- Recognize the main functional areas within a business
- Identify the people and activities within each functional area of a business
- Understand the difference between an internal and external stakeholder
- Describe stakeholders’ relationship with business organizations
Functional Areas in Business
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 which can be categorized into different functional areas. As businesses grow larger, and their products and services become more complex, the number of functional areas within a business grows. Different functions within a business are performed and controlled by different parts of the business. Each functional area makes specific and valuable contributions to the organization as a whole.
main functional areas of a business
- Management: supervising other people
- Operations: converting resources into products and services
- Marketing/Sales: designing products and services to meet customer needs and convincing customers to buy them
- Finance: obtaining and managing a business’ money
- Research and Development: innovating to create new products and services
An important reason for separating business operations into functional areas is to allow each to operate within its area of expertise, 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 ahead of their competition. On the other hand, retail companies such as grocery stores may have no internal R&D department, but will be heavily invested in Operations areas surrounding Supply Chain Management. Also, small businesses may not have enough workers to have separate departments for these functions, but the tasks that have to be accomplished in running the business will touch all of these functional areas.