The Functional Areas of Business (Edexcel IGCSE Business)

Revision Note

Written by: Lisa Eades

Reviewed by: Steve Vorster

Functional Areas and their Roles in Business

Departments are functional areas within a business, and usually every employee is assigned to a specific department
- A functional area is a group of workers with similar skills and expertise who carries out a specific organisational role
- Businesses often split their work in this way to improve efficiency with specialists capable of working at a high standard on their allocated tasks
- These business functions are sometimes outsourced to specialist service providers
  - This can reduce costs and ensure access to advice from specialists who may be expensive to employ directly

Diagram: Functional Areas

The four main functional areas carry out key specialist tasks in a business

The Roles of the four main Functional Areas

Human resources	Finance
Managing workers in the organisation and ensuring their welfare Overseeing employment processes related to recruitment and selection, training, industrial relations and health and safety	Recording money coming into and going out of the business, collecting debts and paying bills Setting and managing budgets, financial forecasting, managing banking and preparing the annual report
Marketing	Production
Finding out the needs and wants of existing and potential customers, planning suitable products and their distribution Persuading customers to purchase a businesses products or services through advertising and other promotional or pricing techniques	Making the product or providing the service sold by the business Ensuring quality, buying raw materials and components, designing and testing new products and managing inventory

Functional areas need to work together effectively to achieve business aims and objectives

Examples of Functional Areas Working Together

Finance sets budgets so that the marketing function knows how much they have to spend on promotional activity

Human resources recruits staff to work within the finance function and organises induction training for new staff so they may settle swiftly into their roles

Marketing carries out research to find out the needs of customers, which informs the production function that makes the products to meet requirements

Production reports output and wastage data to the finance function, which calculates costs of manufacture and determines profit margins

Examiner Tips and Tricks

You do not have to have a detailed knowledge of each of the functional areas - but you should understand the broad purpose and key roles of those covered in the notes above. Examiners have commented on few candidates understanding of the Human Resources function in particular!

Last updated: 11 October 2024

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