CS Foundation Business Functions Notes

CS Foundation Business Functions Notes

→ Business Functions:
A process or operation that is performed routinely to carry out a part of the mission of an organization. Once a business has been properly established and has taken on a reasonable number of employees, the organisational structure will involve the business being splits into number of different departments, each of which has a specific job or task to do – these are called ‘functions’. Business functions describe in greater detail the specific activity that a firm performs in order to produce its product, provide its service, or otherwise achieve its objective.
Business process is also called Business Function. These processes are grouped into core business processes and support business processes. Core business processes relate most directly to the basic business of the firm, with operations representing the key industry activity of the company. Support business processes facilitate core business processes.

→ Strategy:
Strategy has been derived from the Greek word “Strategies” which means “the art of the general “Primarily strategy term was associated with war. As for business strategy, Johnson and Scholes (define strategy as follows “Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations”.

In other words, strategy is about

  • Where is the business trying to get to in the long-term direction.
  • How can the business perform better than the competition in those markets?
  • Which markets should a business compete in and what kind of activities are involved in such markets?
  • What external, environmental factors affect the business’s ability to compete?
  • What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete?
  • What management has to do to handle all the circumstances that affect the business?

→ Strategy at Different Levels of a Business
Strategies exist at several levels in any organisation-ranging from the overall business (or group of businesses) through to individuals working in it.

Corporate Strategy: is concerned with the selection of business in which company should compete. It is a crucial level since it is a deciding factor for investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a “mission statement”.

Business Unit Strategy: Business unit strategies are essentially positioning strategies whereby businesses tend to secure for themselves an identity and position in the market. The aim here is to increase the business value for the corporate and stakeholders by increasing the brand awareness and value perceived by the customers.

Operational Strategy: The final level is both the most difficult and the most exciting, because it involves the way things actually get done. Operational strategies can be short-term to medium-term, ranging from a few months to several years to execute. There can be dozens or even hundreds going on at once.

→ Planning:
Planning is deciding in advance what is to be done, how it is to be done and when it is to be done. It involves projecting the future course of action for the business as a whole and also for different sections within it. Planning is an intellectual process and signifies the use of a rational approach to the solution of a problem. In a more concrete sense, the planning process comprises determination and laying down of objectives, policies, procedures, rules, programmes, budgets and strategies.

Planning is the important and primary function of management. It sets all other functions into action. It is the beginning of process of management. A manager must plan before coming in action. It is concerned in deciding in advance what to do? How to do? When to do? Why to do? Where to do? And who to do?

→ Planning is

  • thinking about organization’s prosperity and helps analysis of information.
  • involves a predetermined course of action.
  • concerned with future and it helps the management to develop strategy
  • a problem of choosing from the alternative courses of action
  • involves both decision-making and problem solving.

→ Budgetory control:
It is a Methodical control of an organization’s operations through establishment of standards and targets regarding income and expenditure and a continuous monitoring and adjustment of performance against them.
Budgetary control is defined by the Institute of Cost and Management Accountants (CIMA) as: “The establishment of budgets relating the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy, or to provide a basis for its revision”.

A budget is a forward financial plan. It provides a prediction of expected flows of money in and out of the firm in the immediate future. Normally, a budget will be prepared in advance of a period of time, usually a year but could be on a monthly or quarterly basis. Budgets are plans and budgetary control are the comparisons of plans with the actual performance.

Advantages of budgeting and budgetary control:
There are a number of advantages to budgeting and budgetary control:

  • Compels management to think about the future, which is probably the most important feature of a budgetary planning and control system.
  • Forces management to look ahead, to set out detailed plans for achieving the targets for each department, operation and (ideally) each manager, to anticipate and give the organisation purpose and direction.
  • Promotes coordination and communication.
  • Clearly defines areas of responsibility.
  • Requires managers of budget centres to be made responsible for the achievement of budget targets for the operations under their personal control.
  • Provides a basis for performance appraisal (variance analysis).
  • A budget is basically a yardstick against which actual performance is measured and assessed.
  • Control is provided by comparisons of actual results against budget plan.
  • Departures from budget can then be investigated and the reasons for the differences can be divided into controllable and non-controllable factors.
  • Enables remedial action to be taken as variances emerge.
  • Motivates employees by participating in the setting of budgets.
  • Improves the allocation of scarce resources.
  • Economises management time by using the management by exception principle.

→ Research and Development (R and D):
Research and development is one of the means by which business can experience future growth by developing new products or processes to improve and expand their operations. Research and development strategies allow companies to create strong marketing campaigns and advertising strategies. The two work together very well. At its core, research and development is about innovation, about offering consumers something they have never seen before.

→ Location of Business:
The location of a business is the place where it is situated. There are a number of factors that need to be considered in choosing a location for a business. One of the earliest decisions any entrepreneur has to make is where to locate his or her business. In order to do this, he or she has to make a careful assessment of costs. The ideal location would be one where costs are minimised. The entrepreneur would need to look at the benefits which each area had to offer as well as any government help which might be available.

The main factors affecting location are:
(a) Raw materials
If the raw materials are bulky and expensive to transport it will clearly be in the entrepreneur’s interest to locate near to them

(b) Market
The nearness of the market and the cost of delivering the goods are likely to be important factors.

(c) Transport costs:
The two major influences are the pull of the market and the pull of the raw materials and these are determined by whether or not the industry is bulk-increasing or bulk-decreasing.

(d) Land
Land costs vary considerably nationally and some firms, e.g. wholesalers, might need a large square-footage. They might, therefore, be influenced by the cheaper rents and property prices found in some areas.

(e) Labour
The availability of labour might well attract firms to an area, particularly if that labour force has the skills they require.

(f) Safety
Some industries have to locate their premises well away from high density population levels and their choice of location is limited.

(g) Waste disposal
Certain industries produce considerable waste and the costs associated with the disposal of this might affect their location.

(h) Government
It is advantageous to put certain business at some location because of advantages and special favours like tax free zone etc. are provided by Government for the development of business at that particular place.

(i) Overseas location decisions
Setting up a business overseas involves a number of challenges including Cultural and language barriers, Legal issues, Exchange rate

→ Supply Chain Management.
The concept of Supply Chain Management is based on two core ideas. The first is that practically every product that reaches an end user represents the cumulative effort of multiple organizations. These organizations are referred to, collectively as the supply chain. Supply chain management has emerged as a powerful managerial concept for delivering value to the customer.

A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters warehouses, retailers and customers themselves.

Companies in any supply chain must make decisions individually and collectively regarding their actions. Supply chain management flow can be divided into

  1. Production: What products does the market want? How much of which products should be produced and by when? This activity includes the creation of master production schedules that take into account plant capacities, workload balancing, quality control and equipment maintenance.
  2. Information: How much data should be collected and how much information should be shared? Timely and accurate information holds the promise of better coordination and better decision-making. With good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it.
  3. Finance: The financial flow consists of credit terms, payment schedules and consignment and title ownership arrangements.

→ The Objective of a Supply Chain:

  • The objective of every supply chain is to maximize the overall value generated.
  • The value a supply chain generates is the difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request.

→ Production Management
“Production management deals with the decision-making related to production process of that the resulting goods and service is produced according to specifications in the amounts and at the scheduled demanded and at minimum cost” – Elwood Butta. ’

Job Method: In this system Products are manufactured to meet the requirements of a specific order. The quality involved is small and the manufacturing of the product will take place as per the specifications given by the customer. It is used when a product is produced with the labour of one or few workers and is scarcely used for bulk and large scale production. Thus this process is always non-standardised.

Batch Production: Batch Production is the manufacture of number of identical products either to meet the specific order or to satisfy the demand. When the Production of plant and equipment is terminated, the plant and equipment can be used for producing similar products This technique is probably the most commonly used method for organizing manufacture and promotes specialist labour, as very often batch production involves a small number of persons.

Flow Production: Flow production (Process Production) is also a very common method of production. Flow production is when the product is built up through many segregated stages; the product is built upon at each stage and then passed directly to the next stage where it is built upon again. The production method is financially the most efficient and effective because there is less of a need for skilled workers.

Job Production Method Batch Production Method:
Job shop production are This production is characterized by the manufacture of limited number of one or few quantity of products produced at regular products intervals.

→ Business Finance:
Finance may be defined as the art and science of managing money. It includes financial service and financial instruments. Business finance refers to the funds and monetary support required by an entrepreneur for carrying out the various activities relating to his/her business organisation. It is needed at every stage of a business life cycle.

→ Financial Management:
According to J. L. Massie, “Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation.”

According to J. F. Bradley, “Financial management is the area of business management devoted to the judicious use of capital and careful selection of sources of capital in order to enable a spending unit to move in the direction of reaching its goals.”

Financial management is that managerial activity which is concerned with the planning and controlling of the firm’s financial resources. Businesses has many areas to manage and to keep things working smoothly. Finance is just one of these areas. Because finances impact virtually everything else the company does, it’s probably the most important thing a manager must address.

Main features of financial management:

  • Management should have Analytical Thinking
  • Basis of Managerial Decisions should be specified
  • It should be a Continuous Process
  • Maintaining Balance between Risk and Profitability
  • Coordination between various Process of business
  • It should be of Centralized Nature

→ Financial Management Decisions:
Managers have to take financial decisions to make use of finances in a best proper manner. There are three types of financial management decisions
1. Capital budgeting is the process of planning and managing a firm’s long-term investments. The key to capital budgeting is size, timing and risk of future cash flows is the essence of capital budgeting. Investment decisions can be short-term or long-term.
Working Capital Management refers to a firm’s short-term assets, such as inventory and its short-term liabilities, such as money owed to suppliers. This is more of a day to day activity.
Capital Structure refers to the specific mixture of long-term debt and equity the firm uses to finance its operations.
Decisions related to capital once taken cannot be reversed thus such decisions are to be taken with high care

2. Financing decisions relate to raising fund from long-term as well as short-term sources. Financial decisions comprise two decisions financial planning and capital structure decisions. Financial planning involves to estimate sources and application of funds whereas capital structure decisions involves the source of funding.

3. Distribution of profits relates to division of profit amongst reinvestment and distributing it as dividend. Thus it is to be planned by management how much of the profit is to be retained by the company for reinvestment and how much to be distributed amongst investors.

→ Financial Planning:
It is a step-by-step process to ensure that you plan and invest in a way so” that you are constantly in sight of your goals and the effort that is required to achieve them. It can also be defined as long-term profit planning aimed at generating greater return on assets, growth in market share and at solving foreseeable problems.

→ Marketing Management:
Market comprises of buyers, sellers and all those who are concerned with the sale and purchase of goods and Marketing Management communicates the best strategic thinking to meet the decision-making needs of knowledgeable executives.

The old marketing concept focuses on selling what is being produced, while new marketing concentrates on producing what can be sold or consumed. Traditional marketing has a very outward orientation, while new marketing is much more inwardly focused. I refer to new marketing as turning traditional marketing on its ear.

→ Marketing Mix:
Marketing involves a number of activities. To begin with, an organisation may decide on its target group of customers to be served. Once the target group is decided, the product is to be placed in the market by providing the appropriate product, price, distribution and promotional efforts. These are to be combined or mixed in an appropriate proportion so as to achieve the marketing goal. Such mix is known as ‘Marketing Mix’. The 4Ps is one way – probably the best-known way of defining the marketing mix. The 4Ps are Product (or Service) Place Price Promotion.

→ Elements of the Marketing Mix by Borden
1. Product Planning – policies and procedures relating to:
(a) Product lines to be offered: qualities, design, etc.
(b) Markets to sell: whom, where, when and in what quantity.
(c) New product policy: research and development program.

2. Pricing – policies and procedures relating to:
(a) Price level to adopt.
(b) Specific prices to adopt (odd-even, etc.).
(c) Price policy, e.g., one-price or varying price, price maintenance, use of list prices, etc.
(d) Margins to adopt – for company; for the trade.

3. Branding – policies and procedures relating to:
(a) Selection of trademarks.
(b) Brand policy-individualized or family brand.
(c) Sale under private label or unbranded.

4. Channels of Distribution – policies and procedures relating to:
(a) Channels to use between plant and consumer.
(b) Degree of selectivity among wholesalers and retailers.
(c) Efforts to gain the cooperation of the trade.

5. Personal Selling – policies and procedures relating to:
(a) Burden to be (placed on personal selling and the methods to be employed in:
(a) Manufacturer’s organization.
(b) Wholesale segment of the trade.
(c) Retail segment of the trade.

6. Advertising policies and procedures relating to: Amount to spend – i.e., the burden to be placed on advertising.
(a) Copy platform to adopt:
(b) Product image desired.
(c) Corporate image desired.
(d) Mix of advertising: to the trade; through the trade; to consumers.

7. Promotions – policies and procedures relating to:
(a) Burden to place on special selling plans or devices directed at or through the trade.
(b) Form of these devices for consumer promotions, for trade promotions.

8. Packaging – policies and procedures relating to:
(a) Formulation of package and label.

9. Display – policies and procedures relating to:
(a) Burden to be put on display to help effect sale.
(b) Methods to adopt to secure display.

10. Servicing – policies and procedures relating to:
Providing service needed.

11. Physical Handling – policies and procedures relating to:
(a) Warehousing.
(b) Transportation.
(c) Inventories.

12. Fact-Finding and Analysis – policies and procedures relating to:
Securing, analysis and use of facts in marketing operations.

→ Human Resources
Human Resources is the group of individuals who make up the workforce of an organization. Human Resource Management (HRM) is the function within an organization that focuses on recruitment of, management of and providing direction for the people who work in the organization. HRM can also be performed by line managers.

→ Objectives of Management
The objectives of management are narrated as under.
1. Organisational objectives: Management is expected to work for the achievement of the objectives of the particular organisation in which it exists. Organisational objectives include:
(a) Reasonable profits so as to give a fair return on the capital invested in business
(b) Survival and solvency of the business, i.e., continuity.
(c) Growth and expansion of the enterprise
(d) Improving the goodwill or reputation of the enterprise.

2. Personal objectives: An organisation consists of several persons who have their own objectives. These objectives are as follows:
(a) Fair remuneration for work performed
(b) Reasonable working conditions
(c) Opportunities for training and development
(d) Participation in management and prosperity of the enterprise
(e) Reasonable security of service.

3. Social objectives: Management is not only a representative of the owners and workers, but is also responsible to the various groups outside the organisation. It is expected to fulfil the objectives of the society which are given below:
(a) Quality of goods and services at fair price to consumers.
(b) Honest and prompt payment of taxes to the Government.
(c) Conservation of environment and natural resources.
(d) Fair dealings with suppliers, dealers and competitors.
(e) Preservation of ethical values of the society.

→ Human Resource Management: Scope
The scope of HRM is very wide:

  1. Personnel aspect: This is concerned with manpower planning, recruitment, selection, placement, promotion, training and development, remuneration, incentives etc.
  2. Industrial relations aspect: This covers union-management relations, collective bargaining, grievance and disciplinary procedures etc.
  3. Welfare aspect: It deals with working conditions and amenities such as canteens, creches, rest and lunch rooms, housing, transport, medical assistance, education, health and safety, etc.

Other Various Services that are the part of organisation are:
Secretarial Services: There are several regulatory/secretarial functions to be adopted by a company in accordance with the statutory legislations. Some of the important secretarial services are conducting Board meetings, conducting annual general meetings, representing before various government organisations.

Legal Services:
Law department is responsible for providing legal services and advice to the company, its divisions and employees. The department office faces a great number of different legal matters. These matters include: business development, contract management, real estate transactions, customer claims against the company for product damages and defects, litigation, employment law, sales and leases matters, debt collection, bankruptcy and much more.

All these activities create the workflow of Legal department. The main functions of the legal department are Providing legal advice and guidance, Prosecution of cases in courts and litigation management, Documentation preparation and drafting. In large MNC’S the legal department may be too big to accommodate lawyers from various countries to tackle the issues of business in all the countries where the company is working.

The finance department of a business takes responsibility for organising the financial and accounting affairs including the preparation and presentation of appropriate accounts and the provision of financial information for managers. The main areas covered by the financial department include preparation of balance sheet, providing management advice etc.

Information and Technology Department:
Information Technology is the use of computers and software to manage information. The Information Technology department of a large company would be responsible for storing information, protecting information, processing the information, transmitting the information as necessary and later retrieving information as necessary.

Administration Department:
It is the management of the Business. The main functions of an administration department of an organization are Organizing any deliveries or suppliers coming into the offices for the day for any reason, To process paperwork for external suppliers, Looking after the internal communications so that all members of the organization are aware of what is going on within the organization.

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