Functional Areas of a Business

There are different functional areas of a business as part of a business’ growth is the deployment of separate departments which functions with specific focus and definitive path. They are structured according to certain business requirements and these departments will vary depending on the type of business being practiced.

Knowing the different functional areas of a business is a basic but major necessity for an entrepreneur especially when he’s still in the planning stage.

According to resource, “Functional Areas” is defined as the grouping of activities or processes on the basis of their need in accomplishing one or more tasks. It’s also an alternative term for business unit.

Functional Areas of a Business

Let’s dive right into the list of functional areas of a business below:


Human resource is the most important asset in the business. The heart of an organization lies on its people. Without people, the day-to-day operation of a business would cease to function.

The success of a business relies fully on the hands of the employees working in the company. In order to achieve the company’s goals and objectives, the company’s Human Resource Department is responsible in recruiting the right people with the required skills, qualifications and experience.

They’re responsible for determining the salary and wages of different job positions in the company. They’re also involved in training employees for their development.


Promotional activities and advertising are the best ways to communicate with your target customers for them to be able to know the company’s products and services. Effective marketing and promotional activities will drive long-term success, profitability and growth in market shares.

This department is responsible for promoting the business to generate sales and help the company grow. Its function involves creating various marketing strategy and planning promotional campaigns. They are also responsible for monitoring competitor’s activities.

One good example of a business that develops an effective marketing strategy is Velvet Caviar and how they have completely dominated the market for iPhone Xs Max Case.


It’s vital for business that the products are in good quality and free from defects. The production department is concerned with manufacturing the products, where inputs (raw materials) are converted into finished output through a series of production process.

Their function is to ensure that the raw materials are made into finished product effectively and efficiently and in good quality. This department should also maintain the optimum inventory level.

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In every business, sales department plays the biggest role in any organization’s success. The sales department is responsible for generating revenue. The sales department is tasked to ensure that the sale of products and services results to profit.

The sales department coordinates with the marketing department in terms of brand-awareness, product-launching and more. From the time the product left the production department. Sales need to develop ways on how to sell the product to their target users/customers.


The Customer Service department is responsible for interacting with customers regarding inquiries, complaints and orders. It also includes having a help desk/reception and contact centers.

It is important for a business to maintain and create relationship with their customers. Customer service should be provided before, during and after the purchase.

This department focuses on giving good service support, especially to potential, new and existing customers. Part of a business’ customer relationship management is having an efficient customer service support. A good relationship with customers will create customer-loyalty.


Cash flow is the lifeblood of any business. It is important to manage the business’ cash outflows and inflows. The company can’t operate without money. If you can’t handle your money properly, you will lose control of your business.

That is where the accounting and finance department comes in, which is a part of the organization that manages the company’s money. This department is responsible for accounting, auditing, planning, and organizing finances. They’re also responsible in producing the company’s financial statements.


No matter how good the product is, it’s deemed useless if it won’t reach customers. If goods are not suitable for the distribution channel, expenses involved in the distribution will be considered wasted.

The distribution department is responsible for receiving orders and delivering orders to the customer at the right place, at the right time.


Innovation is the key to every business’ future. Through innovation, it will open new competitive advantage for the company. Research and Development acts as the catalyst in the innovation process.

They will be responsible for innovations in product, creating its new design and style. As well as for searching new ways of producing their products by being updated with regards to the latest technological and economical trends.

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The administrative and management is the backbone of the business. The administrative and management’s function is to handle the business, planning, decision-making, and also financial review.

This department links with other departments to ensure the smooth flow of information and operations.


The Operations department is held responsible for overseeing, designing and controlling the process of production and redesigning business operations if necessary.

In a manufacturing company, operations department designs process to produce the product efficiently. They also have to acquire materials and maintenance of equipment, supplies and more.


Computers and information systems are very essential in business nowadays. The IT department acts as the backbone of a smooth operation involving the latest technology relevant to the business.

This department is responsible for creating software/s for other departments, providing direct operating assistance in software-use and data-management to maintain functional areas in the organization.


Purchasing is a basic function of an enterprise especially in manufacturing companies. The purchasing department is responsible for the procurement of raw materials, machineries, equipment and supplies.

This department ensures that the materials needed are in the right quantity, at the right price, made available in the right time, from the right supplier. It is also their task to inform the top management of the changes of the price or material development that could affect the company’s sales.

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The legal department is tasked to oversee and identify legal issues in all departments. The department may also offer training and assistance with employee manuals to ensure that the company and its employees are kept up-to-date on workplace law and handles filing of legal documents on government agencies.

They also handle customer complaints in a professional style and represent the company if sued. They act as the official & formal representative/s in behalf of the company or the founder.

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