All businesses need to carry out a number of basic functions in order for them to produce goods or provide services. Since these functions rely on staff with particular knowledge and skills and the use of specialist equipment, each one tends to be done by specialist teams.

What is a Functional Area?

Organisations are usually structured around main activities. The activities are usually grouped into functional areas (or departments/divisions).

In a large manufacturing organisation there are likely to be departments which carry out the functions of Purchases, Human Resources/Personnel, Finance, Production, Sales and Marketing, and Administration. There will usually be a Senior Manager in charge of each area with the Senior Manager being responsible for the direction of their functional area within the organisation.

The 4 main functional areas are:

• Marketing
• Human Resources
• Operations/Production
• Finance

Marketing

The marketing department is concerned with finding out the needs and wants of potential customers and promoting the company’s products or services.

The main functional activities carried out by the marketing department are:

• advertising
• market research
• promotion
• selling products

Advertising

 It is the job of the marketing department to decide how and when to advertise and to develop advertising campaigns.

Market research

To find out if a product or service would meet the needs and wants of customers and would they be willing to purchase them. This can be done through surveys, observations or interviews.

Promotion

The marketing department will decide which form of promotion would be best suited to the product to persuade customers to buy it.

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Operations/Production

The operations department is responsible for making the product or providing the service. It is their responsibility to ensure that the product or service is of the required quality to satisfy the customer.

The main functional activities carried out by the operations department are:

• production of goods or services
• buyingraw materials
• control of quality

Production of goods or services

This involves managing stock, choosing the most suitable production method and distributing finished goods to customers or retailers

Buying raw materials

The operations department will choose suppliers that provide the most cost effective and high quality materials.

Control of quality

The operations department selects the best quality methods to ensure a product or service is of an acceptable standard.

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Human Resources

The human resources department manages the people who work for the organisation. The main functional activities carried out by the human resources department are:

• recruitment and selection
• staff training
• industrial relations
• health and safety

Recruitment and selection

This is the process of finding the best people to come and work for the company.

Staff training

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Finance

The finance department is responsible for managing the money coming into and going out of the business. They will deal with all the financial aspects of the business such as paying suppliers, paying staff wages and receiving payments from customers.

The main functional activities carried out by the finance department are:

• raising finance
• preparing budgets
• preparing final accounts

Raising finance

It is the responsibility of the finance department to ensure a business has enough money to pay bills. To do this they may be required to raise extra finance. This can be done through applying for bank loans or grants.

Preparing budgets

It is important for a business to plan ahead so they can see how much money is expected to come into and out of the business. To do this a business uses a budget which is prepared by the finance department.

Preparing final accounts

Final accounts are required by all businesses to see how much profit or loss has been made and what the business is worth. The final accounts are prepared by the finance department.