Functional areas refer to specialised departments within a business. These departments carry out specific functions that assists the business overall.
Businesses can vary greatly in size. When a business is small, there are no definite functional areas evident. This is so because the owner usually produces and markets his own products, does his own accounting and personnel work. As the business expands, however, specialised (functional areas) departments become necessary. Most large businesses have FOUR functional areas: PRODUCTION, FINANCE, MARKETING and PERSONNEL.
In very large businesses, there are TWO additional functional areas: RESEARCH and DEVELOPMENT, and SOCIAL.
We will now take a brief look at what takes place in these specialised departments.
THE PRODUCTION FUNCTION
In this department, raw materials are combined to produce goods and services are also provided. Designers make specifications which are fully developed and tested. Sample products are also made. There will be no production department however if the business is only engaged in retailing or wholesaling, since they are buying and selling already manufactured goods or they are in the service industry.
THE FINANCE FUNCTION
This department is responsible for the accounting procedures and processes of the business. They are also involved in the investment of funds in plant and machinery, as well as in the purchasing of the needs of other departments of the business. Where shareholders are paid dividends, the finance will make this a reality for them.
THE MARKETING FUNCTION
The marketing function includes market research, publicity, distribution, selling merchandising and after-sales services, advertising and sales promotion.
THE PERSONNEL FUNCTION
This department is sometimes referred to as the human resource department. The functions and duties of this department concern mainly the employees of the business. Primary concerns are: planning and forecasting manpower requirements, recruitment and selection of employees of the business, job analysis and job description, job specifications and employee training, etc.
Having looked at the FOUR main areas, let us now spend a few minutes on the additional functional areas that may exist if the business is large.
THE RESEARCH AND DEVELOPMENT FUNCTION
The work of this department includes many types of research, e.g., consumer research, product research and motivation research. Feasibility studies and pilot projects are carried out and communication with research institutes, such as the department of statistics, takes place.
THE SOCIAL FUNCTION
This may include: trade union negotiations, efforts to reduce pollution and dumping of waste products, provision of health facilities and provision of clean, working environments, and the initiation of social groups in the business, e.g., clubs and credit unions.
That’s it for the functional areas of the business.
Many persons decide to own and operate their own businesses. Some decide to invest in the business ventures of others. Still, others end up working in the business. Whatever the case, one needs to understand the fundamentals of management.