Key Business Functions

1
Key Business Functions
2
Business Functions and Relationship to the value
chain

• Value adding involves transformation. Costs are
  incurred when something created by manufacturing
  is processed.
• The addition of cost transforming the inputs
  into a process that will turn them into finished
  goods adds value.
• Value of pies gt cost of inputs used.

3
Coordinating Business Functions

• A biz common purpose or prime function is often
  outlined in a mission statement.
• Specialized departments / divisions in a business
  include.
• Operations
• Carrying out of the core business activity of the
  business by sourcing supplies and processing them
  to create output.

4

• Employment relations
• Managing labour resources employed by the
  business including acquiring new staff,
  developing staff skills, providing renumeration
  to reward staff efforts, and separating staff
  from the business.

• Marketing
• Identifying the needs of the market and
  developing strategies to satisfy market demand
  while exceeding market expectations

5

• Accounting and Finance
• Ensuring the business financial stability by
  maintaining financial records of the business
  transactions and sourcing appropriate types of
  finance to fund its operations.

6
Operations
Marketing
Inputs
Process
Output
Accounting and finance
Employment Relations
7
Coordinating Business Functions

• Planning and Controlling
• Developing a business plan.
• Includes a vision statement where the business
  is headed
• Mission statement Serving stakeholders
• Internal and external analysis of the business
  environment.
• Financial and Social goals of business
• Objectives and strategies of each key business
  function.
• Develop methods to monitor and control business
  performance.

8

• Strategic Plan
• Long term / holistic
• Capturing market share
• Increasing product diversity
• Changing business orientation / market etc
• Developed by senior management.

9

• Operational plan
• Short term goals
• Set by middle management
• Break down strategic plan into manageable steps
• Makes sure each business function supports
  strategic goals of business

10
Controlling

• Operational controls such as inventory,
  management procedures and quality controls
• Employment relations controls, such as
  interviews, productivity measures, and staff
  turnover rates.
• Marketing controls such as market share analysis,
  sales analysis and profitability analysis.
• Accounting and finance controls, such as budgets
  and interpreting financial statements.

11

• Read and understand Fig. 7.13
• Copy 7.14 from text

12
Functional Structure

• Refers to activities or operations organised
  according to key functions (work type) and
  geographic factors (location)
• Copy down Fig.7.17 as an example
• Functional Structure
• Groups similar work types together
• Encourages specialisation of labour
• Reinforces power of managers over subordinates
• Enable a sense of order and predictability.
• Simple and most obvious structure.

13
Market Structure

• Divides the activities of a business into units
  based on different markets the business serves.
• Product structure Division according to products
  the business makes or sells
• Customer Structure Different types of customers
  catered for ie. Retail, wholesale, manufacturing.

14
Functional Structures (cont)

• Functional structures are often used in
  manufacturing or those that have a large
  unskilled workforce.
• Aust companies that relocate overseas set up
  functional structures to maintain tight control
  of production processes.
• Sometimes, functional structures are seen as too
  restrictive and are therefore replaced with more
  flexible options. They emphasise the people
  involved, not the work.
• A globalised economy often requires businesses to
  structure themselves according to geographical
  location (a factory close to where the raw
  materials come from or labour is cheaper)

15
Division of Labour

• Allocating tasks to workers in which they have
  specialist skills and abilities. Efficient
  resource allocation is essential for the prime
  function to perform effectively.
• Levels of organisation include
• Senior Management directors, CEO, general
  manager, key function managers ie CFO.
• Middle Management area managers, department
  heads, product managers
• Supervisors assistant managers, team leaders,
  factory overseers
• Subordinates A category which includes the
  general workers

16
Advantages and Disadvantages of Division of labour

• Advantages
• Allows employees to concentrate solely on areas
  where they are most efficient
• Fewer training expenses
• Easier replacement of employees as skills clearly
  defined

• Disadvantages
• Employees can lose sight of their role in overall
  process.
• Specialisation may reduce flexibility of
  production.
• Absences of workers may delay process.
• Jobs may lack variety

17
Span of Control

• Refers to the number of people whom a manager is
  directly responsible as well as the ratio of
  managers to subordinates across levels of the
  organisation.
• Narrow span of control only a few people
  reporting to a manager
• Wide Span of control many people reporting
  directly to a manager.
• Span of control is worked out as a ratio. A
  General manager with 5 supervisors underneath her
  has a span of control of 15

18
Chain of Command

• The line of authority from top level of
  management down through the business to the
  subordinates, similar to the rungs on a ladder.
  The chain of command is measured by its length.
• Long chain of command many different levels of
  management from top down.
• Short chain of command Only a few tiers of
  management from top to bottom.

19
Types of business structures

• Unitary Structure

Higher Management
Sales Staff
Service Staff
20

• Multidivisional Structure

Higher Management
Individual customer products
Business customer products
Sydney CBD
Greater Sydney Metro
Large Business
Small Business
21
Hierarchical Structure
workers
workers
workers
workers
workers
workers
22
Flat Structure
General Manager
Workers workers workers workers workers
workers

• A common management structure for SMEs.
• Becoming more common in larger companies as it
  gives employees greater control over work
  decisions.

23
New and emerging structures

• Since the 1980s there has been a trend towards
  flatter organisational structures
• A common method of improving business practice
  is to remove middle management / supervisory
  levels (delayering).
• A way to improve productivity is to give
  employees a sense of ownership. This can be done
  by offering a small number of shares. As
  shareholders, employees stand to gain a financial
  share of the business profits.
• Inclusive and democratic management practices

24

• A trend has emerged that businesses structure
  around the needs of employees, such as choosing
  working hours around ones needs and allowing
  working teams to set their own goals.
• Home based businesses (using internet to trade
  globally if desired)
• Telecommuting staying at home for part or full
  time doing the work for a business. Uses the
  internet / network / fax / phone etc to send in
  work.
• Lean business that use hotelling or hot-desking.

25
Relationship between business functions

• Synergy The whole is greater than the some of
  its parts.
• Examples of the interdependence of business
  functions
• Employment relations function to provide labour
  to complete tasks necessary to produce the output
• Accounting functions to provide funds so that
  required machinery to produce output can be
  purchased.