Transcript Key Business Functions

Key Business Functions
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 > cost of inputs used.
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.
• 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
• 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.
Operations
Inputs
Accounting
and finance
Marketing
Process
Output
Employment
Relations
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.
• Strategic Plan:
–Long term / holistic
–Capturing market share
–Increasing product diversity
–Changing business orientation /
market etc
–Developed by senior
management.
• 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
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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.
• Read and understand Fig. 7.13
• Copy 7.14 from text
Functional Structure
• Refers to activities or operations organised
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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.
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.
Functional Structures (con’t)
• Functional structures are often used in manufacturing or
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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)
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
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
Span of Control
• Refers to the number of people whom a
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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 1:5
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 it’s 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.
Types of business structures
• Unitary Structure
Higher
Management
Sales Staff
Service Staff
• Multidivisional Structure
Higher Management
Individual customer products
Sydney CBD
Greater
Sydney
Metro
Business customer products
Small
Business
Large
Business
Hierarchical Structure
General
Manager
Line Manager
Supervisor
workers
Supervisor
workers
Line Manager
Line Manager
Supervisor
Supervisor
Supervisor
Supervisor
workers
workers
workers
workers
Flat Structure
General Manager
Workers
workers workers workers
workers workers
• A common management structure for SME’s.
• Becoming more common in larger companies as
it gives employees greater control over work
decisions.
New and emerging structures
• Since the 1980’s there has been a trend towards
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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:
• A trend has emerged that businesses structure
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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.
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.