Business, Accounting and Financial Studies | Key Business Functions

Welcome to Key Business Functions!

Hey there! Ever wondered how a giant company like MTR or your favourite local cha chaan teng runs so smoothly every day? It's not magic! It’s all about different departments working together, each with a special job. In this chapter, we're going to explore these special jobs, which we call key business functions.

Think of a business as a human body. For the body to work, the heart needs to pump blood, the lungs need to breathe, and the brain needs to think. Each part has a crucial role. Similarly, a business has different functions that must work together for it to succeed. Understanding these functions will give you a "backstage pass" to see how any business really operates. Let's get started!

1. Human Resources Management (HRM)

What is its role?

The Human Resources Management (HRM) function is all about people. It's responsible for managing the company's most valuable asset: its employees. Think of HRM as the team that builds and takes care of the company's "family".

Its main roles include:

• Manpower Planning: Figuring out how many employees the company needs and what skills they should have.
• Recruitment and Selection: Finding, interviewing, and hiring the right people for the right jobs.
• Training and Development: Helping employees learn new skills to do their jobs better and grow in their careers.
• Compensation and Benefits: Deciding how much to pay employees and providing benefits like medical insurance and MPF.
• Performance Appraisal: Evaluating how well employees are doing their jobs.
• Employee Relations: Maintaining a positive and healthy work environment.

Why is it important?

Without good HRM, a company is just a building with equipment. People bring it to life!

• Attracts and Retains Talent: Good HRM helps find the best people and makes them want to stay.
• Increases Productivity: Well-trained and motivated employees work harder and more efficiently.
• Ensures Legal Compliance: HRM makes sure the company follows all labour laws (like the Employment Ordinance in Hong Kong), avoiding legal trouble.
• Boosts Morale: When employees feel valued and taken care of, they are happier and more committed to the company's success.

Real-World Example: When a new UNIQLO store opens, the HRM team is busy! They post job ads for sales staff, interview candidates to find those with good customer service skills, train them on how to fold clothes perfectly, and manage their salaries and work schedules.

Key Takeaway: HRM

HRM focuses on managing people to help the business achieve its goals. It finds, keeps, and develops a talented and productive workforce.

2. Financial Management

What is its role?

The Financial Management function is the guardian of the company's money. It deals with planning, organising, directing, and controlling all financial activities. If HRM manages the people, Finance manages the cash!

Its main roles include:

• Investment Decisions: Deciding where to put the company's money to get the best return (e.g., buying new machinery, opening a new branch).
• Financing Decisions: Deciding where to get money from (e.g., taking a bank loan, issuing shares).
• Managing Working Capital: Making sure there is enough cash for day-to-day operations (like paying salaries and suppliers).
• Budgeting: Creating a financial plan for the future.
• Financial Reporting: Preparing financial statements like the Income Statement and Statement of Financial Position to track performance.

Why is it important?

Money is the lifeblood of a business. Without proper financial management, even a profitable company can fail.

• Ensures Solvency: It makes sure the company has enough cash to pay its bills on time.
• Helps in Decision Making: Provides crucial financial information to managers so they can make smart choices.
• Maximises Wealth: Aims to increase the value of the company for its owners (shareholders).
• Efficient Use of Funds: Ensures that money is not wasted and is used in the most productive way.

Real-World Example: A small coffee shop owner is a financial manager. She has to decide if she can afford a new espresso machine (investment), whether to use her savings or get a small loan (financing), and ensure she has enough cash each day for coffee beans and milk (working capital).

Key Takeaway: Financial Management

Financial Management is about managing money effectively. It ensures the business has the funds it needs and uses them wisely to grow.

3. Operations Management

What is its role?

The Operations Management function is the "engine" of the business. It’s responsible for the process of creating the company’s products or delivering its services. It transforms inputs (like raw materials and labour) into outputs (finished goods or services).

Its main roles include:

• Production Planning: Deciding what to produce, how much to produce, and when to produce it.
• Quality Control: Making sure the products or services meet a certain standard of quality.
• Inventory Management: Managing the stock of raw materials and finished goods to avoid shortages or waste.
• Logistics and Supply Chain Management: Organising the flow of materials from suppliers to the company, and then finished products to customers.
• Process Design: Designing the most efficient way to make a product or deliver a service.

Why is it important?

This is where the value for the customer is actually created. If operations fail, there's nothing to sell!

• Reduces Costs: Efficient operations minimise waste and lower production costs.
• Improves Quality: Good quality control leads to better products and happier customers.
• Increases Customer Satisfaction: Ensures products are available when customers want them and are of high quality.
• Boosts Efficiency: Streamlines processes to make things faster and better.

Real-World Example: Think about Maxim's Cakes. The operations management team designs the bakery layout for efficiency, manages the inventory of flour and sugar, ensures every cake meets quality standards, and plans the delivery schedule to get fresh cakes to all its shops across Hong Kong every morning.

Key Takeaway: Operations Management

Operations Management is about creating the product or service efficiently and effectively, turning raw materials into something valuable for the customer.

4. Marketing Management

What is its role?

If Operations makes the product, Marketing Management makes sure people know about it, want it, and buy it. It’s all about understanding customers and satisfying their needs profitably. It's the bridge between the company and the customer.

Its main roles, often called the Marketing Mix (the 4Ps), include:

• Product: Deciding on the features, design, and branding of the product or service.
• Price: Setting the right price that customers are willing to pay and that is profitable for the company.
• Place (Distribution): Deciding where and how to sell the product (e.g., in supermarkets, online, in their own stores).
• Promotion: Communicating with customers through advertising, social media, sales promotions, etc.
• Market Research: Gathering information about customers' needs and competitors' activities.

Why is it important?

You can have the best product in the world, but if no one knows it exists, you won't sell anything.

• Generates Revenue: The primary role of marketing is to attract customers and drive sales, which brings in money.
• Builds Brand Reputation: Creates a strong brand image and builds customer loyalty.
• Informs Business Strategy: Market research provides valuable feedback that can guide product development and other business decisions.
• Understands Customers: Helps the company stay close to its customers and adapt to their changing needs.

Real-World Example: When Coca-Cola launches a new flavour, its marketing team is in full swing. They design an eye-catching can (Product), set a competitive price (Price), make sure it's available in Circle K and 7-Eleven (Place), and create fun TV ads and social media campaigns to get everyone excited (Promotion).

Key Takeaway: Marketing Management

Marketing Management is about understanding and satisfying customers. It creates demand for the company's products and builds a strong relationship with the market.

Quick Review: Common Mistake to Avoid!

Don't confuse Marketing with Sales. Selling is just one part of promotion. Marketing is the whole process of creating value for customers, from product design to pricing and building a brand. Selling is the final step of getting the customer to buy.

5. Information Management

What is its role?

The Information Management function (often part of the IT department) is like the company's nervous system. It’s responsible for collecting, storing, protecting, and distributing the right information to the right people at the right time. In today's world, data is power!

Its main roles include:

• Data Collection and Storage: Gathering and securely storing all types of business data (e.g., sales figures, customer details, employee records).
• Information Systems: Managing the computer systems and software that the business runs on (e.g., the point-of-sale system at a shop).
• Data Analysis: Turning raw data into useful information that can help managers make better decisions.
• Information Security: Protecting the company's data from being lost, stolen, or hacked.
• Communication Systems: Managing internal and external communication tools like email and company websites.

Why is it important?

A business runs on information. Without an organised way to manage it, chaos would follow.

• Supports Decision Making: Provides accurate and timely data for all other functions to make informed choices.
• Increases Efficiency: Automates processes and provides easy access to information, saving time and reducing errors.
• Enhances Communication: Facilitates smooth communication within the company and with customers.
• Protects Assets: Good information security protects sensitive company and customer data, which is a valuable asset.

Real-World Example: Your Octopus card is a great example of information management. When you tap your card, the system instantly collects data on your trip, calculates the fare, deducts it from your balance, and stores the transaction. MTR can then analyse this data to see which routes are busiest.

Key Takeaway: Information Management

Information Management is about managing data and information systems to support decision-making and improve business efficiency and security.

6. Risk Management

What is its role?

The Risk Management function is the company's "lookout". It is responsible for identifying, assessing, and controlling threats to the company's capital and earnings. It asks, "What could go wrong?" and "What can we do about it?"

Its main roles include:

• Risk Identification: Spotting potential problems before they happen (e.g., a new competitor, a sudden rise in material costs, a cybersecurity threat).
• Risk Assessment: Analysing the likelihood of a risk occurring and the potential impact it could have.
• Risk Control: Developing strategies to deal with risks. These often include:
- Risk Avoidance: Not doing the risky activity at all.
- Risk Reduction: Taking steps to make the risk less likely or less damaging (e.g., installing fire sprinklers).
- Risk Transfer: Shifting the risk to another party (e.g., buying insurance).
- Risk Assumption: Accepting the risk and having a plan to deal with it if it happens.

Why is it important?

All businesses face uncertainty. Risk management helps a business survive and thrive in an unpredictable world.

• Reduces Losses: Helps prevent or minimise financial losses from unexpected events.
• Creates a Stable Environment: Makes the business more predictable and secure.
• Ensures Business Continuity: Helps the business continue to operate even after a major incident (like a fire or a pandemic).
• Supports Strategic Goals: By managing threats, it allows the company to confidently pursue opportunities.

Real-World Example: An airline company like Cathay Pacific has a huge risk management team. They identify risks like rising fuel prices, technical failures, or bad weather. They manage these by buying fuel in advance (risk reduction), having strict maintenance schedules (risk reduction), and buying insurance for their planes (risk transfer).

Did you know?

Even small businesses practice risk management! A food stall owner who checks the weather forecast before deciding how much food to prepare is managing the risk of having too many unsold leftovers on a rainy day.

Key Takeaway: Risk Management

Risk Management is about identifying and controlling potential threats to protect the business from harm and ensure its long-term survival.

Putting It All Together: One Big Team!

It’s crucial to remember that these functions don't work in isolation. They are highly interconnected and must cooperate for the business to succeed.

Imagine a company launching a new app:

• Marketing identifies a need in the market for the app.
• Operations (the developers) builds and tests the app.
• Finance provides the budget for development and advertising.
• HRM hires the skilled programmers and marketing experts needed.
• Information Management ensures the app data is collected securely and works smoothly.
• Risk Management assesses the risk of the app being hacked or failing to sell.

Just like a winning football team needs its defenders, midfielders, and strikers to work together, a successful business needs all its functions to coordinate and support each other. Each one plays a vital role in achieving the company's overall goals.