Functional

Level
Strategy
VISPERAS
Functional units
Functional units and their structures vary among companies based on their nature, operations,
products, geographic scope, and structure. In this lecture, the functional level strategies are
based on a typical company with four functional units:

1. Marketing

2. Finance

3. Human resources

4. Production and operation

Marketing Strategy
Marketing strategy as the marketing logic by which a company hopes to create customer value
and achieve profitable customer relationships. There are numerous marketing strategies, but they
are broadly classified as follows:

1. Competitive position strategy

2. Market strategy

3. Pricing strategy

4. Promotion and distribution strategy

Competitive Position Strategies
A competitive position strategy dictates the marketing strategy that is adopted by a company
based on its competitive position in a market. The following are the broad classifications of this
strategy:

1. Market leader strategy

2. Market challenger strategy

3. Market follower strategy

4. Market nicher strategy

Market Leader Strategies
The considered market leader is the company that has the largest share in a market. The
following are the variations of the market leader strategies:

1. Expand total demand strategy

2. Protect market share strategy

3. Expand market share strategy

Expand total demand strategy. In this strategy, the market leader expands the demand by
developing new users or promoting new usage of a product.

Protect market share strategy. The protect market strategy is adopted by the market leader when
it continuously innovates and fixes its weaknesses to avoid competitors from taking opportunities.

Expand market share strategy. It is the desire of the market leader to expand its market share
when it offers superior-quality products, build close customer relationships, and creates good
service experiences with customers.
Market Challenger Strategies
The market challenger is a company that has a market share lower than that of the market leader.
It can adopt either of the following strategies:

1. Full frontal attack strategy

2. Indirect attack strategy

Full frontal attack strategy. When the market challenger adopts the full frontal attack strategy, it
matches the market leader’s product, price, and distribution system. The market challenger
attacks the strengths of the market leader and other competitors, not their weaknesses.

Indirect attack strategy. In this strategy, market challenger avoids attacking the strengths of the
market leader. Instead, it works against the weaknesses of the market leader.
Market follower strategies
The market follower is a company that simply follows the market leader or challenger instead of
attacking them. It holds a market share lower than that of the market challenger. It can maintain
its market share by adopting the following strategies:

1. Follow closely strategy

2. Follow at a distance strategy

Follow closely strategy. In this strategy, the market follower studies and learns from the
experiences of the market leader by improving the market leader’s products and programs at
lower cost.

Follow at a distance strategy. The market follower in this strategy simply holds on to its current
customers and tries to win new customers fairly as a way of avoiding retaliation from the market
challenger.
Market Nicher Strategies
A market nicher is a company that provides the needs of a small segment in a market which has
not been given preference yet by the market leader or challenger. It adopts the following
strategies for its competitive positioning in an industry:

1. Specialization niching strategy

2. Multiple niching strategy

Specialization niching strategy. In this strategy, a market nicher can specialize in one type of end
user group or specific customers.

Multiple niching strategy. A market nicher with multiple niching strategy as its competitive
positioning strategy serves two or more market niches.
Market Strategies
In this context, “market” refers to the buyers of a product or service, not the place where a seller
and a buyer meet. They can be actual or potential buyers. This strategy is intended to determine
the growth in a target market. A market strategy is broadly classified as follows:

1. Market identification strategy

2. Market-product growth strategy

Market Identification Strategies
This strategy is designed to determine the customers to be served and the manner in which they
are to be served. The following are variations of this strategy:

1. Segmentation strategy

2. Targeting strategy

3. Positioning strategy
Segmentation Strategy. This strategy aims to divide the market into distinct groups of buyers who
have different behaviors, characters, and needs.

Targeting strategy. This strategy is designed to identify the particular group of customers to be
served.

Positioning strategy. The positioning strategy is concerned with the way customers are served. It
can be achieved by placing a product in the minds of the customers relative to competing
products.
Market-Product Growth Strategies
The market-product growth strategy has two dimensions, namely, the market and the product
dimensions.

4 variations of this strategy:

1. Market penetration strategy

2. Market development strategy

3. Product development strategy

4. Diversification strategy
Market penetration strategy. This strategy is adopted by a marketing functional unit when it aims
to improve a company’s sales through the rigorous selling of existing products to the current
market segment.

Market development strategy. This strategy aims to improve a company’s sales through the sale
of existing products to new markets.
Product development strategy. In this marketing strategy, a company plans to grow by selling new
products to existing market segments.

Diversification strategy. In this strategy, a company plans to grow by entering a new market with
new product lines.
Pricing Strategy
The pricing strategy is an important factor in the struggle of a company to achieve competitive
advantage in an industry.
Pricing strategies are broadly classified as follows:

1. New product pricing strategy

2. Product-mix strategy

3. Price adjustment strategy

New Product Pricing Strategies
Introducing new products to the market means having to set their prices for the first time. The
pricing strategies for new products are as follows:

1. Skim pricing strategy

2. Penetration pricing strategy

Skim pricing strategy. This strategy allows a company to set a high initial price for its product to
obtain the highest possible revenue.

Penetration pricing strategy. In this strategy, a company sets a low initial price for its product so
that it can easily penetrate and gain a considerable share in the market.
Product-Mix Pricing Strategy
Product-mix or product portfolio is a set of product lines or items offered by a seller for a single
price. The different variations of product-mix pricing strategies are as follows:

1. Product line pricing strategy

2. Optional product line pricing strategy

3. Captive product pricing strategy

4. By-product pricing strategy

5. Product bundle pricing strategy

Product line pricing strategy. The product price in this pricing strategy is set across an entire
product line.

Optional product line pricing strategy. This pricing strategy is adopted when there are accessories
that can be added to the main product.

Captive product pricing strategy. It is the pricing strategy that is employed when a certain product
must be used with other products.
By-product pricing strategy. This pricing strategy can be adopted when producing the main
product results in a by-product with a saleable value.

Product bundle pricing strategy. It is the pricing strategy used when products are offered to the
market as a bundle with one collective price.
Price Adjustment Strategies
When a market situation changes as the demand, taste, preferences, and other variables change, the
price in the market also changes. The different price adjustment strategies are as follows:
1. Discount and allowance pricing strategy
2. Segmented pricing strategy
3. Psychological pricing strategy
4. Promotional pricing strategy
5. Geographical pricing strategy
6. Dynamic pricing strategy
7. International pricing strategy
References:
Aduana, 2021, Strategic Management, C&E Publishing, Inc. Quezon City Dess, McNamara, Eisner, 2017,
Strategic Management, Eight Edition, McGraw-Hill Int., Philippines.

Disclaimer:

No copyright infringement intended for this presentation, solely for educational purposes only