Everything you need to know about the functional areas of management. There is a very wide scope of management.
The management function varies in accordance of its use. Every organisation have different functional area of management require for planning of activities, organisation of resources, establishment of communication system, leading and motivation of people, and control of operations for the realisation of its goals or objectives.
Some major functional areas of management are:-
1. Personnel management 2. Financial Management 3. Marketing Management 4. Production Management 5. Purchase Management 6. Development Management
7. Maintenance Management 8. Office Management 9. Human Resource Management 10. Cost Management 11. Accounting Management 12. Sales Management
13. Advertisement Management 14. Communication Management 15. Public Relation Management 16. Environmental Management 17. Service Management 18. Quality Management 19. Research and Development Management.
Additionally, learn about the objectives, nature, functions and activities of each functional area of management.
Top 19 Functional Areas of Management
Functional Areas of Management – Personnel Management, Financial Management, Marketing Management, Production Management and a Few Others
Functional areas of management mean the sum total of all those activities which are performed in an organisation to achieve the objectives of the organisation. These functions can be of different types but personnel, finance, marketing and production activities have a special importance.
Different management experts have created separate functional management areas.
Some major functional areas are given below:
1. Personnel Management
2. Financial Management
3. Marketing Management
4. Production Management
5. Purchase Management
6. Development Management
7. Maintenance Management
1. Personnel Management:
All means of production (men, materials, machines, money, etc.) may be divided into two parts – active and passive. Active means include men while machines, materials, money etc. belong to passive means of production. An enterprise may have large quantity of passive means of production, such as, machines, materials and money but the same are of no use if not properly utilized. These can be utilized properly only with the help of active means, that is, human beings.
What is needed is that such human resource be made available as is perfectly efficient. It is the job of personnel management to make efficient human resource available. In order to fulfil this task, personnel department is established in large organisations. This department functions under the supervision of personnel manager.
Personnel Management is that branch of management which is concerned with the recruitment, selection, development and the optimum use of the employees. In other words, personnel management is concerned with the employees engaged at all levels of an organisation.
Main objectives of personnel management are as follows:
(1) To Provide able Employees:
First objective of personnel management is to provide able employees to the organisation. Able employees alone can contribute to the achievement of the objectives of the organisation.
(2) To Increase Employees’ Efficiency:
Proper selection of the employees is not sufficient for the success of the organisation. Rather it is necessary to add to their efficiency continuously. Personnel manager performs this function by arranging training for the employees.
(3) To Develop Team-Spirit:
It is the objective of personnel management to inculcate team-spirit among all the persons employed in the organisation. Objectives of the enterprise can easily be achieved in this way.
(4) To Develop Cordial Industrial Relations:
The aim of the personnel management is to develop a spirit of goodwill, confidence and mutual respect between the labourers and the employers. Such a spirit makes industrial relations cordial.
(5) To Develop Congenial work Environment:
The environment of work in which the employees have to work has great effect on their efficiency. Clean and healthy environment increase their efficiency. It is, therefore, the function of personnel management to provide good work environment.
Nature of personnel management is clear from the following facts:
(1) It is Related with People:
Personnel management is concerned with human resource. Its scope extends to employees working in an organisation at all levels. It includes recruitment of employees, selection, training, job evaluation, determination of remuneration, provision of good working conditions etc. In short, every activity of personnel management relates with people.
(2) It is a Pervasive Function:
Nature of personnel management is all pervasive. Pervasive here means that the function of personnel management is performed at all levels of management. In other words, managers at all levels perform this function with respect to their employees. In fact, the function of personnel management is performed by a separately established personnel department.
But it is necessary here to make it clear that establishment of this department does not relieve other managers of their personnel management function. Rather the objective of the establishment of this department is only to help other managers to accomplish their function of personnel management. However, its final responsibility remains with all the concerned managers.
(3) It is a Multiple-Objective Function:
Nature of personnel management is multi-objective.
It has to achieve three objectives at the same time:
(i) Organisational Objective:
As an organisational objective, personnel management has to make maximum utilisation of the available labour resources possible in an organisation.
(ii) Employee Satisfaction Objective:
Another objective of personnel management is to satisfy the employees by ensuring proper remuneration, promotion, training, etc.
(iii) Social Objective:
To maintain industrial peace is the social objective of personnel management.
(4) It is a Group of Personnel Activities:
Under personnel management comes several activities concerning employees. It is therefore called a group of personnel activities. Main personnel activities are recruitment, selection, training, job evaluation, fixation of remuneration, etc.
(5) It Requires the knowledge of Psychology:
Personnel management deals with human resource of production. Every individual working in an organisation has his own desires, expectations and tastes. In order to get maximum work out of his subordinates, a manager has to keep in mind all these things. Managers must, therefore, have knowledge of human psychology.
In modern organisations, a personnel manager performs not one but many roles which are mentioned below:
(1) As a Line Executive:
Personnel manager is the head of personnel department. In order to discharge the responsibility of his department when he performs the functions of recruitment, selection, training, etc. he acts as a line executive. The characteristic of a line executive is that he is directly responsible for his activities.
(2) As a Staff Executive:
When a personnel manager advises heads of other departments regarding solution to the problems relating to their employees, then he acts as a staff executive. It is the feature of a staff executive that he is not answerable for the results of his advice.
(3) As a Counsellor:
When a personnel manager listens to the problems of different employees working in the organisation and brings the same to the notice of general manager, then he plays the role of a counsellor. He gives his advice to the general manager regarding solution to these problems.
(4) As a Mediator:
When a personnel manager seeks to solve dispute between management and employees, then he plays the role of a mediator.
(5) As a Representative:
A personnel manager represents his organisation in the meeting convened by the government and non-government organisations to find solution to the problems of employees. Thus he also plays the role of a representative.
The major objective of any business concern is to make profit for its owners by selling goods or services. To reach this goal finance is required. In this context it can be said that finance is the soul of any business concern. Keeping this in view, the proper management of finance is absolutely necessary.
In every business, three main questions which arise regarding finance are – (i) How much finance will be required for different business activities? (ii) How much of it will be obtained from different sources? and (iii) How profit earned from different business activities will be distributed? Answer to all these questions is inherent in financial management.
In other words, it can be said that under financial management, first of all, need for finance is estimated and then different sources of obtaining finance and its quantum are determined and finally arrangements are made for the distribution of profit.
To conclude, it can be said that under financial management, financial needs of a business are met in such a manner that its goals can easily be achieved.
Regarding scope or aspects of financial management there are two approaches. One, traditional approach and two, modern approach. According to traditional approach, procurement of necessary finance for a business is called financial management. Under modern approach scope of financial management is seen in a wider perspective. It includes not only procurement of finance but also its efficient utilization. Modern thinkers have made a mention of three important decisions taken by a financial manager.
The same area as under:
(1) Investment Decision:
Investment decision refers to the selection of those assets in which investment is to be made by the business or the assets which are to be purchased for running the business.
Assets which are obtained by the business are of two types:
(i) Fixed assets and
(ii) Current assets.
On the same basis, investment decision is also divided into two parts:
(i) Fixed Assets Investment Decision:
In order to take this decision, the financial manager must know what assets are required to be bought for other departments like production department, purchase department, sale department, etc. For example- production department is in need of a machine for producing a particular commodity. On receipt of this information from production department, financial manager has to decide which of the different alternatives (different machines) available in the market is the best for producing that particular commodity.
In order to make selection of the best alternatives, cost-benefit analysis of different alternatives is undertaken. That alternative is selected which yields more profit at less cost. Decision regarding investment in fixed assets is called Capital Budgeting.
(ii) Current Assets Investment Decision:
Current assets include mainly Cash, Stock, Debtors, etc. Financial manager has to ensure that there is adequate investment in current assets. By adequate investment is meant that investment in these assets should be so much as to meet the daily liabilities of the business on time. In other words, liquidity of the business must be maintained. It may however be mentioned here that if the amount of current assets is large, liquidity position of the business will improve but profitability will go down.
On the contrary, if the amount of current assets is less than required, it will add to the profitability of the business but liquidity position is adversely affected. Thus, the financial manager has to decide about the optimum amount of investment in current assets. Decision regarding investment in current assets is called management of working capital.
(2) Financing Decision:
The other decision by financial manager relates to different sources from where finance is to be procured to meet the requirements of the business. He is to ascertain the different sources from where the necessary finance is to be mobilized and in what amount. This question relates to capital structure. Capital structure is the sum of debt capital and share capital.
There should be a proper balance between debt and share capital as it influences the market price of the shares and cost of capital. Such a capital structure as makes use of proper amount of debt capital is called optimum capital structure. Such a capital structure has the attribute of maximum market price of shares and minimum cost of capital.
(3) Dividend Decision:
How much of the total profit be distributed among the shareholders as dividend and how much be retained by the business as reserve, is another decision that a financial manager has to take. Shareholders want that they should get maximum dividend and the managers want that maximum profit be retained as reserve to meet the future requirements of the business.
The financial manager has to strike a balance between these two demands on profit, so that both the parties are satisfied. This decision is also called disposal of surplus decision.
Marketing management refers to all managerial activities relating to marketing. Marketing includes all those activities ranging from knowing the needs of the consumers to their satisfaction. On the other hand, management includes planning, organising, staffing, directing and controlling. Performing of all managerial functions in the context of marketing is called Marketing Management.
Thus, main activities of marketing management are as under:
(i) Planning of marketing activities.
(ii) Organising of marketing activities.
(iii) Staffing for accomplishing marketing activities.
(iv) Directing of marketing activities.
(v) Controlling of marketing activities.
Main objectives of marketing management are as under:
(1) To Ensure Consumer Satisfaction:
Prime objective of marketing management is to ensure consumer satisfaction. To achieve this objective, marketing manager makes an intensive study of the needs of the consumers. Production and distribution of goods are in tune with their needs.
(2) To Serve the Society:
Under marketing management, marketing manager plays an important role in discharging the social obligation of the business. To this end, his constant endeavour is to produce good quality products, to supply goods and services at reasonable prices, to avoid false promises through publicity media, to ensure good behaviour to the customers, etc. As a result of this effort, on the one hand, social obligation of the business is fulfilled and on the other, its goodwill is enhanced.
(3) To Increase the Market Share:
Increase in market share means increase in sales. Aim of a marketing manager is to bring under his possession a large part of the market. With a view to increasing the sale of goods and services, he adopts all means of sales promotion, such as, free samples, exhibition, discount sales, etc.
(4) To Generate Maximum Earning for the Business:
Marketing alone is such a business activity as yields income. It is quite clear, that in the absence of profit no business can last for long. It is, therefore, the objective of the marketing manager to generate maximum earning for the business while keeping in mind full satisfaction of the consumers.
(5) To Perform the Marketing Function Efficiently:
Marketing functions include – marketing research, product planning, purchase, sale, branding, packing, pricing, advertising, etc. Marketing manager is responsible for performing all these functions. He is expected to accomplish it efficiently. Thus, an important function of the marketing manager is to perform efficiently all these functions.
(6) To Perform the Managerial Activities in Reference to the Marketing Efficiently:
With a view to performing marketing functions, marketing manager has to plan, organise, direct and control them. It is the objective of the marketing manager that he should perform all managerial activities efficiently.
Functions of Marketing Management:
Functions of marketing management refer to those activities which are carried out to achieve the objectives of marketing. In the first instance, marketing objectives are determined. Then to achieve the same, need is felt for planning, organising, staffing, directing and controlling of marketing activities. These are, as a matter of fact, functions of marketing management.
Their brief description is as under:
(1) Planning of Marketing Activities:
First of all, planning of marketing activities is done in order to achieve marketing goals or to perform marketing activities. Here planning means to determine when, how, where and by whom different marketing activities are to be conducted.
(2) Organising of Marketing Activities:
In order to conduct different activities (purchase, assemble, sale, storage, transportation, packing, pricing, advertising, marketing research, etc.) the same are divided into some groups. Under grouping, a special post is created to carry out similar kind of activities. Rights and duties of different posts so created are clearly defined. Who will be the officer and who will be the subordinates are also decided?
(3) Staffing for Marketing Activities:
Under this function, appointments are made to do different marketing activities. In big organisations, personnel department is established for making appointments. Marketing manager helps personnel manager to secure staff for his department.
(4) Directing of Marketing Activities:
Directing refers to giving of proper guidance to persons working on different posts so that they may discharge their duties efficiently. Under this function, marketing manager supervises his subordinates, provides them good leadership and from time to time motivates them.
(5) Controlling of Marketing Activities:
By controlling of marketing activities is meant review of marketing activities from time to time so that deviations could be traced out. In case of negative deviation, the same is removed by taking corrective action immediately.
The production management is needed by the manufacturing organisations. These organisations change the form of the raw material and make it more useful.
This functional area of management includes the following activities:
(i) To anticipate the production activities,
(ii) To determine the kind and quantity of the goods to be produced,
(iii) To make provision for the raw material well in time,
(iv) To plan and control production,
(v) To determine the need of the employees of the production department and arrange for the recruitment and selection process,
(vi) To conduct the time and motion study,
(vii) To determine the method of production,
(viii) To control the quality of the goods produced, etc.
Purchase management means planning and controlling purchase. It means to determine as to what goods are to be purchased, where to purchase from, when to purchase, etc.
The following are the main functions to be performed under the purchase management:
(i) To obtain the requisition letter of purchase,
(ii) To make enquiry before purchase,
(iii) To place orders for purchase of goods,
(iv) To receive the goods,
(v) To arrange for the storing of goods,
(vi) To control the receipt of goods, its stock and issue.
Development management is related with the management of research activities.
The following activities are performed under it:
(i) To develop new production process,
(ii) To carry on research in relation to the goods, machines and implements used in the process of production,
(iii) To develop new products,
(iv) To discover new substitutes for raw material, etc.
It is the responsibility of this functional area of management to keep the organisation in working condition. If the building and the machines of the factory are not in proper condition, the efficiency of the employees will certainly be reduced. It will, therefore, not be satisfying both for the owner and the employees. Therefore, maintenance management is important for both the categories.
The chief functions of the maintenance management are given below:
(i) To keep the machines and implements in proper condition,
(ii) To ensure the cleanliness of the building,
(iii) To plan for ensuring maintenance,
(iv) To control the maintenance activities, etc.
Office means a place for where the different activities of the organisation are planned and controlled. To run this place in a planned manner is called office management. It is the place from where the employees are given directions and guidance.
The office management includes the following activities:
(i) To prepare accounts and keep them safe,
(ii) To provide for effective communication,
(iii) To lay down plans,
(iv) To establish coordination among different departments
(v) To provide all the necessary equipments in the office,
(vi) To correspond, and
(vii) To ensure the best use of the services of employees, and of all other sources.
Functional Areas of Management – 4 Major Areas: Production Management, Marketing Management, Financial Management and Human Resource Management
The functional areas of management are very wide.
They have been listed as under:
1. Production Management:
As far as manufacturing organization is concerned, production is a core function. The entire production operations are to be planned, organized, directed, coordinated and controlled.
The production activities encompass the following:
i. Product designing.
ii. Acquisition of materials.
iii. Storage of materials.
iv. Planning and controlling of factory operations.
v. Repairs and maintenance.
vi. Inventory and quality control.
vii. Research and development.
Marketing is the total system of interacting business activities designed to plan, price, promote and distribute satisfying products and services to present and potential customers. Marketing is concerned with all those activities which enable the seller to transfer the title to the buyer.
The various marketing activities may be stated as under:
i. Product Planning:
It is concerned with the following-
a. Deciding on whether to manufacture one product or a number of products i.e., product line, product mix decisions.
b. New product development.
c. Product alternation.
d. Product diversification.
e. Product elimination.
h. Handling various phases in product life cycle.
Price determination is yet another task of the marketer. There are many factors that influence the pricing of the business. Pricing is governed by a number of objectives like target, return on investment, maximizing market share, meeting competition, preventing competition, etc. There are different types of pricing the product. Marketing management has to decide the right pricing method in the light of factors influencing pricing decisions.
iii. Physical Distribution:
Next important decision is choice of channel of distribution. Besides, it includes storage, identification source of supply, transportation, location of warehouse decisions, movement of goods within the facility, etc.
Marketer has to take important decisions on the promotional measures which would stimulate demand for the products thus enhancing volume of sales. A battery of tools used in this connection include advertising, personal selling, sales promotion and public relations.
The main focus of financial management is to manage financial resources. Finance is the life blood of an organization. It is needed for carrying on business, achieving growth and development, and protecting its identity in the changing environment. Financial management is concerned with managerial decision of acquisition and financing of long term and short term credit for the business enterprise. It involves planning, organizing and controlling of financial resources.
It comprises the following:
i. Estimation of funds required for both long term and short term needs of business.
ii. Calculation of cost of capital.
iii. Mobilisation of funds.
iv. Determining capital structure.
v. Determining the level of leverage.
vi. Managing current assets.
vii. Dividend decisions.
viii. Selection of appropriate source of funds.
ix. Ensuring proper utilization and allocation of raised funds.
This involves planning, organizing and controlling the procurement, development, compensation and maintenance of human resources in an enterprise.
It consists of the following areas:
i. Manpower planning.
ii. Recruitment and selecting.
iii. Job analysis.
iv. Training and development of the manpower.
v. Performance appraisal.
vi. Compensation and promotion.
vii. Employee well-being.
viii. Maintenance of personnel record.
Functional Areas of Management – 15 Major Functional Areas of Management
The business have a wide and dynamic area. In that, all the major parts like trade, commerce, industry and allied services are being included. In order to perform the tasks concerning of these major parts, there are different segments called the functional areas. These areas or respective departments perform their task under the leadership of functional manager or a businessman. The various areas are managed and organised as little segments or departments.
The different functional areas are briefly stating here:
Production is an important and specific part of the entire business. It performs all the managerial functions like planning, decision making, organising, coordination, direction and control for the production and manufacturing process in any concern. It aims to determine and prepare product planning, plant layout, select the production systems, the requirement of raw material, equipment, machineries and different infrastructural facilities. It has the major parts like product planning, product standards and norms, manufacturing process, work performance and research and development etc.
Cost management is concerned to collect, evaluate, analyse, account and classify the expenditures relating to the activities of the concern. It deals to manage, organise, coordinate and control all the direct and indirect components of the cost of different tasks. It includes different aspects particularly the elements of cost, cost estimation, calculation of cost, cost structure and variation between estimated cost and actual cost etc.
Accounting management is also an important part of functional management. It includes the systems, procedures, documents and records concerning the financial managerial and cost management etc. It aims to manage and maintain the accounts, records, statements and other informative documents to be used in these accounting area.
According to Boward and Upton – ‘Financial Management is the application of planning and control of the financial functions’. It deals with different financial aspects and issues. Financial management is an indispensable organ and have a wide scope of business management. It is more analytical and less descriptive. It helps the top management in determining policies and plans as well as in decision making also. Today the business performance is measured on the basis of financial results.
Office management is a pivot and central point of the business management. In fact, all the activities, performance, directions and policy implementation are directed and controlled over this focal point. It manages and maintain all the records and accounts relevant to different sections and departments of the concern.
Personnel Management is more concerned with the different aspects of human relations and behaviour. It performs several roles like policy determination, planning, organising, direction, decision making, motivation and control which are more concerned with the human assets and human behaviour.
It also conduct different tasks like recruitment, selection, wages and salary determination, training, promotion demotion, health, welfare and grievance redressal etc.
According to Stanton – ‘Marketing is total system of interacting business activities designed to plan, price, promote and distribute want satisfying products to target markets to achieve organisational objectives’. There are different functions like product planning, standardisation, procurements, warehousing, logistic, retailing, pricing, promotion, personal selling, buying and selling and market segmentation which are being performed at the marketing management scenario.
Sales management includes the recruitment of sales employees, their selection and training, their supervision on work and motivation for work and the evaluation of execution of work.
Sales management is also an important part of business and it performs all the personnel functions. It aims to formulate sales plans, policies and programmes and to determine simple and effective sales procedures. It also manages and develop sales promotion and advertising tasks etc. It is also a specific part of marketing management.
Advertising is any form of paid non-personal presentation of ideas, goods or services for the purpose of including people to buy. According to Sheldon – ‘Advertising is a business force, which through the printed words, sells or help sales, builds reputation and foster goodwill.’
It aims to introduce new products, to enhance product acceptance and to create new customers etc. It emphasise and influence the buying decision and to get public participation in selling the products.
According to Newman and summer – ‘Communication is an exchange of facts, ideas, opinions or emotions from one person to another.’ In any business organisation, information are used for making and implementing different targets and policies for the achievements of organisational objectives.
The communication management organise a mutual process to make more reliable and integrated relations, to determine plans and policies, making sound decisions, coordination and to develop motivational aspects within different multidimensional structure in business organisation.
The objectives of public relations is not to sale a product but to produce a favourable image of a concern and improve on it, if necessary. It is a media and have a two way communication with the society. Within business scenario, the public relations management perform the tasks like products’ publicity, promotional programmes, social services, community relations, advisory functions, welfare amenities and civil affairs etc.
It is also an important part of business area. It analyse and evaluate different roles of environmental factors and their consequence effects on the working and performance of business concern. The major factors to be considered are consumers’ demand, supply of product, price level, level of competition, new technology, Government rules and different demographical aspects etc. It develops and manage various measures and devices to make better environmental situation.
According to Philip Kotler – ‘A service is any activity or benefit that are being offer to another that is essentially intangible and does not result in the ownership of anything. In business concern, the service area is an important and decisional part to raise the customisation, value added aspects, customers’ relationship pattern and customers’ retention etc. The services can also provide market opportunities, product images, customers’ cares and products’ reliability etc., in the market.’
Basically the concept of total quality is the notion that excellences is essential in all the functions of business and its allied activities. It aims to manage specialisation, raise the productivity, better work performance, create reliability in product and services, optimum utilise the resources, and raise the level of customers’ satisfaction etc.
Today it is needful to make some worthwhile coordination and follow the different aspects of changing environment. With the emerging issues like innovations, change environment, technological upgradation, professionalisation, social values, service patterns and new behavioural approaches, there is a need to manage the research investigation and organise the developmental activities at large.
In any business, within the purview of strategical and operational planning, there is a needful area to develop the research and developmental task properly. It aims to make optimum allocation and utilisation of resources, quality maintenance, process control, innovative concepts, cost control, performance measures and time management etc.
Functional Areas of Management
In order to achieve its objectives, a business enterprise performs many functions which may be broadly grouped under the following headings – Production, Marketing, Finance and Personnel. In big business organisations, there are separate departments to look after these functional areas. It may be noted that these functions are inter-dependent and inter-related.
For instance, production department depends upon marketing department to sell its output and marketing department depends upon production department for the products of required quality to satisfy its customers. Thus, there must be proper integration of various functional areas of business to achieve its objectives. This can be achieved by the management of the enterprise by effective planning, organisation, direction and control.
The important functions of a business are briefly discussed below:
It deals with arrangement of sufficient capital for the smooth running of business. It also tries to ensure that there is proper utilisation of resources. It takes many important decisions such as raising capital from various sources of finance, investment of funds in productive ventures, and levels of inventory of various items.
It is concerned with transformation of inputs like manpower, materials, machinery, capital, information and energy into specified outputs as demanded by the society. The production department is entrusted with many activities such as production planning and control, quality control, procurement of materials and storage of materials.
It is concerned with distribution of goods and services produced by production department. A business can perform this function efficiently only if it is able to satisfy the needs of the customers. For this purpose, the marketing department guides the production department in product planning and development. It fixed the prices of various products produced by the business. It promotes the sale of goods through advertisement and sales promotion devices such as distribution of samples and novelty items, holding contests, organising displays and exhibitions, etc.
This function is concerned with finding suitable employees, giving them training and fixing their remuneration and motivating them. The quality of human resources working in the enterprise is a critical factor in the achievement of business objectives. Therefore, it is necessary that the work-force is highly motivated and satisfied with the remuneration and facilities provided by the business.
Traditionally, purchasing is considered a part of the production function. But in big organisations, there may be a separate department to perform complicated purchase activities such as inviting tenders, choosing the sources of supply, making transport arrangements and import of raw materials and machines and equipment.
Modern business houses want to be in touch with the public and government through their public relations departments. This department organises publicity campaigns to increase the image and goodwill of the business in the society.
In a big organisation, the legal department may be organised to ensure that the business house is abiding by the rules and regulations framed by the government. It also gives advice to the management in case of disputes with the customers, suppliers and even government over various commercial matters.
Functional Areas of Management – Production Management, Marketing Management, Financial Management and Personnel Management
There is a very wide scope of management. The management function varies in accordance of its use. Every organisation have different functional area of management require for planning of activities, organisation of resources, establishment of communication system, leading and motivation of people, and control of operations for the realisation of its goals or objectives.
The various functional areas of management may be classified into the following categories:
2. Marketing management
3. Financial management
4. Personnel management.
Functional Area # 1. Production Management:
Production simply means the creation of utilities, i.e., when raw materials are converted into finished products, it is known as creation of utilities.
The main aim of any production system is to produce economically the goods and services required by the customers. In order to achieve this aim, it is essential to plan, organise, direct and control the production system. These activities comprise production management and are put under the charge of a ‘production manager’. The production manager should have both the technical and managerial qualifications and skills.
Production management deals with managerial functions related to the design of the production system and operation and control of the production system, i.e., production planning and control.
According to Elwood S. Buffa, “Production management deals with decision-making related to production process, so that resulting goods or service is produced according to the specification, in the amounts and by the schedule demanded, and at minimum cost. If accomplishing these objective, production management is associated with two broad areas of activities—the design and control of production system”.
The basic concept of production management is related with 5P’s:
Production is impossible with the very concept of product. Any produced is to meet the customer specification is terms of performance, quality, quantity reasonable price. In deciding a product, the production manager cannot afford to skip the effect of external factors like technological, economical, legal, social, etc. But internal factors are also important to the considered by the production manager.
For the making of a product, plant is required in the form of building and equipment. And like product, this plant should have concern for the level of future demand, what will be performance and reliability of equipment, what will be the safety norms.
The process is a sequence of operations and production process is related with those operations which transform the material into finished goods. A process is a series of activities leading to transform one thing to another.
A programme is a schedule of operations arranged in a logical sequence. So in a production programme activities are arranged in series and time to move from one activity to another activity is also determined. Proper time tables are set out for delivery of finished goods. But this can only be possible if proper schedules of purchasing the material, manufacturing of the products are already made.
Production is the act which largely depend on people from beginning to end. It is the people who are responsible for the success of the organisation which includes the production department also. All human beings are different in nature, attitude and behaviour. And production manager has to formulate his policies keeping in mind the needs and requirements of the people.
Production management involves a wide range of activities from the plant location to the packaging of products to be distributed by the marketing department of the enterprise.
Production management has a very wide scope and it includes the following operations:
(1) Design of Product:
It is the top management which determines the product to be produced by the firm. But the designing of the product is the responsibility of the production manager. The product designing deals with form and function. The form design deals with the product’s shape and appearance whereas the functional design deals with its working.
(2) Design of Production System:
Production system is the framework within which the conversion if inputs into output occurs. There are three basic kind of production system, namely, process production, job production and intermittent production. The choice of a production system will depend upon the type of product to be produced and the scale of production carried on by the firm. The suitability of the production systems has been defined as the manufacture in production.
(3) Production Planning and Control:
It deals with the determination and regulation of production processes. After the production system has been designed and activated, the production manager is concerned with production planning. He establishes the exact sequence of operation of each individual item, part or assembly and lays down the schedule of its completion. Production planning is followed by production control. Production control is a process by which actual performance is compared with the predetermined standards.
The production manager has to apply to control in these important areas:
(a) Control of inventories,
(c) Control of work-in-process.
(4) Selection of Location:
Plant should be located at such place where production and distribution costs are the minimum. Costs which influence the location decision include cost of land, rental value, transportation costs, labour cost, cost of water and power, etc. Other factors which influence the selection of location are – process inputs, process outputs, process requirements. Government policy, availability of site, personal, etc.
(5) Layout of Plant:
The plant layout represents an arrangement of machines and facilities. The plant layout should be efficient to achieve economy and efficiency in operations of the production department. An efficient layout is one that allows materials to move through the necessary operations rapidly and in the most direct way possible.
(6) Selection of Plant Location:
The choice of plant and equipment depends upon:
(a) What is available or what can be made available? That is technological feasibility constraints, and
(b) What is economically reasonable – That is cost constraints.
The quality of output, life of the machine and adaptability of the facilities are also important considerations.
(7) Research and Development:
Research means critical investigation in order to acquire new knowledge. Applied research explores information for the practical problems in mind and thus is directed to achieve immediate solution to practical problems. Development comes after applied research. It involves design and fabrication of new products and the testing their usefulness keeping in view the needs and demands of customers.
Marketing management is a business discipline which is focused on the practical application of marketing techniques and the management of a firm’s marketing resources and activities. It is an important functional area of business which generates revenues through the sale of goods and services to the customers.
The marketing management process consists of analyzing market opportunities, researching and selecting target markets, and implementing and controlling the marketing efforts. Marketing management is responsible for taking the decisions for the product, price, place and promotion keeping in view the requirements of the business.
The major function of marketing department is to generate revenue for the business by selling want satisfying goods and services to the customers.
In order to achieve this purpose, the marketing manager performs the following functions:
i. Marketing Research:
Marketing research is the function that links the customer, consumer and public to the marketer through information used to identify and define marketing opportunities and problems, generate, refine, and evaluate marketing actions, monitor marketing performance and improve understanding of marketing as a process.
Marketing research specifies the information required to address these issues, designs the method for collecting information, manages and implements the data collection process.
ii. Product Planning and Development:
A product is something which is offered by a business firm to customers to satisfy their needs. It has great importance in all other areas of marketing management. For instance, marketing research is mainly directed towards knowing the needs of the customers and increasing the sale of the product, storage and transportation activities depend upon the nature of the product. Therefore, it is necessary to plan and develop products which meet the specification of the customers.
iii. Buying and Assembling:
Procurement of raw materials, semi-finished or finished products has gained great importance for the modern industrial and commercial enterprises. Raw materials are purchased for production by the industrial enterprises and finished goods are purchased for resale by the commercial enterprises.
Purchasing is different from assembling. Purchasing involves determination of requirements, finding the sources of supply, planning the order and receiving the goods. But assembling means collection of goods already purchased from different sources at a common point.
Selling is providing the customer with the products that they want. Examples- Retail stores and sales people. Sale may take the form of (a) a negotiated sale, and (b) an auction sale. In case of negotiated sale, the terms and conditions between the buyer and the seller are arrived at by bargaining or haggling.
But in case of auction sale, there is no scope for negotiation between the seller and buyer. The buyers assembled at the place of auction and bid against one another for the goods are sale.
Financing involves getting the money that is necessary to operate a business. Business raise money by selling shares, selling their products and taking out loans. This is the preliminary function. Total budgeting is going to be done while planning for marketing the goods and services.
Pricing a product is perhaps the most important part of the marketing functions. Pricing a product involves choosing a price where the profit generated from a product would be at its maximum. This is based on the competitors, prices and how much the consumer would want to pay for the product.
Price of a product is influenced by the cost of product and services offered. Profit margin desired, prices faced by the rival firms and government policy, sound pricing policy are an important factor for selling the products to the customers.
Promotion of a product is crucial to a product’s success in the market. Efforts to try and convince consumers through communication to buy the product are generally called promotions. Promotion is one of the four elements of marketing mix (product, place, promotion place).
It is the communication link between sellers and buyers for the purpose of influencing, informing or persuading a potential buyer’s purchasing decision.
There are three basic objective of promotion.
a. To present information to consumers as well as others.
b. To increase demand.
c. To differentiate product.
Advertising has become an important function of marketing in the competitive world. It helps to spread the message about the product and thus promote its sale. It facilitates creation of a non-personal link between the advertiser and the receivers of the massage. The importance of advertising has increased in the modern era of large scale production and tough competition in the market.
Business firms use several media of advertisement to sell their product. These include newspapers, magazines, radio, television, cinema halls, hoardings, windows displays, etc.
So, these are the eight functions or ways, which is going to be considered by the marketing manager during the decision making process while marketing any product or services.
Financial management seeks to ensure the right amount and type of funds to business at the right time and at reasonable cost. Financial management means planning, organizing, directing and controlling the financial activities such as procurement of funds and utilisation of funds of the enterprise. It means applying general management principles of financial resources of the enterprise.
The financial manager of an organisation or business enterprise has to manage various aspect of the finance which determines the scope of his duties.
The various functions are discussed below:
(i) Formulation of Objective:
The foremost function of the finance department is the formulation of objective. This objective refers to those activities which are correlated with organisation objectives and helps in the fulfillment of goals of the organisation for the accomplishment of finance department goals, it is necessary to have coordination with other various functional departments.
(ii) Estimation of Capital Requirements:
A finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected costs and profits and future programmes and policies of a concern. Estimations have to be made in an adequate manner which increases the earning capacity of enterprise.
(iii) Determination of Capital Structure:
Once the estimation has been made, the capital structure have to be decided. This involves short-term and long-term deft equity analysis. This will depend upon the proportion of equity capital a company is possessing and additional funds which have to be raised from outside parties.
(iv) Choice of Sources of Funds:
For additional funds to be procured, a company has many choices like:
(a) Issue of shares and debentures.
(b) Loans to be taken from banks and financial institutions.
(c) Public deposits to be drawn like in form of bonds. Choice of factor will depend upon the relative merits and demerits of each source and period of financing.
(v) Investment of Funds:
The finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible. The funds procured from various sources are to be prudently invested in various a sets so as to optimise the return on investment. While investment decision, management should be guided by three important principles-safety, profitability and liquidity.
(vi) Disposal of Surplus:
The net profits decision has to be made by the finance manager.
This can be done in two ways:
(a) Dividend Declaration – It includes identifying the rate of dividends and other benefits like bonus.
(b) Retained Profit – The volume has to be decided which will depend upon expansional, innovational, diversification plans of the company.
(vii) Management of Cash:
Finance manager has to make decisions with regards to cash management. Cash is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintenance of enough stock, purchase of raw materials, etc. In order to know the need of cash during different periods, the management should prepare a cash flow statement in advances.
(viii) Financial Controls:
The finance manager has not only to plan, procure and utilize the funds but he also has to exercise control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc.
Personnel management involves planning, organising, directing and controlling the procurement, development, compensation, maintenance, etc., of the human resources in an enterprise. It consists of various functions for managing the human resource of an organisation.
Edwin B. Flippo has defined Personnel Management as that area of management which deals with planning the activities, maintain and utilising the workforce in the enterprise to help in the achievement of its objectives.
Human resource planning may be defined as a process by which the management ensures the right number of people and the right kinds of people at the right place at the right time doing the right things for which they are best suited for the achievement of organisational objectives.
The process of manpower planning involves:
(1) Forecasting manpower requirements –
a. Work load analysis
b. Work-force analysis
(2) Manpower inventory preparation
(3) Manpower gap Identification
(4) Formulating manpower plans
Recruitment is the process of identifying the sources for prospective candidates to stimulate there to apply for jobs in the organisation.
It includes seeking and attracting a pool of people from which qualified candidates for job vacancies can be chosen. The process of identification different sources of personnel is known as recruitment. It is a positive process as it attracts suitable applicants who apply for available jobs.
The process of recruitment:
(i) Identifies the different sources of labour supply.
(ii) Assesses their validity.
(iii) Chooses the most suitable source or sources, and
(iv) Invites applicants from the prospective candidate for the vacant jobs. Recruitment is concerned with listing the candidates for consideration of selection to various jobs. It enables the management to select suitable employees for different jobs. Recruitment is done before selection or employment of workers. Recruitment is a positive process of searching the prospective employees and attracting them to apply for vacancies.
Selection is the process of choosing the best person for a particular job. It leads to employment of workers. Selection is a negative process it involves rejection of unsuitable candidates. More candidates are rejected than are selected. Selection involves several steps to weed out the unsuitable candidates for the job under consideration. Criteria are laid down at an each stage. Those who do not fulfil these criteria are rejected.
“Training is the act of increasing the knowledge and skills of an employee for doing a particular job.”
Training refers to the acquisition of knowledge, skills and competencies as a result of the teaching of vocational or practical skills and knowledge that relate to specific useful competencies. Whereas training increases job skills, development shapes attitudes of employees.
Development involves growth of an employee in all respects. It denotes the process by which the employees acquire skills and competence to do their present jobs and increase their capabilities for handling higher jobs in the future.
Appraisal refers to the rating or evolution of the worth, merit or effectiveness. Performance appraisal (earlier known as merit rating) implies the formal and systematic evaluation of performance on the job. Almost every large organisation has a formal system of evaluating work performance of its employees because its success depends upon such performance.
Performance refers to the degree of accomplishment of the tasks and it is measured in terms of results. According to Flipo, “Performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in matters pertaining to his present job and of his potentialities for a better job.”
Compensation may be defined as money received in the performance of work, plus the many kind of benefits and services that organisation provide to their employees. ‘Money’ is included under direct compensation (popularly known as wages, i.e., gross pay); while benefits come under indirect compensation, and may consists of life, accident and health insurance, the employer’s contribution to retirement, pay for vacation or illness, and employee’s required payments for employee welfare as social security.
Promotion means the transfer of an employee to a job that pays more money or one that enjoys some preferred status. A promotion involves reassignment of an employee to a position having higher pay, increased responsibilities, more privileges, increased benefits and greater potential. According to Pigors and Myers “Promotion is the advancement of an employee to a better jobs in terms of greater responsibilities, more prestige of status, greater skill, and especially higher scale of pay or salary.”
Personnel department maintains the personnel records of the employees working in the enterprise. It keeps full records about their training, achievements, transfer, promotions, etc. It also preserves many other records relating to the behaviour of personnel like absenteeism and labour turnover and the personnel programmes and policies of organisation. Also the research upon the various functions of personnel is necessary for managing the personnel of organisation with the changing environment.
Functional Areas of Management – Quick Notes
1. Production Management:
Production or operations management is the area of management so as to produce the products and services. There products and services should be available in right quality and quality, at the right time, and at the right cost.
It consists of the following activities:
i. Designing the product.
ii. Location and layout of plant and buildings.
iii. Purchase and storage of materials.
iv. Planning and control of factory operations.
v. Repairs and maintenance.
vi. Inventory control and quality control.
vii. Research and development etc.
2. Marketing Management:
Marketing management includes the identification of consumer’s needs and supplying them the products and services which can satisfy those needs.
It includes the following activities:
i. Marketing research to determine the needs and expectations of consumers.
ii. Planning and developing suitable products.
iii. Fixation of appropriate prices.
iv. Selection the right channels of distribution, and
v. Promotional activities through advertising and salesmanship to communicate with the customers.
3. Financial Management:
Financial management ensures the flow of funds in the business with suitable and fruitful financial policies.
It involves the following activities:
i. Estimating the volume of funds required for business.
ii. Determining the appropriate sources of funds.
iii. Raising the required funds at the right time.
iv. Ensuring proper utilization and allocation of raised funds so as to maintain safety and liquidity of funds.
4. Personnel Management:
Personnel management involves planning, organizing, staffing, directing and controlling the procurement, development, compensation, maintenance etc of the human resources in an organization.
It comprises the following activities:
i. Manpower planning.
ii. Recruitment & selection.
iii. Training and development.
iv. Placement and induction.
vi. Compensation and promotion.
vii. Employee services and benefits.
viii. Personnel records and research etc.
Functional Areas of Management – Explained
1. Functions of Production management;
2. Functions of Marketing management;
3. Functions of Financial management; and
4. Functions of Personnel management.
Some management experts have also talked of ‘Information and Administration Management’, ‘Accounting Management’, and ‘Research and Development Management’ as forming part of the functional area of management. But these are at best subsidiary parts of one or the other of the four main areas of management.
A business unit is established for production and distribution of goods and/or services. Production management refers to planning, organization, direction, coordination and control of the production function in such a way that the desired goods or services could be produced at the right time, in right quantity and at the right cost.
Production management involves the following activities:
(a) Developing the product service;
(b) Establishment of proper organization structure;
(c) Selection of personnel;
(d) Management of purchase, storage and transportation of raw materials; and
(e) Ensuring effective production control.
In the modern world, marketing function is becoming more and more complex. This is because, first, the market today is the buyers’ market. The needs, desires, buying capacities and habits of buyers need to be carefully studied to draw them to patronizing a particular product or service. If they are long habituated to using any other product or service, it becomes necessary to wean them away by convincing them how they stand to benefit if they switched to using the product or service offered by the organization.
Remember, how a TV manufacturer highlights the qualities of his product by calling the competing TVs as dabba. Or, how the manufacturer of a washing powder shows a woman washing two shirts, one using the advertised powder and the other—a rival powder, and demonstrating to friends how the advertised powder washes better.
Secondly, the market today is no longer localized. It extends to far-flung areas, even foreign lands. This involves problems of transportation, difficulties in securing payments, advertising in multiple languages, and tackling export and import procedures. Thirdly, there is increasing competition from local as well as foreign producers.
The marketing function comprises the following activities:
1. Assessing consumer demand;
2. Setting up facility to produce goods and/or services;
3. Ensuring adequacy of finance, depending on production costs and length of time-interval between production and sales;
4. Choice of the market, whether high-price top-end or low-price mass market; and
5. Assessing the extent of competition.
Finance is the life-blood of a business; business operations revolve round finance. In fact, all management decisions are subject to availability, safety and liquidity of financial resource.
The main objectives and functions of financial management are as follows:
(a) To ensure availability of adequate funds for business operations;
(b) To allow sufficient flexibility in financial planning to ensure that funds are available when needed;
(c) To raise and maintain funds at the lowest cost possible;
(d) To ensure adequate liquidity of funds so that the business is never short of liquid cash to pay current liabilities;
(e) To achieve safety of investment as also secure maximum return on investments;
(f) To maintain credit-worthiness and reputation of the organization among creditors, bankers, present and potential shareholders and members of the public; and
(g) To secure to owners (shareholders) a fair return on the capital invested by them.
Personnel management is concerned with human resources of an organization. Its functions include procurement, development, provision of compensation, and integration of the personnel to contribute to accomplishment of organizational goals.
The main objectives of personnel management are as follows:
(a) To contribute to welfare of society by creating job opportunities;
(b) To contribute to welfare of individual workers by providing adequate monetary and non-monetary compensation, job-satisfaction, job security, and opportunities for all-round development;
(c) To ensure that various positions in the enterprises are, and continue to be, occupied by competent, contented and effective workers, and they have opportunity to put in their best performance in an atmosphere free from any physical or mental tension; and
(d) To recognize workers’ right to form or join labor unions and persuade their leaders to promote self-discipline among workers such that they achieve maximum efficiency and economy in the functioning of organization.