CHAPTER 11

STRATEGY IMPLEMENTATION: BUSINESS AND FUNCTIONAL LEVELS

Learning Objectives
At the end of this chapter, the student should be able to
1. discuss strategy implementation at the business and functional levels;
2. explain the importance of programs, budgets, and procedures; and
3. describe how to achieve consistency in strategy implementation.

CONCEPT AND NATURE

After a company crafts its vision, mission, goals, and objectives (VMGO), the
different business and functional units have to formulate their own VMGO. The VMGO of the
business and functional units must be consistent with the overall corporate level strategy and
other business units. The business and functional level strategies must be efficiently
implemented in order to achieve a company's objectives.
The implementation of the business and functional level strategies is made possible
through the preparation of the following:
1. Programs
2. Budgets
3. Procedures

The programs, budgets, and procedures at the business level must be anchored on the
objectives of a business unit. In a similar manner, the programs, budgets, and procedures at
the functional level must be anchored on the objectives of the functional units. Moreover, the
objectives of the functional units must be consistent with the objectives of the business unit.
For example, if the objective of the business level is to increase revenue by 30% this year and
50% the next year from its present level of ₱15 million, the production and operation unit has
to pursue the objective of increasing its production output by 20% this year and 30% the
following year.
Figure 11.1 presents the vertical and horizontal consistency of the business and
functional level objectives. The business and functional unit objectives serve as the backbone
of the programs, budgets, and procedures.
 All employees in the business and functional levels equally participate in the
implementation of the business and functional level strategies with varying degrees of
accountabilities and responsibilities. The implementation is spearheaded by the business and
functional level managers or supervisors as illustrated in Figure 11.2.

Business and Functional Level Business and Functional Level

Strategy Formulation Strategy Implementation

Business and functional
Competitive and various level managers Programs, budgets, and
functional level strategies operating procedures

Figure 11.2 Middle- and lower-level managers formulate and implement strategies

The programs, budgets, and guidelines serve as the roadmap in the implementation of
business and functional level strategies. The hierarchy of these elements is illustrated in Figure
11.3. The elements contain information about the target, people involved, cost, expected
completion time, and expected output.

Business and Functional Level

Objective
What to accomplish and when

Programs
Activities needed to achieve
the objective

Budgets
Expected revenue and cost of
the program

Procedures
Steps to accomplish the
program

Figure 11.3 The hierarchy of programs, budgets, and procedures

PROGRAMS
A strategic program is a plan embodying the different activities that must be
accomplished to achieve the objectives of a company through the efficient utilization of its
resources. Programs vary in content and structure across business and functional units.
However, all programs are anchored on the general business objective (e.g., to increase the
revenue by 50% this year). Each business and functional unit prepares a program distinct, to a
certain extent, from the other units.
At the business level, the setting of a program is spearheaded by a business level
manager. It is participated by different functional level managers and other key personnel of a
particular division. At the functional level, the setting of a program is spearheaded by a
functional level manager with the participation of important, lead employees of different
subunits. For example, in the production and operation functional unit, representatives may
come separately from the purchasing, shipping, and quality control units.

The following steps are to be observed in the preparation of a program:

1. Define the business or functional objective.
2. Set the key performance indicator (KPI).
3. Identify the people involved, dates for program review, and completion time.
4. Prepare the program report.

Define the Business or Functional Objective

The first step in setting the business or functional level program is to define the
objective. The objective must be vertically consistent with the corporate level objective. It
must also be horizontally consistent with the objectives of other business and functional units.
Figure 11.1 illustrates how the business and functional level objectives are aligned with the
corporate objective, which is to increase the company's revenue by 50% over the past year's
performance.
In setting an objective, one must follow the SMART (specific, measurable, attainable,
realistic, and time-bound) principle. Usually, the objective is expressed in quantifiable figures
to be specific and measurable. In crafting the objective, the resources of a company should be
considered for it to become realistic and attainable.

Set the Key Performance Indicator

The key performance indicator (KPI) is a quantifiable form of measurement used
to determine how a company effectively achieves its objectives. The KPI varies among
businesses, processes, and functional units. An effective KPI must be based on reliable data
and should fit to the particular program, process, or activity being measured. Information
collected from KPI results is commonly used in strategy evaluation and control. When using
the KPI, it must be based on the objective of the business or functional unit concerned.
 The KPI varies considerably among companies and business and functional units
because every company has its own unique operating processes, nature, and objectives.

Most KPIs fall under the following broad classifications:

1. Increased customer value (e.g., number of complaints)
2. Improved production processes (e.g., average processing time)
3. Reduced manufacturing cost (e.g., number of waste or spoilage)
4. Increased sales revenue (e.g., increase of new customers)

Identify the People Involved, Dates for Program Review, and Completion Time
The strategic program for a project, activity, or process requires people who are going
to execute the strategic activities to pinpoint responsibilities and accountabilities. These people
must have the necessary knowledge, skills, and competency to efficiently achieve the desired
output.
The program must also include the probable dates for conducting reviews about the
progress of different activities. This will provide relevant information about the status of the
process, project, or activity. The expected completion time of every process or activity, which
matches the specified time in the objective, must also be spelled out in the program.

Prepare the Program Report

Every business and functional unit prepares its own program report at the end of a
project, process, or activity. The report varies in structure and content, but it must not fail to
include the objective of the program and the significant actions taken to realize it. The
program report should include information about the expected business risk, the problems
encountered, the hindrances and limitations faced, and some recommendations to facilitate
the completion of the program and the achievement of the objective.
After being finalized, a program is, then, communicated to all members of the business
and functional units. In general, the language of the program must be clear, concise, and
simple. It must lead to understanding, not doubts and confusion.

BUDGETS
Strategy implementation at the business and functional levels requires the preparation
of a budget. A budget is a plan expressed in quantitative, monetary value. It includes the
revenue and expenditure budget. The basis of a budget is the business and functional level
strategic objectives in coordination with a program. In preparing a budget, the resources of a
company are taken into account. This may serve as the cap that will limit the setting of the
budgeted amount.
 In Figure 11.1, the production and operation unit may allocate a budget of ₱800,000 for
the expected 40% increase in production capacity. This amount covers the additional
materials, labor, and overhead costs. In a similar manner, the marketing unit may be provided
with a budget expenditure of ₱250,000 for the 10% increase in the number of salespeople.
This amount is intended for additional salary, per diem, and other operating expenses.
The budget may serve as a control mechanism in the implementation of a strategy. It
also directs the course of the program or activity through the budgeted amount. Furthermore,
it is a good tool to evaluate the efficiency of the performance of the business and functional
units.

PROCEDURES
The procedures, otherwise known as the standard operating procedures (SOP),
specify the detailed or step-by-step process to be carried out to achieve the completion of a
program. It contains the list of things to do, the executor of the program, and the manner and
time of execution. The drafting of the standard procedure is influenced by the strategy,
objectives, and the program.
The format of the procedures varies among business and functional units. It can be in a
simple- step, a hierarchical-step, or a flowchart format. The simple-step format uses simple
sentences in listing down the procedures to be carried out to accomplish a program. A
hierarchical-step format is employed when there are several long procedures involved, and
each major step contains several substeps. A flowchart format is adopted when there are
infinite steps to be carried out since the results may be unpredictable.
The procedures must be consistent with the objectives of a business or functional unit.
For example, in Figure 11.1, the human resource unit may come up with standard procedures
on how to minimize or reduce the absenteeism of employees. The procedures must be
documented to discourage finger-pointing in times when results are not favorable or cannot be
determined. They are not fixed and rigid; rather, they must be periodically evaluated because
changes are happening constantly. The rapid changes in the environment influence the
effective administration of procedures.