Operational vs. Functional Level Strategy

Management strategies provide business owners with frameworks that help them reach their ultimate goals. Management experts have developed these strategies to be applied at different structural levels within a business. Operational-level strategies are applied to business operations as a whole, while functional-level strategies are implemented for each department.

Advantages of Operational Strategy

A major advantage of operational strategy is its focus on competition. Businesses that lag behind their competitors can implement company-wide operational strategies to close the gap. Companies that have a competitive advantage can apply operational strategies to maintain or increase their advantage. These operational strategies then can be broken down and implemented at the departmental level. The success of operational strategies are also easy to measure, such as increased profits, reduced costs and higher market share in the industry.

Drawbacks of Operational Strategy

The operational strategy approach also carries some noticeable disadvantages. An operational strategy can often demonstrate a lack of flexibility. A shift in industry technology, new government regulations, or an upstart competitor can derail a business that adheres too closely to a rigid operational strategy.

Also, the nature of operational strategy calls for all company assets to be assessed in terms of their contribution to the company's profits. While placing a monetary value on computers, equipment, and intellectual property is a necessary step, employees may resent being treated like a cog in a machine.

Advantages of Functional Level Strategy

While operational-level strategies cover the company as a whole, functional-level strategies involve individual departments, functions, or roles within the company. These functional strategies serve as components to the overall operational strategy. The functional strategies focus on specific business tasks and use the skills of the employees within each department to their peak efficiency.

For instance, if the company has an operational strategy of reducing costs, the functional strategy for the accounting department will be to find where those costs can be cut, while the functional strategy for the manufacturing floor will be to find ways to increase efficiency in the manufacturing process.

Drawbacks of Functional Level Strategy

Although a functional-level strategy can give department leaders some autonomy, problems occur when each department becomes an island. When departments heads place too much emphasis on implementing their departmental functional strategies, the overall result can be a company-wide loss of productivity. These losses can occur when individual departments fail to communicate with each other.

Communication breakdowns can create conflict between departments. When these breakdowns occur, company leaders must step in and resolve the issues, leading to a loss in productivity while the issues are discussed.