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Business LibreTexts

1.5: Functional Areas

  • Page ID
    3592
  • What you’ll learn to do: identify the primary functional areas within a business and describe their contribution to the organization

    The decisions about how best to use the factors of production to provide the goods or services of the business require a team of people working in a variety of jobs. As businesses grow larger and their products and services become more complex, the number of functional areas within a business grows. Each functional area makes specific and valuable contributions to the organization as a whole. In this section we will explore some of the most common functional areas in a business and how each contributes to the overall success of the business.

    learning objectives

    • Identify the primary functional areas within a business
    • Identify key people and explain the activities within each functional area

    Functional Areas of Business

    Sideview photo of eight floors of an office building, showing many people inside at their desks. Title of photo: Worker Bees.

    Just as different functions in the human body are performed and regulated by different organs, different functions within a business are performed and controlled by different parts of the business. One of the reasons for separating business operations into functional areas is to allow each to operate within its area of expertise, thus building efficiency and effectiveness across the business as a whole. The key functional areas of a business are the following:

    • Management
    • Operations
    • Marketing
    • Accounting
    • Finance

    Management

    The primary role of managers in business is to supervise other people’s performance. Most management activities fall into the following categories:

    • Planning: Managers plan by setting long-term goals for the business, as well short-term strategies needed to execute against those goals.
    • Organizing: Managers are responsible for organizing the operations of a business in the most efficient way, enabling the business to use its resources effectively.
    • Controlling: A large percentage of a manager’s time is spent controlling the activities within the business to ensure that it’s on track to achieve its goals. When people or processes stray from the path, managers are often the first ones to notice and take corrective action.
    • Leading: Managers serve as leaders for the organization, in practical as well as symbolic ways. The manager may lead work teams or groups through a new process or the development of a new product. The manager may also be seen as the leader of the organization when it interacts with the community, customers, and suppliers.

    Operations

    Operations is where inputs (factors of production) are converted to outputs (goods and services). Operations is like the heart of a business, pumping out goods and services in a quantity and of a quality that meets the needs of the customers. The operations manager is responsible for overseeing the day-to-day business operations, which can encompass everything from ordering raw materials to scheduling workers to produce tangible goods.

    Marketing

    Marketing consists of all that a company does to identify customers’ needs and design products and services that meet those needs. The marketing function also includes promoting goods and services, determining how the goods and services will be delivered, and developing a pricing strategy to capture market share while remaining competitive. In day’s technology-driven business environment, marketing is also responsible for building and overseeing a company’s Internet presence (e.g., the company Web site, blogs, social media campaigns, etc.). Today, social media marketing is one of the fastest growing sectors within the marketing function.

    Accounting

    Accountants provide managers with information needed to make decisions about the allocation of company resources. This area is ultimately responsible for accurately representing the financial transactions of a business to internal and external parties, government agencies, and owners/investors. Financial Accountants are primarily responsible for the preparation of financial statements to help entities both inside and outside the organization assess the financial strength of the company. Managerial accountants provide information regarding costs, budgets, asset allocation, and performance appraisal for internal use by management for the purpose of decision-making.

    Finance

    Although related to accounting, the finance function involves planning for, obtaining, and managing a company’s funds. Finance managers plan for both short- and long-term financial capital needs and analyze the impact that borrowing will have on the financial well-being of the business. A company’s finance department answers questions about how funds should be raised (loans vs. stocks), the long-term cost of borrowing funds, and the implications of financing decisions for the long-term health of the business.