Assignment- Conceptual Framework for the Integration of Business Functions

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Advanced Science and Technology Letters
Vol.47 (Business 2014), pp.412-417
http://dx.doi.org/10.14257/astl.2014.47.94 Conceptual Framework for the Integration of Business
Functions
Chan Kwon Park*, Yeong-Bin Cho **, Chae-Bogk Kim*
*School of Business Administration, Kyungpook National University
80 Daehak-ro, Buk-gu, Daegu 702-701, South Korea
E-mail: rommel11413@empal.com, kimcb@knu.ac.kr
**Department of Business Administration, College of Social Science
Konkuk University
E-mail: ybcho111@kku.ac.kr Abstract. In this paper, relationships among functional departments and
suppliers are investigated. When integrating business functions, conceptual
framework for relationships among marketing, operations, R&D, logistics,
purchasing departments is developed. Generally, conflicts among business
departments can be occurred because of the difference of each department’s
objective, characteristics, culture, etc. The proposed model considers conflicts
as well as relationships among business functions. It can be applied to the
research on the investigation of cooperation and collaboration among
departments.
Key Words: Business functions, Modeling, Integration, Conflict 1 Introduction After the concept of supply chain management (SCM) prevailed in the world, the
integration of entire supply chain as well as functional departments in an organization
has received great attention by researchers and top management in order to obtain a
competitive advantage [7]. There are two types of drivers of competitive advantage:
Cost driver and uniqueness driver [10]. Cost driver includes economics of scale,
learning, capacity utilization, linkages, integration, timing, location and discretionary
policies that affect cost. Uniqueness is concerned with availability, quality, rapid new
product introduction, product uniqueness, responsiveness to customer request and
custom designs. Both drivers for competitive advantage are highly related to the
integrations of functional units and other organizations. Marketing department plays
an important role on surveying customers' needs, analyzing market trends, demand
management and choosing correct marketing channel. Production unit impacts the
performance of other functional units by controlling production capacity, inventory,
sequencing and scheduling, and manufacturing process. Research and development
(R&D) department influences the process of other units by new product development,
design process, and development chain management. Logistics unit affects other ISSN: 2287-1233 ASTL
Copyright © 2014 SERSC Advanced Science and Technology Letters
Vol.47 (Business 2014) departments by delivering correct items ordered to customers, meeting the due date,
and selecting adequate transportation [8].
According to the researches on practical area or academic area, the integration of
internal functions and external suppliers in corresponding supply chain is really
important. Well-managed supply chain helps stakeholders to achieve high level of cost
saving and customer value by employing cost reduction and value creation. However,
poorly managed supply chain has a weak point in integration as depicted in [7]. This
means higher level of integration leads to higher level of organizational performance.
The integration of business functions as well as suppliers is an essential factor for
the achievement of better organizational performance, as discussed in the literature
[11]. However, in order to obtain the benefits of integration among departments and
suppliers, three important antecedents (environmental uncertainty, information sharing
and flexibility) which influence the level of integration, should be investigated
because these three factors are related to cost and uniqueness for customer satisfaction.
Organizational performance measures related to SCM have been used to evaluate
employed systems and mechanisms. As Miller [5] depicted, organizational
performance is dependent on the fitness between organizational strategy and
environment. Therefore, the analysis of relationships among internal integration,
external integration and organizational performance is needed. 2 Literature Review Integration can be divided into two categories: internal and external integration.
Internal integration focuses on the integration of different functional departments in a
single organization. However, external integration addresses the integration between
organizations such as suppliers, customers, etc. Pagell [7] refers integration to "a
process of interaction and collaboration in which manufacturing, purchasing and
logistics work together in a cooperative manner to arrive at mutually acceptable
outcomes for their organization" since he examined the integration between only three
internal supply chain functions.
With integration of marketing and other departments receiving a great attention,
researchers have studied cross-functional coordination. Since marketing plays a
coordinating role, connecting customer demands to internal functions such as R&D,
manufacturing, logistics, etc., marketing's interaction with other departments is an
important factor to achieve customer satisfaction as well as high performance [3].
However, when coordinating functional departments together, the potential for
conflict exists between any business functions because of integration barriers. Supply
chain management stresses harmony and provides the high level of customer value by
working together for value creating processes [7].
Even though SCM emphasizes harmony from raw material suppliers to customers,
early studies on coordination of departments has focused on only internal integration.
Many firms have reported success when applying SCM to their organizations.
Therefore, external integration concerned with suppliers and customers is included to
study the collaboration of supply chain. Because of these trends, the performance Copyright © 2014 SERSC 413 Advanced Science and Technology Letters
Vol.47 (Business 2014) measures to evaluate a certain effect have changed from simple financial,
manufacturing or marketing measures to SCM related measures or balanced system
measures. 3 Conceptual framework 3.1 Relationship between marketing and R&D
When investigating the relationship between marketing and R&D, there has been
much research about the differences between both departments. Six personality
dimensions (time orientation, professional orientation, bureaucratic orientation,
tolerance for ambiguity, types of projects preferred, perceptions of integration needed)
with 14 personality differences were presented to find teamwork barriers when
coordinating both functions [9].
The integration of marketing, manufacturing and R&D has navigated in respect to
the strategic phases of NPD in Gerwin [1]. He argued marketing and R&D functions
interact together at the early stages of NPD process, and then manufacturing joins the
interaction by concurrent engineering. However, recent emerging trends show that
partnerships among marketing, manufacturing and R&D are an important factor in the
opening stages of NPD by focusing on the design strategy.
3.2 Relationship between marketing and manufacturing
It is generally accepted that coordination and integration of marketing and
manufacturing improves firm performance by removing suboptimal practices.
Coordinating mechanisms such as referral upward, decision rules/controls, planning
processes, personal contacts meetings, liaison roles, committees task forces were
investigated and the correlation among mechanisms were presented in [11].
Karmarkar [4] mentioned about the integrative research in marketing and operations
management. He provided the schematic levels of integration from the integration by
recognizing cross functional interactions, with the integration via joint decision
making to the complete integration of functions. He compared consumer marketing
and industrial marketing with operations role. This article provided insight of
constructs when integrating marketing and manufacturing functions.
Generally, the conflicts between marketing and manufacturing generate negative
impacts on firm's performance. That means the cooperation between marketing and
manufacturing improve the performance measure. However, if we design a strategic
incentive system well, not all conflict is bad. 414 Copyright © 2014 SERSC Advanced Science and Technology Letters
Vol.47 (Business 2014) 3.3 Relationship between marketing and logistics
Since both marketing and manufacturing have different responsibilities, it is not easy
to accommodate both functions [11]. The responsibilities of marketing department are
to define target customers, understand customer needs, determine marketing strategy
including 4P (product, price, place, promotion) strategy, and decide customer service
level. However, the responsibilities of manufacturing are to make a decision on
capacity expansion, determine facility layouts, plan production schedule, and control
product quality. Even though marketing and manufacturing have quite different
objectives, there is a strong interdependency in order to achieve the harmony and high
performance of supply chain.
Kahn and Mentzer [3] studied the integration between marketing and
manufacturing. They suggested two types of integrations: Interaction and
collaboration. Interaction emphasizes on the communication between departments
such as meeting and information flows. However, collaboration focuses on the sharing
resources, common goals and mutual understanding. It was shown that both types of
integrations affect positively to performance outcomes. However, there was a research
which showed logistics-marketing integration does not impact on performance [2].
They said the high level of logistics-marketing integration does not lead to better
performances developed. But, firms with high level of logistics-production integration
achieved high performance.
3.4 Relationship between marketing and purchasing
Purchasing has not received much attention because of the passive role in the business
organization. By the 1990s, both practitioners and academic researchers gave more
attention on strategic purchasing because purchasing ability influences the speed to
market as well as cost competency in the rapidly changing competitive business
environment. It is considered purchasing, production and distribution are the three
important functions in internal supply chain.
There is not much research on marketing and purchasing relationship in the
literature. Pagell [7] studied the integration among operations, purchasing and
logistics. Purchasing integration and practices were studied by Narasimhan and Das
[6]. They defined purchasing integration, foundational element of SCM integration, as
"the integration of strategic purchasing practices and goals. Then, they referred
purchasing practices to activities related to purchasing-supply interface". It was shown
that purchasing integration has a positive relationship with manufacturing performance.
3.5 External integration
There are three types of integration related research in the literature: relationship
between internal integration and performance, relationship between external
integration and performance, and relationship between both internal and external
integration and performance. External integration of marketing-logistics and Copyright © 2014 SERSC 415 Advanced Science and Technology Letters
Vol.47 (Business 2014) manufacturing-logistics was explored by Gimenez and Ventura [2]. They presented
the variables in the questionnaire concerning internal integration, external integration
and performance.
As Pagell [7] mentioned, external integration focuses on the coordination that
occurs between organizations. Studies on buyer-supplier relationships can be
considered in this category. Since SCM is the integration of activities associated with
goods and information flows from raw material to customers, external integration is
essential factor in SCM to achieve sustainable competitive advantage. 4 Conclusion This paper proposes the modeling procedure for integrating business functions.
Conflicts are considered in the model because they can occur when coordinating
business departments. Since the objectives of each department are different,
relationships among marketing, operations, R&D, logistics, purchasing departments
are investigated for better trade off to reduce conflicts. Also, external integration is
considered for suppliers in the supply chain. Acknowledgements. This research was supported by Kyungpook National
University Research Fund, 2011.
References
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Integration: Their Impact on Performance. International Journal of Operation & Production
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