Berbice Educational Institute

Business Education Department

Subject: Principles of Business

Grade 10

Section 1: The Nature of Business

Handout #5

Topic: Functional areas of a business

Very small businesses are managed by one person-do not really have departments. The single manager
will be responsible for, amongst other things, deciding on prices (marketing); recruiting new workers
(personnel); overseeing quality (production) and arranging bank loans (finance). Larger businesses will
usually be managed by more than one person. These different managers will often have specific skills
and experiences, for example in marketing or finance. Each manager will then have specialized staff to
help them. This creates the functional areas or departments of the business.

Subtopic the main functional areas of a business:

1. Marketing
2. Production
3. Personnel
4. Finance

1. Marketing: The work of this department is focused on finding out what customers want to buy and
once this has been produced, the products need to be promoted and sold. The key tasks are:

● Using market research to find out what customers wants are and what other businesses are
selling- this helps the production department to make the ‘right product’.
● Setting an appropriate price
● Promoting and advertising
● Distributing the product and selling it.

2. Production: this department is responsible for buying resources-production space, materials,

machines-and making products to satisfy consumer wants. The key tasks are:

● Researching and developing suitable products

● Purchasing supplies of raw materials and components
● Deciding on the best location for production
● Deciding on the most appropriate production method
● Ensuring high quality of production
● Storing materials and finished products
● Undertaking research and development into new products-but in a large business this may be
undertaken by a separate department.
3. Personnel: All businesses-apart from those with only one owner and no employees-need workers.
These workers need to be recruited, paid, motivated and communicated with. The personnel
department has these responsibilities. The key tasks are:

● Deciding on the number of workers needed by the business and the skills that they should have-
this is called a workforce plan.
● Recruiting and selecting suitable workers
● Deciding on suitable methods of pay and other forms of motivation
● Arranging staff training when necessary.

● Taking responsibility for staff welfare

● Disciplining and, if necessary, sacking workers for breaking their contracts, or making them
redundant if the business needs fewer workers.

4. Finance: accountants, bookkeepers and financial specialists will be employed in the finance
department. The key tasks are:

● Keeping accurate and up-to-date accounting records

● Making future financial plans, called budgets
● Keeping a check on departments to try to make sure they do not exceed their budgets
● Keeping cash flow records
● Arranging new sources of finance when needed.

Class Activity

a) Define the term business budget

b) Explain in your own words the importance of a business having an effective marketing
department.