Section 2. Functional Areas of a Business Organisation Target questions:

1. What are the main operation divisions of a manufacturing company?

2. What are the main functions of each operation division?

A variety of operations keep businesses, especially large corporations, running efficiently and effectively. Common business operation divisions include (1) production, (2) marketing, (3) finance, and (4) human resource management.

Production

Production includes those activities involved in conceptualizing, designing, and creating products and services. In recent years there have been dramatic changes in the way goods are produced. Today, computers help monitor, control, and even perform work. Flexible, high-tech machines can do in minutes what it used to take people hours to accomplish. Another important development has been the trend toward just-in-time inventory. The word inventory refers to the amount of goods a business keeps available for wholesale or retail. In just-in-time inventory, the firm stocks only what it needs for the next day or two. Many businesses rely on fast, global computer communications to allow them to respond quickly to changes in consumer demand. Inventories are thus minimized and businesses can invest more in product research, development, and marketing.

Marketing

Marketing is the process of identifying the goods and services that consumers need and want and providing those goods and services at the right price, place, and time. Businesses develop marketing strategies by conducting research to determine what products and services potential customers think they would like to be able to purchase. Firms also promote their products and services through such techniques as advertising and personalized sales, which serve to inform potential customers and motivate them to purchase. Firms that market products for which there are always some demand, such as foods and household goods, often advertise if they face competition from other firms marketing similar products. Such products rarely need to be sold face-to-face. On the other hand, firms that market products and services that buyers will want to see, use, or better understand before buying, often rely on personalized sales. Expensive and durable goods — such as automobiles, electronics, or furniture — benefit from personalized sales, as do legal services such as the provision of insurance policies or tax preparation.

Finance

Finance involves the management of money. All businesses must have enough capital on hand to pay their bills, and for-profit businesses seek extra capital to expand their operations. In some cases, they raise long-term capital by selling ownership in the company. Other common financial activities include granting, monitoring, and collecting on credit or loans and ensuring that customers pay bills on time. The financial division of any business must also establish a good working relationship with a bank. This is particularly important when a business wants to obtain a loan.

Human Resource Management

Businesses rely on effective human resource management (HRM) to ensure that they hire and keep good employees, and that they are able to respond to conflicts between workers and management. HRM specialists initially determine the number and type of employees that a business will need over its first few years of operation. They are then responsible for recruiting new employees to replace those who leave and for filling newly created positions. A business’s HRM division also trains or arranges for the training of its staff to encourage worker productivity, efficiency, and satisfaction, and to promote the overall success of the business. Finally, human resource managers create workers’ compensation plans and benefit packages for employees.

Activity 1. Structure and Hierarchy in a Company.

Read the passage about the typical structure and hierarchy in a company and answer the questions which follow.

The highest executive body in a company is the Executive Board (or the Board of Directors). It is accountable to stockholders, and the Board reports to them at the annual stockholders' meetings. The President of the company (Chairperson in Britain) usually makes the report. The President is the nominal head of the company and is elected at the annual stockholders' meeting. But the President does not supervise the day-to-day running of the company. That is the duty of the Senior Vice-President, or Chief Executive Officer (called a Managing Director in Britain). He or she has the real executive power, though the President presides in the Executive Board. The other members of this board are also vice-presidents (or directors in Britain). They will usually include a Vice-President for Production (British: Production Director), a Vice-President for Marketing (British: Marketing Director), a Vice-President for Finance and Administration (British: Financial Director), and often a Vice-President for Shipping (Transportation).

Every Vice-President is responsible for the operation of one or more departments. Executive departments may vary, depending on the company and its activity, but some that are found most frequently are Production, Marketing, Finance, Personnel (Human Resources), and Research and Development (R&D). The Personnel Department is usually under the supervision of the Vice-President for Finance and Administration, while the R & D Department is under the Vice-President for Production. Department heads are called directors or managers, and they are supervised by vice-presidents. Departments, in their turn, may be subdivided into sections or sectors. For instance, the Marketing Department may have a Market Research Sector, a Sales Sector, and an Advertising and Promotions Sector. The Finance Department may be divided into Financial Management Sector and Accounting Sector, with the Chief Accountant at the head of the latter. In some companies sectors may form separate Departments with separate directors or managers.

There are some peculiar positions in a company's hierarchy. One of them is a Public Relations Manager who either belongs to the Marketing Department or heads a special sector. His or her responsibilities are to create and maintain the best possible image for the company in the eyes of the public.

A big company may also have divisions. This happens when the goods (commodities) produced by the company are quite different. For instance, an automobile company may have a truck division and a car division, each with its own department for production, marketing, or other tasks. Many companies, especially multinational corporations, are also divided geographically. There are special departments, managers, directors, or even vice-presidents responsible for operations in certain geographical territories, countries, or continents.

Geographical division facilitates management and allows taking local peculiarities into account.

In American corporations, departments responsible for operations outside the USA report to the Vice-President for International Operations or to some other Vice-President. In Britain, regional departments are accountable either directly to the Managing Director or to the head of the Sales Department.

Finally, corporations often have subsidiaries (affiliates) that are more or less autonomous. An affiliate is another company owned by a parent company. An affiliate, or subsidiary, appears when a company becomes the owner (proprietor) of more than 50% of its capital.

As you see, the structure and hierarchy of a company is quite complicated. This is true in large partnerships as well. The structure and hierarchy is called ‘the chain of command’ and ensures the company’s efficient functioning.

Questions.

1. Who is the nominal head of a company?

Where and to whom does he/she report?

Does he/she supervise the day-to-day running of the company?

Is he/she elected or appointed?

2. Who has the real executive power in a company?

3. What is the biggest executive body in a company?

Who are the members of this body?

What are their titles (in the USA and Great Britain)?

4. What is each Vice-President responsible for? What departments do they supervise?

5. What is a division? Can division have separate departments?

6. Why is the geographical division of big companies necessary?

Who supervises the work of such departments?

7. What is a subsidiary or affiliate?

8. What is the ‘chain of command’?

Activity 2. СOCA-COLA

White's Shandwick International wrote a series of 10 articles about western business success stories in Ukraine. Here is the story of Coca Cola published in Volume 4/2002 in the magazine The Ukrainian.