Business Studies Grade 10 | Business functions and the activities of the business.

Business Studies Grade 10
Business functions and the activities of the business.

Business functions refer to the various activities that a company undertakes to achieve its objectives. These functions can be categorized into two main groups: core and support functions.

1, Core Business Functions
Core business functions are the primary activities that generate income for a business. These functions are crucial for the production of goods or services that are intended for distribution to customers. Examples of core business functions include the production function, which is responsible for creating the final products or services that customers purchase. These functions are directly involved in the creation of value for the business and are essential for its survival

2, Support Business Functions
Support business functions, on the other hand, are activities that facilitate the production of goods and services. These functions are vital for ensuring that the core business functions run smoothly and efficiently. Examples of support business functions include the marketing function, which plays a crucial role in promoting the business’s products or services to potential customers. These functions support the core activities by providing the necessary infrastructure and resources for the business to operate effectively.

The Business Functions
There are eight business functions, and each function plays a unique role in contributing to the overall success of the business. By recognizing the importance of these functions, businesses can allocate resources effectively, optimize their operations, and ultimately achieve their objectives. These functions are

1, Production Function:
The production function involves the creation of goods or services that a business offers to its customers. It focuses on manufacturing, assembling, or delivering products efficiently and effectively.

2, Human Resources Function:
The human resource’s function is responsible for managing the organization’s workforce. It includes tasks such as recruitment, training, performance evaluation, and employee relations to ensure a skilled and motivated workforce.

3, Marketing Function:
The marketing function involves activities aimed at promoting and selling products or services to customers. It includes market research, advertising, branding, and customer relationship management to attract and retain customers.

4, Public Relations Function:
The public relations function focuses on managing the reputation and communication of the business with the public, media, and stakeholders. It aims to build a positive image and maintain good relationships with external parties.

5, Administration Function:
The administration function involves managing the day-to-day operations of the business. It includes tasks such as record-keeping, scheduling, communication, and coordination to ensure smooth functioning of the organization.

6, Financial Function:
The financial function is responsible for managing the financial resources of the business. It includes tasks such as budgeting, financial planning, accounting, and financial reporting to ensure financial stability and growth.

7, Purchasing Function:
The purchasing function involves acquiring goods or services needed for the business operations. It includes tasks such as sourcing suppliers, negotiating contracts, and managing inventory to ensure timely and cost-effective procurement.

8, General Management:
General management oversees the overall operations of the business. It involves setting goals, making strategic decisions, coordinating activities, and ensuring the organization’s objectives are met across all functions.

The Purpose of the Eight Business Functions
Here are some key points to understand the purpose and significance of these functions:

1, Interconnected Functions:
The eight business functions operate in synergy to achieve the business objectives. Each function performs specific tasks that are closely intertwined to accomplish the shared goal of the business. For instance, the marketing function collaborates with the operations function to ensure that production aligns with consumer demand, optimizing resources and maximizing profitability.

2, Adaptability Based on Business Size and Growth:
Roles and responsibilities within these functions may evolve based on factors such as the size, type, or stage of growth of the business. This adaptability ensures that the functions align with the changing needs and dynamics of the business environment. For example, in a small family-owned restaurant, the procurement function could involve the owner personally sourcing ingredients from local suppliers and managing inventory levels based on daily sales. while, in a large restaurant chain, procurement might be handled by a dedicated team of professionals who negotiate contracts with global suppliers to ensure consistent quality and cost-effectiveness across multiple locations.

The relationship between business functions:

The eight business functions are interdependent; they are interconnected and collaborate to ensure the success of the business, as explained below

1. The general management function is connected to all seven business functions. For example, the management team sets the overall direction and strategy for the business, which informs decisions made within each function.
2. The financial and administration functions are responsible for gathering, storing, and processing information and records. For instance, the finance department tracks expenses and revenues, providing data to inform budgeting decisions made by management. Administration ensures that necessary resources are available for various functions to operate smoothly.
3. The purchasing, production, and marketing functions are responsible for the delivery of goods. For example, the purchasing department buys raw materials required for production. Production processes these materials into finished goods. Marketing then promotes and sells these goods to consumers, ensuring revenue generation for the business.
4. The public relations function promotes the business and ensures that there is a good relationship between the business and the public/consumers. For instance, if a company faces a crisis, the PR team coordinates with management to develop a response strategy. Marketing might adjust its campaigns to address public concerns, while administration ensures resources are allocated for any necessary communications efforts.
5. The Human resource function is responsible for sourcing and appointing skilled staff, which impacts the performance of all other functions. For example, if production requires specialized skills, HR needs to recruit and train employees with the necessary expertise. Additionally, HR ensures that the organizational culture and policies support the effective functioning of all departments.

The differences between management and leadership:

1. A leader creates a vision/sets direction by establishing a clear vision for the organization and setting the direction towards achieving it. For example, Steve Jobs set a vision for Apple to create innovative products that revolutionize industries. On the other hand, a manager understands the goals of the business and focuses on the strategic objectives and operational targets of the organization. For example, a project manager understands the project goals, timelines, and deliverables to ensure successful completion.
2. A leader creates the team and inspires subordinates to achieve the organization’s goals. Elon Musk, for instance, inspires his teams at SpaceX and Tesla with his ambitious vision for space exploration and sustainable energy. A manager assigns tasks, monitors progress, and ensures team members complete tasks within deadlines and deliver quality outputs.
3. A Leader Influences human behavior by motivating people to work towards common goals. Nelson Mandela’s leadership during South Africa’s transition from apartheid demonstrates his profound influence on human behavior towards reconciliation and unity. On the other hand, a manager guides human behavior by providing guidance, support, and feedback to employees to help them perform their duties effectively. For example, a retail store manager will guide employees on customer service standards and sales techniques to enhance performance.
4. A leader communicates using vision/charisma to inspire others. Oprah Winfrey’s ability to connect with her audience through her talk shows showcases her effective communication skills in conveying her vision for empowerment and self-improvement. The manager communicates through formal channels and uses management tools and techniques to coordinate activities and resources. For example, a production manager communicates production schedules and requirements through meetings, emails, and reports.
5. Leaders are born with natural/instinctive leadership skills. For instance, some individuals possess innate qualities such as charisma, empathy, and vision that make them effective leaders from an early age. On the other hand, individuals become managers through promotion or appointment based on their experience, skills, or qualifications, rather than inherent leadership traits. For instance, an employee may be promoted to a managerial role due to their expertise in a particular area or their demonstrated ability to lead a team.

The general management function:

General management is a critical function within an organization that sets the overall direction and strategy for the business. This function oversees the control of all other functions within the company, ensuring that they work cohesively towards achieving the organization’s objectives.

General managers are responsible for setting goals, making decisions, allocating resources, managing people, and ensuring that the organization operates efficiently and effectively.

General management has three different levels, each with its own roles and responsibilities which ensure that there is coordination among the seven different functions of the business.

The meaning of the levels of management

The levels of management define a hierarchy within an organization, establishing a chain of command, the extent of authority, and the status associated with each managerial role.

Let’s look at the three levels of management

1, Top level management

a, Oversees the activities of the other functions so that the business can achieve its objectives:
This means that top-level management monitors and supervises the activities of all other departments or functions within the organization to ensure that they are aligned with the overall goals and objectives of the business. They provide guidance, direction, and support to ensure that everyone is working towards the same end goals.

b, Comprises of the CEO and directors:
Top-level management typically consists of the highest-ranking executives in the organization, including the Chief Executive Officer (CEO) and directors. These individuals are responsible for making key strategic decisions and setting the direction for the entire company.

c, Develops long-term goals, strategic plans, and business policies:
Top-level management is responsible for setting the direction of the organization by establishing long-term goals, creating strategic plans to achieve those goals, and implementing policies and procedures to guide the operations of the business. These plans and policies provide a roadmap for the organization’s future growth and success.

d, Determine the vision/mission/objectives/strategy of the business:
Top-level management plays a crucial role in defining the vision, mission, objectives, and overall strategy of the business. They articulate the organization’s purpose, values, and goals, and develop strategies to achieve them. This helps provide clarity and direction for employees at all levels of the organization.

e, Ensure that people work together to accomplish certain goals:
Top-level management fosters collaboration and teamwork within the organization to ensure that everyone is working towards common goals and objectives. They create a supportive and inclusive work environment where employees are motivated to contribute their best efforts towards achieving the organization’s goals.

2, Middle level Management

a, Responsible for specific departments within the business:
Middle level management oversees and leads specific departments or functional areas within the organization. They are typically responsible for a particular aspect of the business, such as marketing, finance, operations, or human resources.

b, Take medium-term tactical decisions:
Middle level managers make decisions that are more focused on the day-to-day operations and medium-term objectives of their departments. These decisions are tactical in nature and are aimed at addressing immediate challenges and opportunities within their areas of responsibility.

c, Execute the organizational plans in conformance with the company’s policies:
Middle level managers are tasked with implementing the strategic plans and objectives set by top-level management. They ensure that the day-to-day operations of their departments align with the broader goals and policies of the organization.

d, Responsible for achieving the goals and objectives set for specific departments:
Middle level managers are accountable for achieving the goals and objectives set for their respective departments. They work with their teams to develop action plans, allocate resources, and monitor progress towards meeting departmental targets.

e, Implement plans made by top-level management:
Middle level managers play a key role in translating the strategic plans and directives of top-level management into actionable steps for their departments. They break down the overarching goals into specific tasks and projects, delegating responsibilities as needed.

f, Implement the vision and plans of the top management:
Middle level managers work to operationalize the vision and plans set forth by top-level management. They ensure that the strategies and initiatives devised by senior leadership are effectively implemented at the departmental level.

3, Lower-level management

The roles and responsibilities of lower-level management are

a, Act as role models for employees because they provide supervision and performance feedback
Lower-level management serves as the immediate supervisors for employees within specific departments or teams. They set an example for their subordinates by demonstrating professionalism, work ethic, and adherence to company policies. They provide guidance, support, and feedback to help employees perform their jobs effectively.

b, Focus on controlling and directing:
Lower-level managers are primarily concerned with overseeing the day-to-day operations of their respective areas. They ensure that tasks are completed according to established procedures and standards. This involves directing employees, assigning tasks, monitoring progress, and intervening when necessary to maintain control and keep operations running smoothly.

c, Responsible for a high level of productivity, technical assistance, and motivating employees:
Lower-level managers are tasked with maximizing productivity within their teams or departments. They provide technical assistance and support to employees to help them overcome challenges and achieve their goals. Additionally, they play a key role in motivating and inspiring their team members to perform at their best through encouragement, recognition, and creating a positive work environment.

d, Take short-term routine/operational decisions:
Lower-level managers make day-to-day decisions related to the routine operations of their departments. These decisions are often tactical and focus on addressing immediate issues or tasks to ensure that operations run smoothly on a daily basis.

e, implement instructions given by middle management:
Lower-level managers receive guidance and directives from middle management regarding the implementation of organizational policies, procedures, and initiatives. They translate these instructions into actionable tasks for their teams and ensure that they are carried out effectively.

f, Called the first management level because it is the first management level to which subordinates can be promoted: Lower-level management represents the entry point into managerial roles within the organization. Employees who demonstrate leadership potential and proficiency in their roles may be promoted to lower level management positions, where they begin to take on supervisory responsibilities and oversee the work of others.

The administration function
The function of administration involves the collection, processing, and dissemination of information that aids in managerial decision-making. It utilizes modern technology to store and record information and carries out general office tasks like filing and maintaining records.

Activities of the administration function

1, Management of information

The administration function is responsible for managing information accurately and supporting decision-making processes within an organization. It’s imperative for administrative staff to handle information with precision to avoid making incorrect decisions based on flawed data

Types of Information Managed:

A, Accounting Records:
The administration function is responsible for maintaining accounting records, which are vital for preparing financial statements and reports. These records provide insights into the financial health of the organization and support strategic financial decision-making.

B, Business Transactions:
Admin staff manage the maintenance of up-to-date business transactions, ensuring that all transactions are recorded accurately and in a timely manner to facilitate financial analysis and reporting.

C, Cost Accounting:
This involves assessing whether a product can be competitively priced while considering manufacturing or production costs. Cost accounting helps in determining the profitability of products and services.

D, Budgets:
Admin staff are involved in the creation and management of budgets, which are projections of anticipated expenses and revenues for a specific period. Budgets help in financial planning and resource allocation.

E, Numerical Data and Statistics:
The administration function is responsible for collecting and categorizing numerical data and statistics. This data provides valuable insights into various aspects of the organization’s performance and helps in decision-making processes.

2, Handling of information
In the administration function, the handling of information is a critical task that involves gathering data from both inside and outside the business. Furthermore, the availability of accurate and reliable information is essential for making informed decisions and running the business effectively.

3,Office Practice:
As an activity within the administration function, office practice involves establishing and implementing guidelines and procedures that administrative staff must adhere to in their roles. This includes defining and communicating expectations around employee dress code, proper document filing and organization, telephone etiquette, and internet usage by staff. By setting clear standards, the administration function ensures that administrative tasks are carried out efficiently, consistently, and in line with the organization’s policies and best practices.

4, Collection of information:
Information gathering is a critical aspect of administrative duties. It entails acquiring data from external sources as well as from the internal workings of the business. Ensuring the accuracy and reliability of this information is vital for informed decision-making and to run the business successfully. This information should also comply with regulatory and financial standards.

5, Information technology (IT):
This involves the use of electronic equipment to assist with various administrative tasks and empower administrative staff to communicate, manage data, and automate tasks more efficiently.

3, The financial function:
The financial function is responsible for planning and managing all the funds and assets of the business. It involves the acquiring and use of funds required for effective operations. Businesses need a regular stream of income to cover their expenses. Hence, the financial function is responsible for planning and managing all the funds and assets of the business.

The purpose of the financial function:

1. Determines how much capital the business needs:
   This involves assessing and calculating the exact amount of funds required by the business to operate effectively. It considers factors like operational expenses, growth plans, and potential risks.
2. Establishes the sources for acquiring the capital:
   Once the capital needs are determined, the financial function identifies and evaluates various sources from which the business can acquire the necessary funds. This could include sources like loans, investments, or internal revenue generation.
3. Decides how to invest/allocate the capital funds in the business:
   After acquiring the capital, the financial function decides how to allocate these funds within the business. This involves making strategic decisions on where to invest the funds to maximize returns, manage risks, and support the overall goals and objectives of the business.
4. Ensuring Income Sufficiency:
   The financial function ensures that the business generates adequate income to cover the expenses associated with acquiring capital. This involves maintaining profitability and managing cash flow effectively to meet financial obligations and repay any borrowed funds.
5. Prepares financial statements:
   As part of its role, the financial function prepares detailed financial statements to present to banks or investors to convince them that the business is financially healthy and capable of meeting its obligations. These statements provide an overview of the business’s financial health, including its assets, liabilities, income, and expenses.

Reasons Why Businesses May Need Finance:

1. Money for Starting Up a Business:
   Businesses often require finance to kickstart their operations, whether it’s to purchase assets, inventory, leasing space, hire employees, or cover initial expenses. Borrowing money to start a business is common, especially for new ventures looking to establish a solid foundation for growth and success.
2. Money to Cover Running Costs While Waiting for Payments:
   Sometimes, businesses face delays in receiving payments from customers while still needing to cover ongoing expenses like rent, utilities, and payroll. This creates a gap between when expenses are incurred and when payments are received. Securing finance can help bridge this gap and keep the business running smoothly.
3. Money to Replace Machinery, Equipment, and Computers:
   As businesses evolve, the need to upgrade or replace machinery, equipment, and technology becomes essential to maintain efficiency and competitiveness. Finance can provide the necessary capital to invest in new assets, ensuring that the business not only remains up to date with the latest tools and technologies but also continues its operations efficiently.
4. Money for Expansion to Grow a Successful Business:
   Successful businesses often require additional funds to fuel their growth and expansion initiatives. Whether it’s entering new markets, launching new products or services, or scaling operations, finance plays a crucial role in supporting the strategic expansion of a thriving business. Access to finance enables businesses to seize opportunities for growth, increase market share, and enhance their overall competitiveness in the industry.

Sources of financing

When it comes to financing a business, there are various sources available, each with its own characteristics and implications as explained below

1, Bank loans
Bank loans are funds borrowed from a bank to be repaid within an agreed-upon timeframe. They are typically utilized for long-term financing and are repaid with interest. Entrepreneurs may secure the loan by pledging a fixed asset as collateral equivalent to the loan’s value.

2, Bank overdraft
A bank overdraft is a short-term loan that is applied to an entrepreneur’s or business’s account. It is repaid at a predetermined interest rate within an agreed-upon period.

3, Asset-based loan
An asset-based loan is a financial arrangement in which funds are provided to successful businesses looking to expand their operations. The loan is used to acquire an asset, which remains the property of the lender until the loan is fully repaid. If the loan is not repaid, the lender has the right to seize the asset

4, Grants

This pertains to the financial support offered by the government to small businesses during their growth phase. These funds do not need to be repaid if they have a positive impact on the community. The government’s goal is to ensure that small businesses in their development stage make a beneficial contribution to the community and the environment.

5, Receivable finance
Receivable finance also known as invoice financing is a loan given to businesses as they await payment for goods or services provided. This is done to prevent cash flow shortages, and the loan amount is based on the outstanding invoices that are due.

6, Angel funding
Angel funding, also known as angel investment, involves wealthy entrepreneurs providing capital to other businesses in exchange for a share in that business. This type of funding is commonly sought after by startups, and it represents a significant risk for the investor.

7, Venture capital
Venture capital is funding provided by individuals or organizations to establish or expand a business in exchange for a stake in the company. Typically, the investor will also seek a management role or to be a board member in the business.

Budgeting
Budgeting is a planning tool used in business to estimate the money that will be received (income)
and how it will be used (expenditure). After creating a budget, it should be regularly compared with the actual income and expenditure figures. Effective budgeting allows businesses to monitor their finances and ensure better profitability. Each department within an organization should have its own budget.

Types of budgets

There are two main types of budgets that organizations use for financial planning and management:

1, Capital budget
A capital budget is used to plan and evaluate major long-term investments and projects that a company is considering. It helps determine whether an organization’s long-term investment plans are worth pursuing.

The capital budget Plans the purchasing, upgrading, and changing of the fixed assets such as buildings, machinery, equipment, and so on. such as buildings, machinery, and equipment.

2, Cash budget
The cash budget helps to assess whether the income will cover the expenses, such as purchasing materials, paying employees, and other expenses. It also aids in estimating the amount of working capital available at any given time, to enable the businesses to manage its short-term liquidity. Furthermore, it assists business to determine whether it will be able to buy all the needs for its operation

Investments

Businesses invest some money from their profit to generate wealth and income. The Invested money increases without labour or effort. Businesses have the option to invest in financial institutions, government bonds, or public companies. Other available investment choices include property, unit trusts, Government Retail Savings Bonds, fixed deposits and more.

Types of capital

1, Fixed capital
Fixed capital, also known as fixed assets, constitutes the capital invested in long-term assets like land, buildings, machinery, and equipment. It serves as a financial resource to meet the long-term capital requirements of a business. Sources of fixed capital include the capital market, selling shares, issuing mortgage bonds, and other long-term financing options.

2, Working Capital
Working capital, also known as operating capital, refers to the funds used for day-to-day business activities such as trading stock and purchasing raw materials. It covers the short-term financial needs of the business and may include money market funds, credit from suppliers, short-term loans, and other similar resources.

3, Owner’s capital
Owner’s capital, or equity capital, is provided by the owners of the business and can come from personal savings, the sale of assets, or external investors. Examples include personal savings and venture capital.

4, Borrowed capital
Borrowed capital refers to funds obtained through loans from financial institutions such as banks or from individuals. This money must be repaid along with interest. Examples include bank loans and bank overdrafts.