3. Business Functions

Dr. Parveen Kaur Nagpal
BUSINESS FUNCTIONS

BUSINESS FUNCTIONS
Business functions are the activities carried out by an enterprise, that can be
divided into core functions and support functions.
Core business functions are activities of an enterprise yielding income, like,
the production of final goods or services intended for the market.
Support business functions are ancillary (supporting) activities carried out by
the enterprise in order to permit or to facilitate the core business functions.
Eg. Logistics, after-sale-service etc.
One of the reasons for separating business operations into functional areas is
to allow each to operate within its area of expertise, thus building efficiency
and effectiveness across the business as a whole.

BUSINESS FUNCTIONS
❖Planning
❖Strategy
❖Decision-Making
❖Supply Chain
❖Finance
❖Marketing
❖Human Resource
❖Legal
❖Accounting & Auditing
❖Administration
❖Information & Auditing
❖Social Functions

PLANNING
Planning is the function of management that involves deciding in advance
about the objectives to be pursued by the enterprise; the selection of best
alternative course of action to reach those objectives and a specification of
activities technical, financial, personnel etc. required for the implementation
of the pre-selected course of action.
Planning requires that managers be aware of environmental conditions facing
their organization and forecast future conditions.
It also requires that managers be good decision makers.

PLANNING
1. “Planning is an intellectually demanding process; it requires the conscious
determination of courses of action and the basing of decision on purpose,
knowledge, and considered estimates.” – Koontz and O ‘Donnell
2. “Planning is the selecting and relating of facts and the making and using of
assumptions regarding the future in the visualization and formulation of
proposed activities believed necessary to achieve desired results.” –
George R. Terry

CHARACTERISTICS OF PLANNING
Primary Function
Pervasive & Continuous Function
Objective Oriented
Flexibility
Raises Accuracy/ Efficiency
Link between Past, Present and Future
Brings Unity of Purpose and Action

PLANNING
Advantages of Planning Limitations of Planning
✓ Uniform Decision Making
✓ Performance Standards
✓ Handles Changes
✓ Solution to Problems
✓ Ensures Stability
✓ Removal of Wastages
✓ Unity of Purpose
✓ Survival and Progress
✓ Lack of Accurate Information
✓ Time Consuming Process
✓ Expensive
✓ Inflexibility
✓ Encroachment on Individual
Freedom and Initiative
✓ Delays Action
✓ Limited Practical Value
✓ Resistance from Employees
✓ Resistance to change
✓ Environmental constraints
✓ Lack of ability and commitment
✓ Reluctance to establish goals

STRATEGY
The word “strategy” is derived from the Greek word “strategos”; stratus
(meaning army) and “ago” (meaning leading/moving).
The concept of strategy has been adopted from the military and adapted for
use in business. It is an art and science of directing military forces in a war or
battle. In business, as in the military, strategy bridges the gap between policy
and tactics. Together, strategy and tactics bridge the gap between ends and
means.
In business, strategy describes what actions managers would take to achieve
organization’s goals and objectives.
It involves setting goals, determining actions to achieve the goals, and
mobilizing the available resources to execute the actions.

STRATEGY
The In 1987, the Canadian management scientist Henry Mintzberg
distinguished five visions for strategy for organizations.
The five components allow organization to implement more effective strategy
Strategy as Plan: A directed course of action to achieve an intended set of
goals.
Strategy as Pattern: Pattern is about strategy that has
been implemented before. If certain choices have
already been made in, an organization is likely to make
those decisions again in future. By becoming aware of
such patterns within the organization, managers are
able to include their strengths in developing a strategy.

STRATEGY
➢Strategy as Position: This is about the organizations position in the market.
It is important to consider in advance how the organization wants to
position itself and what will its identity look like to the stakeholders.
➢Strategy as Ploy: A specific maneuver intended to outwit a competitor. E.g.
a phone service provider can mislead others by suddenly offering internet
services free.
➢Strategy as Perspective: Strategy is about the larger perspective. It is
important to find out how all the stakeholders perceive the organization and
make targeted strategic choices.

CHARACTERISTICS OF STRATEGY
Long Term Developments
Unified and Comprehensive
Universal Applicability
Applicable to all Functional Areas – Marketing, Production, Finance, HR
Affected by the Environment
Levels of Strategy – Corporate Level, Business Level, Functional Level
Allocation of Resources

DECISION MAKING
Decision is a conclusion or resolution reached after consideration
It is a choice made between two or more
available alternatives.
Decision Making is the process of examining the
possible options, comparing them, and choosing
a course of action.
Decision making is the process of choosing the
best alternative for reaching objectives.

DECISION MAKING
Decision making can be defined as a process of choosing between
alternatives to achieve a goal. It is the process by which an individual chooses
one alternative from several to achieve a desired objective (Manmohan
Prasad, 2003)
Decision-Making Process includes:
✓Recognizing and defining the nature of a decision situation
✓Identifying alternatives
✓Choosing the ‘best’ [most effective] alternative
✓Putting it into practice

CHARACTERISTICS OF DECISION MAKING
Intellectual Abilities
Choosing the Best Alternative
Rational Process
Specific Purpose
Problem Solving
Pervasive
Goal Oriented

SIX C’s OF DECISION MAKING
Construct
Compile
Collect
Compare
Consider
Commit

SUPPLY CHAIN
Supply chain is a network of supplier, manufacturing, assembly, distribution and
logistics facilities that perform the functions of procurement of materials,
transformation of these material into intermediate and finished products, and the
distribution of these products to customers
According to Professor Douglas M Lambert, “Supply Chain Management is the
integration of business process from the end user through original supplier who
provide products, services and information that adds value for the customers”
According to Ganeshan & Harrison, “A supply chain is a network of facilities and
distribution options that perform the function of procurement of material
transformation of these materials into intermediate and finished products, and the
distribution of these finished products to customers”

FEATURES OF SUPPLY CHAIN
Integration of Processes
Co-operation among Partners
Mutually Sharing Information
Customer Satisfaction
Long Term Relationships
Mutually Sharing Channel Risks and Rewards

FINANCE
The finance function involves the acquiring and utilization of funds necessary for efficient
operations.
Finance is the lifeblood of business as it is the source to run any organization, it provides
the money, it acquires the money
Finance function has been classified into three:
• Long-Term Finance: Includes finance of investment 3 years or more. Sources of long-
term finance include owner capital, share capital, long-term loans, debentures, internal
funds and so on.
• Medium Term Finance: Financing done between 1 to 3 years, this can be sourced from
bank loans and financial institutions.
• Short Term Finance: Finance needed below one year. Funds may be acquired from bank
overdrafts, commercial paper, advances from customers, trade credit etc.

IMPORTANCE OF FINANCE FUNCTION
Identify Need of Finance
Identify Sources of Finance
Optimum Utilization of Financial Resources
Comparison of Various Sources of Finance
Investment

MARKETING
Marketing deals with identifying and meeting human and social needs.
Marketing is a societal process by which individuals and groups obtain
what they need and want through creating, offering, and freely
exchanging products and services of value with others.
Marketing is the process of planning and executing the conception,
pricing, promotion and distribution of ideas, goods and services to
create exchange and satisfy individual and organizational objectives.
(American Marketing Association)

MARKETING
(Source: https://www.dreamstime.com/stock-photo-importance-marketing-diagram-image85636656)

HUMAN RESOURCE
Human resources is the set of the people who make up the workforce of an
organization, business sector, industry, or economy.
It is the most important resource as it has feelings and sentiments, it can put
the other resources in the best possible use.
HRM views people as an important source or asset to be used for the benefit
of the organizations, employees and the society.
Human resource management (HRM) is the process of employing people,
training them, compensating them, developing policies relating to them, and
developing strategies to retain them.

OBJECTIVES OF HUMAN RESOURCE
•Procurement of Human Capital
•Developing Organizational Climate
•Effective Use of Manpower
•Motivation of Manpower
•Maintain Performance Standards
•Maintain Harmonious Relationship
•Employee Retention
•Competitive Advantage
•Meet Legal Compliance
•Societal Objectives
•Corporate Image

LEGAL
All businesses large and small must comply with the legal regulations.
This may involve the expertise of a specialist who can help entrepreneurs
succeed in this area
Some of the largest legal areas necessary in business include the following:
•Legal basics such as ethics, court system structure, substantive law, and
procedural law are foundational.
•Contract law includes drafting, rights assignment, work delegation,
transactions, agreements, breach of contract, and remedies for a breach.
The Uniform Commercial Code (UCC) is part of contract law governing sales.
•Intellectual property law (IP), including trademarks and patents, prevents
others from profiting from your ideas and creations.
•Corporate law governs the formation of corporations and sale of corporate
equities.

LEGAL
•Tax law determines how different types of businesses are taxed.
•Antitrust and competition are also included.
•Employment law governs how employers interact with their employees and
the rights and responsibilities of each, minimum wage law, workplace
safety, and overtime rules.
•Environmental law strives to mitigate the impact businesses have on the
environment by limiting water and air pollution, regulating pesticide and
chemical use, and establishing penalties for violating these laws.
•Business organization laws define major business entities, such as
partnerships, limited liability companies, sole proprietorships, and
corporation.
•Property law governs personal and real property.

LEGAL
•Negotiable instruments law includes governance of secured transactions
and bankruptcy.
•Computer law analyzes and governs the impact of computer technology on
other areas of business law.

PURPOSES AND FUNCTIONS OF LAW
• Establishing standards identifies what types of behavior are and are not accepted
in society. For example, damage to person or property is considered a crime
because it is not tolerated by society.
• Maintaining order is necessary for a civilized society.
• Resolving disputes allows for the mitigation of issues that arise between those
with different wants, needs, views, and/or values. The court system is the formal
legal method for resolving disputes and consists of both state and federal courts.
Disputes can also be resolved through alternative dispute resolution, which are
official but less formal methods such as mediation and arbitration.
• Protecting liberties and rights ensures each individual is allowed his or her
constitutional rights, including freedom of speech and so forth.

ACCOUNTING & AUDITING
The financial stability of any business cannot be stated without accounting and
auditing.
Accounting and Auditing play a vital and crucial role in preparing accurate financial
statements.
The purpose of accounting is to provide help and assistance to stakeholders and to
enable business decisions with the help of financial information
Auditing is the process of assessment and ascertaining of financial, operational,
and strategic goals and processes in organizations to determine whether they are
in compliance with the stated principles and conform to organizational and
regulatory requirements.
The purpose of auditing is to provide an open minded independent examination of
the financial statements, which increases the profit and reliability of the financial
statements created by management, reduce investor risk and accordingly reduce
the costs.

ACCOUNTING & AUDITING
Importance of Accounting Importance of Auditing
• Proper planning for Financial
Stability
• Assists in evaluation of Business
Performance
• Helps to prepare future financial
estimates and budgets
• Helps in keeping records in order
• Helps in discovery and prevention
of Fraud
• Helps in establishing
accountability
• Helps in assigning complete
report
• Helps to encourage value and
credit Rating
• Helps to provide a very efficient
Reliability
• Provides genuine Aaccuracy and
assurance to business

ADMINISTRATION
Business administration is the process of managing workers and allocating
resources efficiently and effectively by applying microeconomic principles.
The goal is to achieve stability, growth and profitability for a business.
Business administration is a function of organizational structure, the desired
system of task allocation, coordination and supervision.
Some businesses choose to have a hierarchical structure, in which stockholders, a
board of directors, an executive committee and managers work together through a
system of checks and balances to achieve desired objectives.
Depending on the organizational structure, some or all of these business
administrators work together to apply business principles such as accounting,
marketing, finance and management to effectively work toward their common
goals.

ADMINISTRATION
The word “Administer” is derived from the Latin word – “ad+ministraire”
means ‘care for’ or look after people to manage affairs.
Administration is the organization and direction of human and material
resources to achieve the desired ends.
The administration of a business includes the performance or management of
business operations and decision-making, as well as the efficient organization
of people and other resources to direct activities towards common goals and
objectives.

INFORMATION
The information collected through marketing intelligence and marketing
research helps to develop an information base in the organization. It is called
marketing information system.
Marketing information system includes all facts, estimates, opinions and
other data used in the marketing decision marketing.
Information is the glue that holds organization together. Updated information
provides good decision-making system to the businesses. Therefore every
organization collects information regularly from within the organization and
also from external sources, which is useful for planning and controlling of
marketing activities

INFORMATION
According to Philip Kotler, “Marketing information system (MIS) consists of
people, equipment and procedures to gather, sort analyses evaluate and
distribute needed timely and accurate information to marketing decision
makers.
•Continuous and systematic process
•Operates with speed and accuracy
• Involves people, procedures and plans
•Operates in a systematic manner
•Needs co-operation of different departments and executives

NEED & IMPORTANCE OF MIS
Correct and Prompt Decision Making
Growing Competition
Growing Consumer Expectations and Growing Consumerism
Complex Nature of Marketing System
Information Explosion
Provides Information on Business Environment

SOCIAL FUNCTIONS
The social functions of business are a part of the Corporate Social
Responsibility (CSR)
Corporate Social Responsibility, often abbreviated "CSR," is a corporation's
initiatives to assess and take responsibility for the company's effects on
environmental and social wellbeing.
CSR may also be referred to as "corporate citizenship" and can involve
incurring short-term costs that do not provide an immediate financial benefit
to the company, but instead promote positive social and environmental
change

SOCIAL FUNCTIONS/ CSR TOWARDS STAKEHOLDERS

REASONS FOR BUSINESSES TO ENGAGE IN CSR
Business engage in CSR mainly because:
➢Altruism – being a good citizen
➢Window Dressing – to appease stakeholders
➢Contracting Benefits – Helps recruit and retain employees
➢Gain Customers – Attract customers, helps brand and product positioning
➢Reduces Production Costs – in terms of packaging, consumption of energy
➢Risk Management – Address potential legal or regulatory action
➢Better Access to Capital – Investment and funds available

Thank You
www.linkedin.com/in/dr-parveen-kaur-nagpal-82965b15

3. Business Functions

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