most businesses share the major functional areas in common. Some functional areas are marketing, accounting, customer service, and human resources. There may be other functional areas such as, but not restricted to, international business and research and development.
Strategic management planning comprises the four (sometimes stated as five) steps involved in developing a strategic business or product plan. A strategic management plan relies upon research data to analyze the market and competitive environments for the business or product. This analysis is used to develop a strategic plan of approach for progress toward the company or product goal and objective. The plan developed is then implemented and launched in a community or larger market. The implementation is evaluated for strengths, weaknesses, successes and failures. After evaluation, the strategic management process starts all over again to incorporate observations into a revised strategic plan to be implemented and launched in its turn.
It is easy to see that if any of the functional areas, for example accounting and marketing, are left out of the strategic management planning process and not integrated, then the efforts of the company are bound to fail because integral functions of running a business and of successfully introducing a company or a product into a community or a larger or more specialized market are bound to fail. For example, if the accounting functional area is not integrated into the strategic management plan, the cost of the plan may or may not be within the budget thus may or may not be possible.
Strategic Management is the process through which strategy is developed, evaluated and executed. A strategy is a long term plan for an organization. Organizations formulate stratgies by considering the mission, vision and goals of the organization. The functional areas goals and objectives are developed from the strategy based upon the organization strategy. Hence the major functional areas marketing, finance, human resource management and production develop functional strategies by integrating themselves to the organizational strategy and goals.
The four major phases of strategic management process are:
- Analysis: It includes examining and understanding industry in which the company want to enter into the business.
- Formulation: During this stage the company want to articulate its mission, outlines its goals, objectives and mission and decide a particular type of strategy like stability or expansion strategy etc.
- Implementation: The formulated stratgy is put into action, in this stage the resoruces are allocated for effectively engaging the emplopyees into the production process.
- Evaluation: In this stage the system continuously check whether the formualted strategy is being implemented and checks any deviation between the actual and the expected output of the strategy.
Therefore the organizations functional areas must be integrated into the four phases of strategic management. If the functiona areas are not considered then the ultimate aim of the strategy of the organization cannot be achieved.
- Strategic Management: Concepts and Cases, Fred R, David, 12th edition, PHI Learning Private Ltd, 2010.
- Pearce and Robinson, Strategic Management: Formulation, Implementation and Control, Mc-Graw Hill, 9th edition, 2007.