Functional strategy, as is suggested by the title, relates to a single functional operation and the activities involved therein.

Decisions at this level within the organization are often described as tactical. Such decisions are guided and constrained by some overall strategic considerations. Functional strategy deals with relatively restricted plan providing objectives for specific function, allocation of resources among different operations within that functional area and coordination between them for optimal contribution to the achievement of the SBU and corporate-level objectives. Below the functional level strategy, there may be operations-level strategies as each function may be dividend into several sub functions. For example, marketing strategy, a functional strategy, can be subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to functional strategy.

Strategies at all the three levels are interlinked in which a higher level strategy generates a lower-level strategy and a lower-level strategy contributes to the achievement of the objectives of higher-level strategy.