What are an Organisations

Functions?
As we have seen, businesses exist to provide
products or services that people want to consume
They do this by organising the firms resources to
meet customers needs
Many organisations arrange these resources into
different business functions
 Levels of Organisation
1. Operational Information is a record of all events and
transactions within an organisation. A record must be kept of
all payments and orders. This includes payroll records and
stock management

2. Tactical Information is information commonly used by

middle management. They need to know how fast particular
products are selling, how quickly stock levels can be refreshed
and at what times of the week a store is most busy

3. Strategic Information is needed by senior management. The

leaders of an organisation need to plan for the future and they
need accurate information about economic and environmental
factors, social trends and so on to decide what direction the
business should take. Information can be used to build
computer models to forecast the effects of certain changes.
Business Functions and Organisation

Functional areas within business

 What are an Organisations
Functions?
Whatever the business, all organisations have to
manage the following functions:

Sales and marketing

Accounts or finance
Human resources or staff
Administration
 What are an Organisations
Functions?
Many businesses will also have the following
activities that need managing:
Production
Purchasing or buying
Research and development

Whether they do or not depends on their industry or

sector
 Engineering Business Functions
Planning
Research and Development
Design
Product Development
Manufacturing
Commissioning
Quality
Product Support
Operations
Customer Service
Finance and Accounts
Purchasing
Administration and IT
Human Resources
Sales
Marketing
Distribution
Functional Areas of Operation
 Key functions in business

Customer
services
Administration
Operations and IT support

The main Marketing and

functional sales
Finance areas

Human
Research and
resources
development
 Delivering key functions
In a small business, will be done by individuals
In a medium/large business, will be done by
individuals working in functional areas or
departments
 Links between functions
All functional areas
must link together to HR R&D
achieve the overall Ops
aims and objectives
This means cooperation Admin Sales
IT
and good
communications
CS Marketing
Financ
e
 Internal and External Information Flow
How do different departments communicate with one
another?

Information also flows vertically managers set targets,

employees will carry out the task

Unidirectional external flow - one way only

Bidirectional external flow both ways

What are the common agencies that

companies\organisations communicate with?
 Administration
Administration is about supporting the work
of an organisation
It is not the central purpose of the business
But every business organisation must have
someone to carry out these tasks
Otherwise there would be chaos!

What does Administration do?
Most businesses rely on administration in order to be
organised
Often administrative staff are vital to a firms
activities
They have a close understanding of the business
across all of its functional areas
They need to know who does what in the firm
 Is Administration Important?
The administrative function is an indirect part of a
business
It is also crucial to what a business does
Examples of administrative tasks are:
dealing with enquiries
giving messages
producing documents
 Research and Development
R&D is about improving the products a firm
makes or the way it makes them
Many large firms have dedicated R&D staff
But R&D is an expensive activity
So firms often rely on using the ideas of others
 Research and Development
In some industries R&D is the main source of
future business growth
Examples are:
Car manufacturers (investing large sums of capital
in developing new vehicle models)
Pharmaceutical companies (reliant on new drug
products for future growth)
 Human Resources
Recruitment and retention
Job descriptions
Person Specifications
Dismissal
Redundancy
Motivation
Professional development and training
Health and safety and conditions at work
Liaison with trade unions
 Sales and Marketing
Market research
Promotion strategies
Pricing strategies
Sales strategies
The sales team
Product advice on new product development,
product improvement, extension strategies, target
markets
 Research and Development
New product development
Product improvements
Competitive advantage
Value added
Product testing
Efficiency gains
Cost savings
 Finance and Accounts
Cash flow
Monitoring income/revenue
Monitoring expenditure
Preparing accounts
Raising finance
Shares
Loans
Links with all other functional areas
 Production/Operations
Acquiring resources
Planning output labour, capital, land
Monitoring costs
Projections on future output
Production methods
Batch
Flow
Job
Cell
Efficiency
 Customer Service
Monitoring distribution
After-sales service
Handling consumer enquiries
Offering advice to consumers
Dealing with customer complaints
Publicity and public relations
 Human resources
Recruitment, retention
and dismissal
Health and
safety Working
The main conditions
responsibilities of the
human resources
function
Employee Training,
organisations development
and unions and promotion

Includes the legal rights and responsibilities of

employer and employees
 Finance
Concerned with money and future plans
Preparing accounts, eg invoices, management accounts,
financial accounts for shareholders and Inland Revenue
Preparing wages and salaries
Obtaining capital and resources, eg money for expansion
or to pay for resources such as equipment and materials.
 Administration and IT support
Clerical work, eg
mail, record keeping
Cleaning and
maintenance Health and
safety
The role of
administration and
ICT function

Security
Support for software applications,
electronic communications and
electronic transactions
 Operations
Concerned with the main business activities
Obtains and converts resources of the business into
goods/services, ie
Buildings and land
Equipment
People
Materials
 Marketing and Sales
Both are concerned with customer needs.

Market research

Activities
include:

Sales Promotion
 Customer service
Concerned with customer relationships
Activities include:
Providing information
Giving advice
Providing credit facilities
Delivering goods
Providing after-sales service
 Research and development
Concerned with developing new goods/services
and updating old ones

Activities include:
Technological developments
Scientific research
Design features
Performance of product
 The use of IT
Relates to all functional areas:
Electronic communications (eg email)
Data sharing (eg databases)
Security systems (eg virus protection)
External communications (eg Internet)
Online support for customers (eg order tracking)
Electronic transactions (eg EFT)
 Functional variations
No two businesses are the same!
Functions will vary because of:
Size and scale of business
Activities of business
Type(s) of customers
Needs of customers
Preferences of owner(s)
 Investigating functional areas
Identify key functions
Find out where these carried out (or by whom)
Check names of key areas/departments
Identify links between functions/areas
Identify use of IT within/between functions and
customers
Note any problem areas
 Organisational Areas

What different functional areas exist within businesses?

What activities does each functional area perform?

How do functional areas rely on each other?

How are businesses structured and how can this be

represented?
 Delivering Key Functions
Businesses must be run efficiently to
achieve their aims and objectives.

To be able to sell products, specific

functions must be performed by the staff
regularly.

In small businesses, individual people

complete the functions.

In medium or large businesses, such as Tesco, the functions are

performed by individuals working as members of functional areas,
or departments.
How many departments do you think a Tesco store might
have? What are they?
 Case study: Thorpe Park and Tesco

Company: Thorpe Park Company: Tesco

Mission: achieve aims and Mission: achieve aims and
objectives objectives

Which departments would help these companies complete their

missions?

Human Resources Marketing

Finance & Accounts Sales
Administration Customer Services
IT Support Research & Development.
Do you know what jobs each functional area
performs?
 Human Resources (HR)
Human Resources (HR), also known as Personnel, is
the functional area in a business that performs tasks
relating directly to the employees:
 Case study: Tesco
Tesco is the UKs biggest private sector
employer with over 260,000 employees.
Its core purpose is: to create value for
customers to earn their lifetime loyalty.

Tesco manages its staff through its HR

department. It offers them benefits, such
as childcare vouchers, share schemes and
pensions, to initially attract them to the
company and also to stop them from
leaving.

How do you think the Human Resources department

affects the other departments?
 Finance and Accounts
Finance and Accounts record and manage the revenue and
costs of the business to calculate how much profit or loss
it has made.

How do you think the Finance and Accounts department

affects the other areas?
 Administration and IT Support
The Administration and IT Support functions are responsible for a
range of tasks which help the business to run smoothly.
If the following duties are not performed properly, the other
functional areas will not be able to complete their tasks and the
business might fail its customers:
clerical tasks
manning the reception desk
cleaning and maintenance
health and safety assessments
security
hardware/software support
network management.
How do the Administration and IT Support functions
affect the other departments?
 Operations and Production
The Operations function is central to any business, no matter what
its size. Its chief purposes are to:
obtain resources necessary for the
business to produce goods or
provide services
organize the resources in the most
efficient and effective way
possible.
The Production function is responsible for providing customers
with whatever the business offers. This usually takes the form of
either producing goods or offering services, e.g. Ford manufacture
cars, a firm of solicitors offers legal advice to clients.
 Marketing
The role of the Marketing function is to promote the goods or
services that the business offers by making customers aware of
them. Tasks that the marketing team undertakes include:

conducting market research to find

out what customers want
developing products in line with
customers needs and wants
carrying out promotional activities
in order to make customers aware
of the businesss services, e.g.
advertising, publicity.
 Sales
Some products are personally sold to customers by specially trained
sales staff from the Sales department.
Customers often like to ask for
advice when buying expensive
products. A salesperson can offer
this advice and encourage the
customers to spend more.

The Sales department is often split into further subdivisions:

Sales staff sell within the store.
Sales representatives travel to the customers.
Telesales staff sell over the telephone.
Merchandisers display the products strategically.
 Customer Services
Customers are the most important part of any business.

The Customer Services department is responsible for looking after

customers needs to make them feel valued.

The Customer Services team has a number of tasks:

offering information, advice and

credit facilities
arranging deliveries
providing after-sales service
managing complaints.

How does the Customer Services team affect

the other departments?
 Case study: Tesco
Tesco tries to achieve its core purpose by offering excellent
customer service and following this value:
No-one tries harder for customers.

In 1999, Tesco launched

www.tesco.com. It is an online
shop where customers can buy
their groceries and have them
delivered to their homes at
convenient times. Currently, it is
the worlds most successful
online grocery shopping service.
Find out the other ways in which Tesco tries to offer its
customers great service.
 Research and Development (R&D)
Unless a business is continually expanding and developing its
range of products, it is unlikely to succeed.
Sales for a new product should
Product life cycle
gradually increase provided that the
marketing mix fits the market
requirements. However, sales will
begin to level and then decline. This
sequence is called the product life
cycle.
Declining sales reduce the businesss income, so large businesses
often have a Research and Development team to improve their
existing products and to invent new ones.
How does the Research and Development function affect
the other departments?
 Case study: Thorpe Park
In March 2006, after 11 months of building, Thorpe Park opened
the ride Stealth. It is Europes fastest and tallest launch coaster,
but at 12 million, it was a very expensive project to undertake.
The R&D department designed Stealth, but the Marketing
department were also involved in considering:

cost
price to charge customers
practicality: where, when,
how
profit.
 Independence of Functional Areas
Departmental links are essential in order to meet the aims and
objectives of the business. This is known as interdependence, as
departments depend on each other.

In a small business, links between different functional areas are

often informal and regular.

In larger businesses, people

may work in separate areas and
rarely meet each other but they
still need information and
support from each other in
order for the business to run
efficiently.
 Interdependence Situations
To highlight the interdependence of different functional areas, think
about these scenarios.
Explain the likely effect on the achievement of targets if the
following situations occurred at Cadburys:
1. Marketing do not advise their Production department that they
have launched a 1 million advertising campaign for Giant
Buttons.
2. Finance do not tell Production that there is a 5% budget cut.
3. Customer Services do not inform Research and Development that
there have been a record number of complaints about a recently
launched chocolate bar.
4. Finance do not advise IT Support that they have purchased new
financial management software.
 Organisational Structure

An organization chart is a diagram which shows the internal

organizational structure of a business, and how the different jobs
within it fit together.
Different businesses are organized in different ways, to
best achieve their objectives. However, an organization
chart for any business will clearly show:
the different functional areas of the business and the job roles
within each functional area
how many people work in each functional area
the different levels of responsibility/authority in the business
who is in charge, and who reports to whom.
 What is an Organization Chart?
This is an organization chart showing how Head teacher
the subject departments (functional areas)
of Science, English and Maths are
organized in one school. Deputy Head

Head of Maths Head of English Head of Science

Maths Teacher English Teacher Science Teacher

What do the horizontal and vertical lines indicate?

Draw an organization chart for your school.
Chain of Command and Span of Control
In an organization chart, the people near the top
have responsibility for those below them.

The chain of command refers to the number

of layers through which messages
(commands) have to pass in order to get from
the person at the top level of authority to staff
at the bottom level. The larger the business,
the longer the chain of command is likely to
be.

The span of control is the number of people under the supervision

of any given manager (i.e. the people below them in the chart).
 Case Study: Thorpe Park
Thorpe Park is a large business with many different
functional areas. This organization chart shows the structure of the
Marketing department at Thorpe Park.
General Manager

Marketing Manager

Brand Manager Marketing Analyst PR Manager

Marketing Executive
 Hierarchical and Flat Structures
Large businesses and organizations such as Thorpe Park and your
school will usually have a hierarchical structure.
This is a form of organization with many different
levels of responsibility. The more levels in a business,
the more opportunities there are for promotion up the
hierarchy.
Smaller businesses or organizations will
tend to have flat structures where there are
only two or three levels. These types of
business are more informal, with close
contact between managers and the rest of the
staff.
What advantages and disadvantages of flat and hierarchical
structures can you think of?
 Centralised and decentralised
organizations
Organizations can either be centralized or decentralized.
A centralized organization keeps the control in the hands
of a few senior managers or directors. In a decentralized
organization, authority and control is delegated to the individual
managers.

Virgin is well-known as a decentralized

organization: the Virgin group consists of
separate, semi-independent companies.
While Richard Branson is chairman of the
Virgin group, he allows his managers to take
control of the running of each business.
 Organisation Charts
Hierarchical Structure
Managing Director

Marketing
Sales Director Finance Director
Director

A B C D Market Strategy Purchasing Sales Accounts

Research Manager Manager Manager
 Organisation Charts

Pyramidal Structure
MD

Senior
Management

Middle
Management

Workers
 Organisation Charts

Centralised/Entrepreneurial

Finance

R&D Production

MD

Marketing Sales
 Organisation Charts

Collaborative
Sales

Accounts Marketing

Production
 Organisation Charts

Circular/Flat Marketing Sales

Finance Production

R&D
 Question time
1.Why do businesses allocate tasks between functional
areas?

2.Why is the Operations function at the heart of any

business?

3.If a product is in the decline stage of the product life

cycle, how can a business boost its sales?

4.What three things will an organization chart show?