Main functional areas of a business interact
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‘How do the main functional areas of a business interact and contribute to its effective management?’
The main functional areas of a business are marketing, human resource, finance, information systems and production. All these interact with each other in different ways but all contribute to effective management. Management would not be completely effective if one of the above areas are missing. They are all needed in different ways to make sure that the business reaches objectives, achieves effectiveness and efficiency and while doing this trying to get a balance in which they can satisfy different stakeholders.
One of the most important functional areas of a business is marketing. Marketing provides the organization with information, which allows the organization to make decisions on the demands of the consumers, changes in the market as well as any strategies of competitors. This contributes to effective management because it allows the business to make sure that they provide the right product or service to consumers. This is very important for management because if the business does get this wrong then the survival of the business is under threat. To make sure that the business provides the right good or service, the marketing manager has to gather all the relevant information and distribute it to other areas in a way that will benefit the organization as a whole. Information can be used to help management plan their objectives and strategy’s, which can be very effective for the business.
Marketing interacts with functional areas through the planning process. Businesses need to plan for the future and the marketing plan is part of this. The marketing plan shows the current situation of the business and where it wants to be in the future. This helps set the objectives and plan how these objectives will be achieved. It helps the business set targets and then evaluates the results to make sure that the business is performing efficiently and effectively.
The information that is gathered by the marketing department needs to provide other areas with this knowledge. A production department would find the information from marketing very useful because they need to make sure that they are making a product that will satisfy the consumers wants and needs. This interaction contributes to effective management because if the production department didn’t interact then the wrong products could be produced, which would be very costly for the business.
Marketing also interacts with the finance department, which allows the business to perform effectively. Finance will need to know information from marketing to make sure the business had sufficient capital in order to finance any materials or equipment for new products etc.
Marketing doesn’t always contribute to effect management. If the business lose sight on which consumer group they are satisfying or changes in demand then this could lead to decrease in sales.
Management of a business would find it hard to function effectively without the human resource department. Krulis-Randa believed that human resource management (HRM) was beneficial for a business because ‘ employees are viewed as subjects with the potential for growth and development’ and human resource management ‘identifies this potential and develops it in line with adaptive needs of the organization’. HRM contributes to effective management because it ensures that the businesses human resources i.e. employees are used efficiently by using there ability, knowledge and skills to the full which will benefit the organization.
Human resource department interacts with finance because they need to know how much capital there is when considering how much staff they will need and what training programmes they can implement. A business will use human resource planning (HRP) to make sure that the business employees the right people and it also allows them to predict how many employees they will need to be able to run effectively.
Human resources also interacts with marketing. This is because they need to know about the market and any changes in products or services so that they can employ and train the right staff. Marketing can also encourage more motivation from employees because they can be prepared for any changes and will be confident to deal with these changes.
HRP gives other functional areas information and allows the business to plan for the future by looking at the businesses objectives and making sure that the business can adapt to changes when they happen i.e. employing new staff and making sure that training is provided. This can help them to avoid things like to little or to many staff and develop new training programmes if employees seem lacking in the skills needed for the job. HRP allows the business to take more time when making decisions, which means that any actions that they take will be better planned and thought through.
To make sure that human resources are interacting and contributing to effective management a number of things can be looked at. If productivity rates this have risen then it could be due to better workforce that have been selected correctly. If there is not a lot of waste then this could be because workers are trained to work with care with out a lot of mistakes being made. High labour turnover could show that maybe they aren’t picking the right people for the jobs.
HRP can contribute a lot to effective management however there can be a few problems when this isn’t always the case. One problem is that those plans don’t always last that long due to the competitive environment and HRP can’t always predict unexpected changes in the market etc. Also for HRP to work it needs full cooperation of the workforce.
Finance is a functional area that interacts with many functional areas, which allows the business to run effectively. The financial statements allow other areas to look at what is happening financially in the business. The finance department will have to plan because ‘profit doesn’t doesn’t just happen, it has to be planned’ (Horngren et al). Finance will prepare a budget, which will let other functional areas know how much money they have to spend on their area. The budget is prepared by looking at the targets and objectives of a business and then plan what money they have to spend and what profit they should be expecting to generate.
For the budget to work all areas of the business need to follow what is said and be prepared to make changes when problems occur. This is where finance interacts with marketing. Finance needs to know what the market environment is like at the time and what it will be like in the future in order to prepare the budget. This contributes to effective management because a lot of businesses fail when they can’t afford to finance the growth of the business. It can also make the business more competitive because it will be able to have the right amount of money to development new ideas, which could put them in front of other competitors.
Finance also interacts with the production department because they need to know how much things are costing to get produced and what money is being spent on material, machinery etc. This makes sure that the business isn’t spending too much money on producing the goods/service when it could be spending capital more efficiently. If the business can do this then it can be effective because money can be spent on areas that need improving to meet targets and objectives.
The budget brings together the activities of the different areas to make sure that they are all focused on the main objectives.
Information systems (I.S) is another functional area that interacts and contributes to effective management. I.S store information from all functional areas. Information and plans on financial, marketing, human resources, production areas are all stored. I.S links all the functional areas and contributes to effective management because all the information is important to the strategy and objectives of the business. Management information systems (MIS) use all the information to be able to give advice and support to management. It provides management with all the relevant information that it would need to make decisions about the business.
Production is a main area in which it interacts with. It is beneficial because it links orders placed by customers to the production department. I.S is important here because it needs to be accurate or the business might produce too much or too little. I.S are more precise and prevent problems like that occurring. MIS provide management with accurate data to help make decisions on the right kind of materials to use and what machinery should be used.
I.S. interacts a great deal with finance. It stores financial information like the balance sheets and profit and loss accounts. MIS can give useful financial information on the budget and help management make decisions on ways to use capital efficiently. It can also help make decisions on ways to increase profits by cutting costs.
I.S interacts with marketing. It can give information by looking at consumer demands and comparing them to help management predict the marketing environment and what product or service will meet the needs of the consumers. I.S also is greatly linked to human resource function because it will provide information on labour turnover, advice on what training is needed to which role. It can also record the efficiently of the workers by looking at how much is produced.
Problems with I.S is that they are only useful to people that understand how to use them. If management don’t understand then this could cause a lot of wrong decisions made which would have a bad effect on the business. Management also need to make it clear to employees why the system has been implemented. This will cause problems and confusion if not.
In conclusion, it is clear that the main functional areas of a business are needed to ensure effective management. The areas need good communication constantly to make sure that information and support are given to all the areas. This communication enables them to interact and allows them to contribute to its effective management.