Some economists would add enterprise to the list of factors of production. Enterprise refers to the role of the people who risk their money in establishing and operating the business. The other resources would not be put to use without the catalyst of entrepreneurs wiling to invest their money and take the risk.
All businesses combine factors of production as an essential part of their production activities. To combine these factors, to engage in production and to achieve their objectives organisations undertake a number of functions. The major business functions include finance, production, human resources, marketing, administration and research and development. Not all organisations have separate departments to deal with these functions. Small business might merge many of these functions within their administration department, with responsibility in the hands of one or two people. As a business grows the number of workers increase, therefore the business id more likely to employ specialists to carry out functions such as finance and marketing.
A separate department normally carries out the finance functions of the business. The finance department carries out number important activities such as the financial department records all the financial records, listing the revenue earned by the business and the expenditure necessary for production. They oversee customer accounts to ensure that the business receives the money to which it is entitled and therefore able to pay its own bills. Employees in the finance department may interpret financial data for the senior and middle mangers to ensure that decision making is based on the most up to date information available. They also provide financial information about the company to important external bodies. Accountants analyse the cost incurred by the business and compute standard costs associated with various aspects of the firms activity. The financial function is vital to the wellbeing of all organisations. The consequences of failure of the financial function to carry out its duties efficiently are significant and potentially disastrous. Accurate financial information is essential in allowing an organisation to maximise profits, achieve sustained growth, maximise revenue from sales and meet other business objectives.
Production covers all the activities that must be undertaken to make the firm’s products, from the receipt of raw materials through to the output of the final product. The production function concentrates upon planning and controlling the various stages of production, so that the most efficient use is made of the businesses resources. Important issues for production managers in manufacturing environment include maintaining supplies of components and raw material to ensure continuous production, production managers use stock control system to keep track of stock of raw material and finished product held by firms. Also ensuring that the precise requirement of customers are met and monitoring quality to ensure that finished products meet the quality standard expected by the customers. One of the most important issues in production is quality. Modern businesses compete just as strongly on the quality of their goods and services as they do on the prices. Although production has links with a number of other departments within the business, some relationships are particularly critical. The finance department has to make sure that production is carried out within agreed costs. If a production cost escalates then profits may be eroded. The relationship between finance and production must therefore be strong and effective if the business is to meet its profit objectives. The relationship between production and marketing is vital to the success of most business. Marketing can provide production with crucial information and what customers actually want. The marketing department can liaise with production in testing any new products on a sample of customers and feedback opinions to ensure the final product is acceptable to consumers.
In modern business, human resources management is now taking on the role previously carried out by personnel management. There is very clear distinction between personnel management and human resource management.
