Principles of Business

The Functional Areas of Business

The term functional area refers to grouping individuals on the basis of the role or purpose each
performs in the organisation. There are five main functional areas in business: Production, Marketing,
Finance, Human Resources and Research and Development.

Manager

Research
Human and
Production Marketing Finance
Resources Developmen
t

The Production Department - Production is the process used to transform inputs such as raw
materials, information or semi- produced goods into goods and services.

The Marketing Department – Marketing refers to all the processes involved in promoting and selling
goods or services in the most profitable and efficient manner. The marketing department is responsible
for market research, advertising and the actual selling of the product/service. This department
coordinates the Four Ps of marketing (Product, Price, Place and Promotion).

The Finance Department – Finance is the most important resource of all business functional areas.
The success of any business depends on the efficient management of its finance. This department is
responsible for the management of start-up capital and operating capital to ensure the business can
function.

The Human Resources Department – Human Resources is concerned with managing people in an
organisation. Human Resources includes six areas: Recruitment (finding staff with the appropriate
skills and experiences to meet the needs of the business); Safety (guarding against injuries and ill
health at work that could result from working conditions); Employee relations (creating and

1
maintaining a strong employer/employee relationship); Compensation and benefits (Paying fair wages
for work done, providing medical insurance, pensions, bonuses and other benefits); Compliance
(ensuring that the business conforms to all the labour and employment laws) and Training and
development (training involves adapting and improving employee skills for their current role whereas
development is concerned with building skills for a future role).

The Research and Development Department – engages in investigative work with the aim of getting
new knowledge that it can use to create new products or services so that the business can remain
competitive.

The Key Stakeholders of Business

The activities of any business can have a great impact on many people or groups. Therefore, these
people have an interest in whatever may happen with all businesses in their community. They are
called Business Stakeholders. The main key stakeholders are:

Customer
s

Owners/Shareholders Employee
s

The Key
Stakeholder
s of
Supplier Business Government
s

Special Interest Society/Local

Groups/Pressur Community/School
e Groups s

2
What are the roles, rights and responsibilities of stakeholders?

Role Rights- what they Responsibilities (not

expected from the necessarily legally
business binding)

Customers
● Purchase goods and ● To receive goods ● To be honest – pay
services. and services that for goods bought
meet local laws and services
● Provide revenue
regarding health received when
from sales which
and safety, requested.
allows the business
design,
to function and ● Not to steal
performance and
expand.
so on at fair ● Not to make false
● Provide feedback to prices. claims about poor
business on the ● To be offered service or faulty
performance of goods.
replacements,
products.
repairs or ● To be informed
compensation in
the event of ● To complain in a
failure of the reasonable way
product or service ● To report
– to at least the
unethical practices
minimum levels
laid down by law.

Suppliers
● Supply goods and ● To be paid on ● To supply goods
services to allow the time – as and services
business to offer its specified by the ordered by the
products to its own law or the service business in the
customers. agreement. time and condition
laid down by the
● To be treated
purchase contract
fairly by the
or suppliers’
purchasing
service
business
agreements.

Employees
● Provide manual and
other labour services
to the business to
● To be treated at ● To be honest.
least to the
● To meet the
minimum limits as
conditions and

3
 allow goods and established by the requirements of
services to be national law, e.g. the employment
provided to on minimum contract.
customers. wage.
● To cooperate with
● To be treated and management in all
paid in the ways reasonable
described in the requests.
employment
contract.
● In most countries,
to be allowed to
join a trade union
if desired.

Society/Local
● Provide local services ● To be consulted ● To cooperate with
Community/
and infrastructure to about major the business,
Schools the business to allow changes that where reasonable
it to operate produce affect it, e.g. to do so, on
and sell within legal expansion plans expansion and
limits. or changing other plans.
methods of
● To meet
production.
reasonable
● Not to have lives requests from the
of local residents business for local
negatively services such as
affected by the public transport
business’ (e.g. to allow staff
activities. to get to work and
waste disposal.
● To be supported
through
donations and
sponsorships
where possible.

Government
● Pass laws that ● Businesses have a ● To treat
restrain many duty to businesses equally
aspects of business government to under the law.
activity. meet all legal
● To prevent unfair
constraints, such

4
 as producing only competition.
● Provide law and
legal goods and to
order to allow legal ● To establish good
pay taxes on time.
business activity to trading links with
take place. other countries to
allow international
● Achieve economic
trade.
stability to encourage
business activity.

Owners/
● Provide capital. ● To be kept ● To keep capital
Shareholders
informed of the invested in the
● Attend annual
performance of business in order
general meetings to the business. to allow it to
receive annual survive and
reports and elect ● To receive a share
possibly expand.
directors. of the profits.
● To have an
opportunity to
appoint the
directors of the
business.