Information SystemsFunctional Areas within a Business - Example
Levels of Organisation• 1. Operational Information is a record of all events and transactions within an organisation. A record must be kept of all payments and orders. This includes payroll records and stock management• 2. Tactical Information is information commonly used by middle management. They need to know how fast particular products are selling, how quickly stock levels can be refreshed and at what times of the week a store is most busy• 3. Strategic Information is needed by senior management. The leaders of an organisation need to plan for the future and they need accurate information about economic and environmental factors, social trends and so on to decide what direction the business should take. Information can be used to build computer models to forecast the effects of certain changes.
Internal and External Information Flow• How do different departments communicate with one another? – Information also flows vertically – managers set targets, employees will carry out the task – Unidirectional external flow - one way only – Bidirectional external flow –both ways• What are the common agencies that companiesorganisations communicate with?
Organisational AreasWhat different functional areas exist withinbusinesses?What activities does each functional area perform?How do functional areas rely on each other?How are businesses structured and how can this berepresented?
Delivering Key FunctionsBusinesses must be run efficiently toachieve their aims and objectives.To be able to sell products, specificfunctions must be performed by thestaff regularly.In small businesses, individualpeople complete the functions.In medium or large businesses, such as Tesco, the functionsare performed by individuals working as members offunctional areas, or departments. How many departments do you think a Tesco store might have? What are they?
Case study: Thorpe Park and TescoCompany: Thorpe Park Company: TescoMission: achieve aims and Mission: achieve aims and objectives objectivesWhich departments would help these companies completetheir missions? Human Resources Marketing Finance & Accounts Sales Administration Customer Services IT Support Research & Development. Do you know what jobs each functional area performs?
Human Resources (HR)Human Resources (HR), also known asPersonnel, is the functional area in a businessthat performs tasks relating directly to theemployees:
Case study: Tesco Tesco is the UK’s biggest private sector employer with over 260,000 employees. Its core purpose is: to create value for customers to earn their lifetime loyalty. Tesco manages its staff through its HR department. It offers them benefits, such as childcare vouchers, share schemes and pensions, to initially attract them to the company and also to stop them from leaving. How do you think the Human Resourcesdepartment affects the other departments?
Finance and AccountsFinance and Accounts record and manage therevenue and costs of the business to calculate howmuch profit or loss it has made. How do you think the Finance and Accounts department affects the other areas?
Administration and IT SupportThe Administration and IT Support functions are responsiblefor a range of tasks which help the business to run smoothly.If the following duties are not performed properly, the otherfunctional areas will not be able to complete their tasks andthe business might fail its customers: clerical tasks manning the reception desk cleaning and maintenance health and safety assessments security hardware/software support network management. How do the Administration and IT Support functions affect the other departments?
Operations and ProductionThe Operations function is central to any business, nomatter what its size. Its chief purposes are to: obtain resources necessary for the business to produce goods or provide services organize the resources in the most efficient and effective way possible.The Production function is responsible for providingcustomers with whatever the business offers. This usuallytakes the form of either producing goods or offering services,e.g. Ford manufacture cars, a firm of solicitors offers legaladvice to clients.
MarketingThe role of the Marketing function is to promote the goods orservices that the business offers by making customers awareof them. Tasks that the marketing team undertakes include: conducting market research to find out what customers want developing products in line with customers’ needs and wants carrying out promotional activities in order to make customers aware of the business’s services, e.g. advertising, publicity.
SalesSome products are personally sold to customers by speciallytrained sales staff from the Sales department. Customers often like to ask for advice when buying expensive products. A salesperson can offer this advice and encourage the customers to spend more.The Sales department is often split into further subdivisions: Sales staff sell within the store. Sales representatives travel to the customers. Telesales staff sell over the telephone. Merchandisers display the products strategically.
Customer ServicesCustomers are the most important part of any business.The Customer Services department is responsible forlooking after customers’ needs to make them feel valued.The Customer Services team has a number of tasks: offering information, advice and credit facilities arranging deliveries providing after-sales service managing complaints. How does the Customer Services team affect the other departments?
Case study: TescoTesco tries to achieve its core purpose by offering excellentcustomer service and following this value:No-one tries harder for customers.In 1999, Tesco launchedwww.tesco.com. It is an onlineshop where customers can buytheir groceries and have themdelivered to their homes atconvenient times. Currently, it isthe world’s most successfulonline grocery shopping service. Find out the other ways in which Tesco tries to offer its customers great service.
Research and Development (R&D)Unless a business is continually expanding and developingits range of products, it is unlikely to succeed.Sales for a new product should Product life cyclegradually increase – provided thatthe marketing mix fits the marketrequirements. However, sales willbegin to level and then decline.This sequence is called theproduct life cycle.Declining sales reduce the business’s income, so largebusinesses often have a Research and Development team toimprove their existing products and to invent new ones. How does the Research and Development function affect the other departments?
Case study: Thorpe ParkIn March 2006, after 11 months of building, Thorpe Parkopened the ride Stealth. It is Europe’s fastest and tallestlaunch coaster, but at £12 million, it was a very expensiveproject to undertake. The R&D department designedStealth, but the Marketing department were also involved inconsidering: cost price to charge customers practicality: where, when, how profit.
Independence of Functional AreasDepartmental links are essential in order to meet the aimsand objectives of the business. This is known asinterdependence, as departments depend on each other.In a small business, links between different functional areasare often informal and regular.In larger businesses, peoplemay work in separate areasand rarely meet each otherbut they still needinformation and support fromeach other in order for thebusiness to run efficiently.
Interdependence SituationsTo highlight the interdependence of different functional areas,think about these scenarios.Explain the likely effect on the achievement of targets if thefollowing situations occurred at Cadbury’s:1.Marketing do not advise their Production department that they have launched a £1 million advertising campaign for Giant Buttons.2.Finance do not tell Production that there is a 5% budget cut.3.Customer Services do not inform Research and Development that there have been a record number of complaints about a recently launched chocolate bar.4.Finance do not advise IT Support that they have purchased new financial management software.
Organisational StructureAn organization chart is a diagram which shows the internalorganizational structure of a business, and how thedifferent jobs within it fit together.Different businesses are organized in different ways, tobest achieve their objectives. However, an organizationchart for any business will clearly show: the different functional areas of the business and the job roles within each functional area how many people work in each functional area the different levels of responsibility/authority in the business – who is in charge, and who reports to whom.
What is an Organization Chart?This is an organization chart showing Head teacherhow the subject departments(functional areas) of Science, Englishand Maths are organized in one school. Deputy Head Head of Maths Head of English Head of Science Maths Teacher English Teacher Science Teacher What do the horizontal and vertical lines indicate? Draw an organization chart for your school.
Chain of Command and Span of ControlIn an organization chart, the people near thetop have responsibility for those below them.The chain of command refers to thenumber of layers through whichmessages (commands) have to pass inorder to get from the person at the toplevel of authority to staff at the bottomlevel. The larger the business, the longerthe chain of command is likely to be.The span of control is the number of people under thesupervision of any given manager (i.e. the people below themin the chart).
Case Study: Thorpe ParkThorpe Park is a large business with many differentfunctional areas. This organization chart shows the structureof the Marketing department at Thorpe Park. General Manager Marketing ManagerBrand Manager Marketing Analyst PR Manager Marketing Executive
Hierarchical and Flat StructuresLarge businesses and organizations such as Thorpe Park andyour school will usually have a hierarchical structure.This is a form of organization with many differentlevels of responsibility. The more levels in abusiness, the more opportunities there are forpromotion up the hierarchy.Smaller businesses or organizations willtend to have flat structures – wherethere are only two or three levels. Thesetypes of business are more informal,with close contact between managersand the rest of the staff. What advantages and disadvantages of flat and hierarchical structures can you think of?
Centralised and decentralised organizationsOrganizations can either be centralized or decentralized.A centralized organization keeps the control in the handsof a few senior managers or directors. In a decentralizedorganization, authority and control is delegated to theindividual managers. Virgin is well-known as a decentralized organization: the Virgin group consists of separate, semi-independent companies. While Richard Branson is chairman of the Virgin group, he allows his managers to take control of the running of each business.
Question time1.Why do businesses allocate tasks between functional areas?2.Why is the Operations function at the heart of any business?3.If a product is in the decline stage of the product life cycle, how can a business boost its sales?4.What three things will an organization chart show?