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Plans and Policies

Functional Strategies-Meaning
Relatively restricted plan designed to achieve the following: Objectives in a specific functional area, Allocation of resources among different operations within that functional area and Coordination among different functional areas For achievement of the business and corporate level objectives.

Functional Strategies-Fit
Vertical Fit
Congruence and coordination among strategies at different level. Lower Level Functional Strategy aligned with Higher Level Business Strategy. Leads to Functional Strategies & their implementation.

Horizontal Fit
Congruence and coordination among different strategies at same level. Alignment among the various activities performed in different functional areas. Horizontal Fit leads to Operational Implementation.

Corporate Level strategies Business Level Strategies Functional-Level Strategies

Marketing Plan & Policies

Financial Plan & Policies

Operational Plan & Policies

HRM Plan & Policies

Information Management Plan & Policies

Functional Plans and Policies

Functional strategies defined in terms of functional plans and policies-plans or tactics to implement business strategies- are made within the guidelines set at the higher levels. PLANS are made to select a course of action while POLICIES are required to act as guidelines to action.

Implement strategic decisions by all parts of an organization; Control activities in different functional areas of business; Reduce time spent by functional managers in decision making Handle similar situations occurring in different functional areas in a consistent manner; Coordination across the different functions takes place where necessary.


Financial Plans and Policies

Related to availability, usage & management of funds. 1. Sources of Funds: 1. Capital Mix Decisions: Capital structure, procurement of capital and working capital borrowings, reserves and surplus, relationship with lenders, banks and financial institutions. 2. Important since they determine how financial resources will be made available for the implementation of strategies. 2. Usage of Funds: 1. Investment or asset-mix decisions: Capital investment, fixed asset acquisition, current assets, loan and advances , dividend decisions etc. 2. Important since it relates to efficiency & effectiveness of resource utilization.

Financial Plans and Policies

3. Management of Funds:

1. The system of finance, accounting and budgeting, cash, credit and risk management, cost control and reduction etc. 2. Important as it aims at the conservation & optimum utilisation of funds.

Marketing Plans and Policies

These have to be formulated and implemented on the basis of 4 Ps of Marketing Mix.
1. Product: Characteristics like quality, features, choice of models , brand names, packaging etc. 2. Pricing: Discount, mode of payment, allowances, payment period, credit terms etc. 3. Place: Channels to be used, transportation, logistics and inventory storage management and coverage of markets etc. 4. Promotion: Advertising, personal selling, sales promotion and publicity.

Operations Plans and Policies

Related to the production system, operational planning & control and R&D. Production system - capacity, location, layout, product or service design, work systems, degree of automation, extent of vertical integration. Operations Planning and control aggregate production planning; materials supply; inventory, cost and quality management; and maintenance of plant and equipment. Research and development- product development, personnel and facilities, level of technology used, technology transfer and absorption, technological collaboration and support.

Personnel Plans and Policies

Personnel System - manpower planning, selection, development, compensation, communication and appraisal. Organizational and employee characteristics corporate image, quality of managers, staff and workers, perception about and image of the organization as an employer, availability of development opportunities for employees, working conditions. Industrial Relations union-management relationship, collective bargaining, safety, welfare and security, employee satisfaction and morale.

Personnel Plans and Policies

Information Management Plans and Policies

Acquisition and retention of information- sources, quantity, quality and timeliness of information, retention capacity and security of information.For eg. CRM & SCM. Processing and synthesis of information database management, computer systems, software capability and the ability to synthesize information. For eg. RLI capital investment on IT. Retrieval & Usage of Information Availability & Appropriateness of Information formats & capacity to assimilate & use information. For eg Reduction in paper work by banks & other financial institutions. Transmission & Dissemination of Information Speed, Scope, Width & Depth of coverage of Information & willingness to accept information.For eg Work from home


Need for Internal Consistency
Ensures different functional areas operating in consonance.

Relevance to development of organizational capability

OC in terms of strategic or competitive advantage.

Making trade off decisions

Integration ensures minimum aberration due to trade-off decisions.

Determination of Intensity of linkages

Important to determine the level of coordination that should exist between various functional areas.

Timing of Implementation of plans & policies

Implemented at appropriate time.

Example-Plans and Policies of Public Sector banks

The public sector banks (the State Bank group and the nationalized banks) had to face a tough challenge when the new private sector banks made their entry in early nineties. The new banks had the benefit of starting on a clean slate and had started with state-of-the-art technology which in turn helped them save on man power costs and provide better services. The older banks had not kept up-to-date with technology and were facing competition of this kind for the first time.

Marketing Strategy--Introduction of new products and services: new products include debit cards, credit cards, international cards, special deposits, demat accounts and anywhere-banking. Some of the new services include round-theclock phone-banking, Automated Teller Machines (ATMs), intercity, inter-branch banking, net-banking and bill payment services. Information Technology Strategy--Computerisation and networking of branches: Many of these branches were also networked so that their customers could be offered any-time, any-where banking services. Financial Strategy--Risk Management and Capital Adequacy: Many public sector banks were saddled with large nonperforming assets (NPAs) and suffered from low capital adequacy. Banks have since put in place stringent Risk Management Systems to address not only credit risk, but also market risk and other operational risks.