business and business enviroment

1. BTEC HND Level 5
Business and the Business
Environment
Week 05, LO2
Topic: LO2 -Interrelationship of the various functions within
anorganisation and their link to organisational structure
Ms. Naila Amin

2. LO2 -Demonstrate the interrelationship of the various
functions within an
organisation and how they link to organisational
structure

3. i)-The various functions within an
organisation:

4. The role of marketing, finance, human resource
management and operations within an organisational
context and the interrelationships.

5.  Organizational Functions
• Different functions within a business are performed and controlled by different
departments of the business.
• Each department is managed by individuals with specific skills and qualifications in
the functional area of work.
• This departmentalization is to allow each to operate within its area of expertise,
thus building efficiency and effectiveness across the business as a whole.
• Functional areas in a business vary according to the nature of the market and the
size of the business.
• For example, manufacturing companies like Nike and Apple have significant
Research and Development (R&D) departments in order to stay in the lead in their
respective business segments.
• On the other hand, retail companies may have no R&D functional area per se, but
will be heavily invested in Operations areas surrounding Supply Chain Management.

7. Management
The primary role of managers in business is to supervise other people’s
performance. Most management activities fall into the following
categories:
 Planning: setting long-term goals for the business, as well as short-
term strategies needed to execute those goals.
 Organizing: organizing the operations of a business in the most
efficient way—enabling the business to use its resources effectively.
 Controlling: controlling the activities within the business to ensure
that it’s on track to achieve its goals
 Leading: 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.

8. Operations
• Operations is where inputs, or factors of production, are converted to
outputs, which are goods and services.
• Operations is the heart of a business—providing goods and services in
a quantity and of a quality that meets the needs of the customers.
• Operations controls the supply chain, including procurement and
logistics, ensuring adequate inventory is available for production and
output quality is within specifications.
• The operations department needs support from other departments in
planning and carrying out day-to-day activities, including:
 Sales forecast to prepare production schedules, determine how much
output to produce, and ensure the supply chain runs effectively.

9.  New products to be produced and their specifications to determine
the appropriate production methods and quality control.
 Budget for running day-to-day operations and for business
expansion, for example, buying new machines.
 Staff, for example, when they need new people to support increased
production.
 Termination programs, for example, when switching to new
technology with a smaller workforce, to remain compliant with
relevant labor laws.
 Break-even information to set production targets.

10. Marketing/Sales
• The marketing department is responsible for satisfying customer needs,
creating value, and maintaining long-term relationships.
• To keep customers satisfied with the company’s offerings and loyal,
willing to continue buying products, continuing to pour money into the
company.
• 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.

11. • In today’s technology-driven business environment, marketing is
also responsible for building and overseeing a company’s Internet
presence (e.g., the company website, blogs, social media
campaigns, social media marketing etc.).
• Sales functional areas can vary in structure and approach
depending on the nature of the market and the company size

12. • The marketing department must work with other business functions to:
 Recruit new staff to support new programs being implemented, such as
research and development.
 Ensure adequate inventory when needed by consumers
 Maintain customer loyalty by ensuring products meet specifications and are
not defective.
 Set the right selling price, which requires information such as production
costs.
 Have an adequate budget to run marketing programs such as promotions.
 Design a discount program for customers who pay on time, encouraging
them to remain loyal to the company.

13. Finance
• The Finance function involves planning for, obtaining, and managing a company’s funds,
deals with corporate money, including managing cash inflows and outflows, reporting and
analyzing them.
• Finance managers plan for both short-term and long-term financial capital needs
• It also plans how funds should be raised, the long-term cost of borrowing funds, and the
implications of financing decisions for the long-term health of the business.
• Accounting is a crucial part of the Finance functional area, which provides managers with
information needed to make decisions about the allocation of company resources.

14. • Financial accountants are primarily responsible for the
preparation of financial statements to help assess the
financial strength of the company.
• Managerial accountants provide information regarding
costs, budgets, asset allocation

15. • The finance department needs the support of other business functions to:
 Have staff with adequate accounting, finance, and related skills.
 Ensure budget allocation according to plans, such as training and
development budget, promotion, and daily expenses.
 Monitor the progress of budget absorption in each department.
 Determine the financing strategy when the operations department plans to
launch an investment project.
 Ensure the company is making a profit, which requires information such as
sales targets by the marketing department.

16. Human Resources
• The human resources department is strategic for the entire business.
• Human resource management relates with recruiting, training,
compensation, motivating the individuals required by other business
functions to carry out daily activities.
• The human resources department relates with the marketing, operations,
and finance departments, including to:
 Ensuring they have adequate resources, not too many to increase costs or
not too few to disrupt business processes.

17.  Organize training and development for individuals in each
department to become professionals in functional areas.
 Handles disciplinary issues and employee complaints across
all departments of the business.
 Ensure compliance with labor regulations such as labor
health and safety laws.

18. Distribution and Logistics
• Distribution and logistics handle transportation, warehousing, and order
processing activities.
• Incoming logistics handles various goods that will enter the production
facility or warehouse, such as raw materials and components.
• Outbound logistics delivers the company’s output to customers, including
handling its warehousing.
• Some companies may sell and ship their own products directly to
customers. While others rely on intermediaries such as distributors and
wholesalers.

19. Research and Development
• Research and development are responsible for innovation within the company, possibly
related to products or business processes.
• If not separated, this function may fall under the operations department.
• This department should be filled with open-minded individuals, have strong analytical
experience, and have a deep understanding of the market and business processes.
• In developing product innovations, the team conducts market research, identifying trends,
and conducting experiments to help determine the most profitable products to
commercialize.

20. Customer service
• Customer service activities may fall under the marketing department.
• The team manages profitable long-term relationships with customers.
• They handle aspects such as customer complaints and inquiries,
returns, and customer requirements. Therefore, they need skills in
communication, handling conflicts, and patient dealing with
customers.
• Superior customer service keeps customers loyal to the company,
thereby bringing money into the company in the long run.

21. Information Technology
• Information technology handles the flow of information within the
company and outside the company, including the required software and
hardware.
• The team is responsible for installing and maintaining information
systems, digital networks, the internet, information security, etc.
• They also provide technical assistance to other departments to use
technology tools or when they encounter problems.

22. Communication
• The communications department deals with aspects such as
corporate communications, public relations, and crisis
management.
• For example, they hold press releases and build good relations
with journalists to promote and build a good company image in
the public’s eyes. That includes how to handle negative issues
about the company so as not to damage the company’s image.

23. Procurement
• The procurement department deals with aspects such as
purchasing, logistics, and supply chain management.
• Its responsibilities include handling the purchase of materials
and components for the production process.
• buying other items needed by the company such as office
equipment is also under this department.
• This department functions strategically for handling large
purchases, to help company lower costs.

24. Quality management
• Quality management activities usually fall under the operations
department.
• The team ensures the company’s products meet the
specifications or standards set.
• They carry out quality management procedures, including quality
planning, quality assurance, quality control, and quality
improvement.
• They test products and review production processes to ensure
the products sold meet company and customer requirements.

25.  Key People Within Functional Areas
Here is an example of the functional areas of a large technology manufacturing corporation and the key
functions and people within.

26. • The Management functional area in most large corporations is led by the Chief
Executive Officer (CEO). Depending on company size, there may be a President in
position as well.
• The Operations functional area is managed by the Chief Operations Officer (COO). In
this example, Operations consists of Production, led by a Vice President (VP), a Supply
Chain department, and a Procurement area with Director-level people in charge.
• The Finance functional area is led by the Chief Financial Officer (CFO),
• In addition to running Finance and Accounting, the CFO is responsible for reporting
company results to the financial community.
• It is common for the CFO to have VPs of HR, Accounting, and Legal as direct reports.

27. • The Marketing/Sales functional area is managed by the Chief Revenue Officer (CRO),
• The CRO may have a Sales VP and Marketing VP as direct reports, but in some cases, the
CRO may act as VP of Sales or Marketing.
• This functional area may also contain Customer Service (and Support) with a Director-level
manager in charge.
• the Research and Development functional area is staffed with scientists, thought leaders,
subject matter experts, and industry analysts striving to provide the organization with
knowledge and ideas to keep up with, and ahead of, the competition.
• R&D is led by the Chief Technology Officer (CTO)

28.  Organizational Charts
• The New York and Erie Railroad developed the first organizational charts in the 19th
century as a way to improve management efficiency.
• A chart shows the lines of authority and control running between different departments
and levels of management.
• A well-designed chart will make it easy to see who makes decisions, who reports to
whom and how your organization divides up its operating functions.

29.  How are Various Departments Interrelated in an
Organization?
• Larger organizations usually have separate departments and the departmental interrelationships within the
organization are important for the success of the business.
• The various departments in an organization work together and communicate with each other to achieve
common organizational objectives.
• The functions of each department are interrelated with other departments to ensure smooth operations
within the entire organizational system.
• Each function has its own goals and targets, but it must support the company’s goals as a whole.

30. • All of these functions must work together if a business is to be successful.
• various departments or functions need to understand the challenges faced in
other areas of the business and how their actions have either a positive or
negative impact on other parts of the company.
• One of the marks of a good general manager is the ability to create and
sustain cohesion between the various departments that he/she oversees.

31. • Here are a few ways in which an organization’s departments
can be interrelated:
Production v Purchase & Supply
• Production department provides its specifications in terms of
the raw materials needed to develop the product
• The purchase department then procures those raw materials on
time and with the right price.

32. Production v Research and Development
• The R&D works closely with production department
and identifies new trends and innovation through
market research
• Production makes sure that those innovations are
incorporated into the production process.
• The key here is to meet the customer’s needs and go
ahead of competitors.

33. Production v Finance and Accounting
• The production department proposes the raw materials and labor required in
production; and the finance department uses their proposal to develop a budget
for the procurement of raw materials and production of goods.
Marketing v Research and Development
• The marketing department communicates with customers to identify their
needs.
• The information is used by the R&D department to develop innovative ideas to
meet those needs; and the production department implements those ideas
through product development and improvement.

34. Human Resources v Finance
• The human resource department establishes the employment
needs in the organization, including the right amount of
wages that is appropriate for each position based on the
prevailing market wage rate and the company’s policies.
• The finance department then creates a payroll to release
funds to each employee according to their wage rate.

37. Recommended Resources
Textbooks
BURNS, J. and NEEDLE, D. (2019) Business in Context: An Introduction to Business and its
Environment. 7th Ed. Cengage Learning.
MORRISON, J. (2020) The Global Business Environment: Towards Sustainability? 5th Ed. Red Globe
Press.
WETHERLEY, P. (Editor) and OTTER, D. (2018) The Business Environment: Themes and Issues in a
Globalised World. 4th Ed. Oxford: Oxford University Press.
WORTHINGTON, I. and BRITTON. C. (2018) The Business Environment. 8th Ed. Harlow: Pearson.