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Functions of Business - Internal, External and Support

square Functions of Business

The most fundamental or primary functions of business are depicted below.

functions of business

The functions of business are mainly categorised into three groups viz;

  1. Internal functions of business,
  2. External functions of business, and
  3. Support functions of business.

Internal functions of business help to lay its preliminary foundation.

External functions facilitate promoting products produced by the business.

Support functions continuously aid both internal and external functions.

These three groups of functions of business are categorised based on their fundamental and immediate requirements needed to carry on the primary and ancillary (supportive) business processes.

These three groups or categories of business functions cannot be performed independently. In other words, they are mutually dependent on each other to execute their respective tasks or jobs.

Now let's discuss in detail each category of functions of business.

1. Internal functions of business

Internal functions consist of all those essential and crucial business activities which help to lay a business foundation.

The internal functions are required to carry on the business objectives. It's the promoters of business who decide these objectives. These objectives are decided at the time of business establishment.

Internal functions are also required to carry on regular activities of business.

The important internal functions of business are depicted below.

internal functions of business

The main internal functions of business are as follows:

  1. Acquisition of finance is a process of acquiring funds for the establishment of business. The finance is acquired from various sources like banks, investors, and other financial institutions. Once finance is acquired, the funds are then allotted and subsequently channelized to initiate important preliminary activities of business such as purchasing of fixed assets like land, buildings, machineries, vehicles, and so on.
  2. Purchasing of raw-materials takes place once essential fixed assets becomes ready to be used for commercial production of goods. While purchasing raw-materials, purchase manager has to take care of three important things such as quality, price, and delivery time of raw-materials.
  3. Hiring of labour is required to process the purchased raw-materials into finished goods. To achieve this task, the production manager has to hire labour contractors. Each hired labour contractor then provides (supplies) the required number of labour (manpower) to the production department. Once labour is employed, production manager administrates crucial factors like labour working hours, labour pay-rate, and idle (non-productive) time taken by the labour to complete the assigned task or job.
  4. Overhead expenses are costs incurred (sustained) while operating mandatory business activities. These costs are incurred to run a business smoothly and on a continuous basis. Costs incurred on consumption of electricity, fuel, water, gas, etc., fall under overhead expenses.
  5. Production of goods involves conversion, transformation or processing of raw-materials into finished goods, which are ready for sell. The process of production is very wide and comprehensive in nature. Production process adds utility (usefulness or ability to satisfy a need) to the finished goods. It fulfils the demand of end-customers and hence is considered as the most important internal function of business.

2. External functions of business

External functions consist of all those activities happening outside the premises or precincts of an organisation and which facilitate the promotion of goods produced by the business organisation. These functions are required to carry on the business of the organisation at its best in the competitive markets.

Generally, it is the concerned sales manager of an organisation who forecasts, plans and controls the external function of business. Sales manager initiates these functions when he/she seeks profitable business opportunities in the market.

External functions are also required to make strategic decisions during the course of a business. These are required in scenarios such as:

  1. Introduction of new product in the market,
  2. Discontinuation of an old product from the market,
  3. Determination of the selling price of an existing product, etc.

The major external functions of business are depicted below.

external functions of business

The main external functions of business are as follows:

  1. Marketing research helps to explore and find out the market demand for the goods produced by the organisation. It collects information of the produced goods in relation to its consumers, competitors, policies of the government, etc. This collected researched information is then studied carefully by the top-level of management to ascertain the future scope of the product in the market.
  2. Advertisement is a way to inform, educate, and make people aware about any specific goods and/or services. It helps to lure (attract) the consumers to purchase a product. Generally, advertisements are propagated to people through mass media like newspapers, magazines, television, the internet, radios, etc.
  3. Sales promotion means to promote a product in the market. It is a technique whose purpose is to increase the sales of the product. This technique covers activities like providing free samples, offering discounts, giving gifts, giving cash back schemes, etc.
  4. Appointing of sales agent helps the organisation to represent itself in front of consumers. The sale agents communicate in person with consumers. They inform and demonstrate various functions of the product and convince the consumers to buy their quality product. They also collect feedbacks from the consumers and report it to their organisation.
  5. Selling and distribution covers of all those activities which direct the flow of goods from producer to the consumers. Sales manager led these activities and is responsible for timely delivery of goods to the consumers. He must also ensure the goods are properly and promptly supplied to all target (advertised) areas.

3. Support functions of business

Support functions include all those ancillary (assisting) activities, which facilitate and ensure smooth working of both internal and external functions of business.

Generally, managers of respective support teams operating within an organisation handle these functions. Their role is to provide the available information as and when required by the management. The management then utilizes such information to take strategic decisions regarding further implementation of internal and external functions of business.

The significant support functions of business are depicted below.

support functions of business

Followings are the main support functions of business:

  1. Accounting operations are required for recording and transacting the day-to-day financial transactions of business. This includes transactions related to purchases and sales, expenses and incomes, etc. It helps the organisation to know about their sales-turnover and profitability. For example, if an organisation wants to fund a new product, then the accounting operation shall provide prompt information of the available funds.
  2. Public relation officers (PROs) are the authorised (official) representatives of the organisation. They link their organisation with customers, shareholders, media, government, and others. They also support in providing the correct information with respect to activities like production of goods, selling and distribution, etc. of the organisation as and when required.
  3. Quality control (QC) is a process through which we assess the inputs and outputs with some pre-determined standards. It helps to ensure and control the purchase of good-quality materials. It takes care that the productions of goods are in accordance with the pre-established standards set by the organisation. Furthermore, it also helps in distribution of good quality (i.e. quality checked) products to consumers.
  4. Business process outsourcing (BPO) helps to outsource the non-productive works of the organisation. Generally, this includes taking customers' complaints, preparing payroll accounts, calculating sales agents' commission, etc. It also helps to focus on income-generating activities of business such as selling and distribution, acquisition of finance, production of goods, advertisements, and so on.
  5. Human resource services helps to appoint a suitable candidate for the requisite post available within the organisation. HR services verify candidate's eligibility for the required position after checking his or her's qualification, experience, background, and so on. For e.g., the appointment of a production manager shall be done only after verifying his necessary experience and qualification needed to lead the production process.



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