Information Systems

Functional Areas within a Business - Example

• 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.

Levels of Organisation

http://www.bized.co.uk/sites/bized/files/images/functional1map.gif

• 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 companies\organisations communicate with?

Internal and External Information Flow

What different functional areas exist within businesses?

What activities does each functional area perform?

How do functional areas rely on each other?

How are businesses structured and how can this be represented?

Organisational Areas

Delivering Key FunctionsBusinesses must be run efficiently to achieve their aims and objectives.

In medium or large businesses, such as Tesco, the functions are performed by individuals working as members of functional areas, or departments.

How many departments do you think a Tesco store might have? What are they?

In small businesses, individual people complete the functions.

To be able to sell products, specific functions must be performed by the staff regularly.

Case study: Thorpe Park and Tesco

Do you know what jobs each functional area performs?

Company: Thorpe Park

Mission: achieve aims and objectives

Company: Tesco

Mission: achieve aims and objectives

Which departments would help these companies complete their missions?

Marketing SalesCustomer ServicesResearch & Development.

Human Resources Finance & AccountsAdministration IT Support

Human Resources (HR)Human Resources (HR), also known as Personnel, is the functional area in a business that performs tasks relating directly to the employees:

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.

How do you think the Human Resources department affects the other departments?

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.

Finance and AccountsFinance and Accounts record and manage the revenue and costs of the business to calculate how much 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 responsible for a range of tasks which help the business to run smoothly.

clerical tasks manning the reception deskcleaning and maintenancehealth and safety assessmentssecurityhardware/software support network management.

How do the Administration and IT Support functions affect the other departments?

If the following duties are not performed properly, the other functional areas will not be able to complete their tasks and the business might fail its customers:

Operations and Production

The Operations function is central to any business, no matter what its size. Its chief purposes are to:

obtain resources necessary for the business to produce goods or provide servicesorganize the resources in the most efficient and effective way possible.

The Production function is responsible for providing customers with whatever the business offers. This usually takes the form of either producing goods or offering services, e.g. Ford manufacture cars, a firm of solicitors offers legal advice to clients.

Marketing

The role of the Marketing function is to promote the goods or services that the business offers by making customers aware of them. Tasks that the marketing team undertakes include:

conducting market research to find out what customers wantdeveloping products in line with customers’ needs and wantscarrying 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 specially trained 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.

Customers are the most important part of any business.

Customer Services

offering information, advice and credit facilities

arranging deliveries

providing after-sales service

managing complaints.

How does the Customer Services team affect the other departments?

The Customer Services team has a number of tasks:

The Customer Services department is responsible for looking after customers’ needs to make them feel valued.

Case study: Tesco

Tesco tries to achieve its core purpose by offering excellent customer service and following this value: No-one tries harder for customers.

In 1999, Tesco launched www.tesco.com. It is an online shop where customers can buy their groceries and have them delivered to their homes at convenient times. Currently, it is the world’s most successful online grocery shopping service.

Find out the other ways in which Tesco tries to offer its customers great service.

Unless a business is continually expanding and developing its range of products, it is unlikely to succeed.

Research and Development (R&D)

Declining sales reduce the business’s income, so large businesses often have a Research and Development team to improve their existing products and to invent new ones.

Sales for a new product should gradually increase – provided that the marketing mix fits the market requirements. However, sales will begin to level and then decline. This sequence is called the product life cycle.

How does the Research and Development function affect the other departments?

Product life cycle

Case study: Thorpe Park

In March 2006, after 11 months of building, Thorpe Park opened the ride Stealth. It is Europe’s fastest and tallest launch coaster, but at £12 million, it was a very expensive project to undertake. The R&D department designed Stealth, but the Marketing department were also involved in considering:

cost

price to charge customers

practicality: where, when, how

profit.

Independence of Functional Areas

Departmental links are essential in order to meet the aims and objectives of the business. This is known as interdependence, as departments depend on each other.

In a small business, links between different functional areas are often informal and regular.

In larger businesses, people may work in separate areas and rarely meet each other but they still need information and support from each other in order for the business to run efficiently.

Interdependence Situations

To highlight the interdependence of different functional areas, think about these scenarios.

Explain the likely effect on the achievement of targets if the following 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 Structure

An organization chart is a diagram which shows the internal organizational structure of a business, and how the different 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?Head teacher

Deputy Head

Head of Science

Science TeacherEnglish TeacherMaths Teacher

Head of EnglishHead of Maths

What do the horizontal and vertical lines indicate?

This is an organization chart showing how the subject departments (functional areas) of Science, English and Maths are organized in one school.

Draw an organization chart for your school.

Chain of Command and Span of Control

In an organization chart, the people near the top have responsibility for those below them.

The span of control is the number of people under the supervision of any given manager (i.e. the people below them in the chart).

The chain of command refers to the number of layers through which messages (commands) have to pass in order to get from the person at the top level of authority to staff at the bottom level. The larger the business, the longer the chain of command is likely to be.

Case Study: Thorpe Park

Thorpe Park is a large business with many different functional areas. This organization chart shows the structure of the Marketing department at Thorpe Park.

General Manager

Marketing Manager

Marketing AnalystBrand Manager PR Manager

Marketing Executive

Hierarchical and Flat StructuresLarge businesses and organizations such as Thorpe Park and your school will usually have a hierarchical structure.

This is a form of organization with many different levels of responsibility. The more levels in a business, the more opportunities there are for promotion up the hierarchy.

Smaller businesses or organizations will tend to have flat structures – where there are only two or three levels. These types of business are more informal, with close contact between managers and the rest of the staff.

What advantages and disadvantages of flat and hierarchical structures can you think of?

Centralised and decentralised organizations

Organizations can either be centralized or decentralized. A centralized organization keeps the control in the hands of a few senior managers or directors. In a decentralized organization, authority and control is delegated to the individual 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 time

1.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?