The Impact of Changes to Size on the Functional Areas (AQA A Level Business): Revision Note
Exam code: 7132
The impact of growth on functional areas
When a business grows, whether organically or through external growth, its size, structure and resource needs all change
Each functional area feels both the benefits and difficulties of operating on a larger scale
Case Study
Growth via franchising: Greggs’ expansion into service stations
Scenario
Greggs pursued external growth through franchising, opening outlets in motorway services and petrol stations via partnerships (e.g. with Moto and EG Group)
Functional Impacts
Operations: Franchising required standardised processes and training to ensure consistency across franchisees
Finance: Greggs reduced capital risk by shifting costs (e.g. store setup, staffing) to franchise partners while earning royalties
Human Resources: HR developed training modules and compliance frameworks but left recruitment and day-to-day management to franchisees
Marketing: Brand awareness expanded into new, high-footfall locations, increasing visibility without major ad spend
Outcome
Greggs scaled rapidly and profitably, especially in underserved geographic markets, without overstretching internal resources
Impacts of increased scale
Functional area | Positive effects | Negative effects |
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Marketing |
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Finance |
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Human Resources |
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Operations |
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The impact of retrenchment on functional areas
Retrenchment can improve a business's cash situation and let it focus on what it does best
However, cutting back can hurt staff morale,and reduce flexibility in day-to-day operations
Case Study
Retrenchment: Marks & Spencer’s store closures
Scenario
In 2018, M&S announced the closure of over 100 UK stores as part of a major retrenchment strategy aimed at cutting costs and shifting focus to online retail
Functional Impacts
Operations: Downsizing led to reduced capacity and overheads, but disrupted local supply chains and delivery routes
Human Resources: Hundreds of staff faced redundancy; HR had to manage union negotiations, morale, and redeployment
Finance: Short-term costs rose due to redundancy payouts and lease terminations, but long-term savings helped fund digital investment
Marketing: The business had to communicate the retrenchment to customers without damaging brand trust—especially among older demographics
Outcome
Although painful, retrenchment allowed M&S to redirect capital into e-commerce and food growth sectors
Marketing
Retrenchment usually means smaller promotional budgets
Spending is concentrated on the strongest brands, so messages become clearer and the return on investment in promotion may rise
However, reduced spending can weaken brand awareness over time, while dropping product lines may disappoint loyal customers
Finance
The finance team will be focused on selling assets, cost‐cutting and reducing debt
Cash from asset sales and lower overheads should improve liquidity
However, one-off restructuring costs for redundancies and ending leases early can reduce short-term profit
Human Resources
HR manages redundancies, redeployment and changing culture when a business gets smaller
A leaner organisational structure shortens the chain of command and speeds up decisions
However, job losses impact morale among remaining staff, and key staff may leave voluntarily, fearing instability
Operations
Operations close premises, simplify supply chains and reduce inventory levels
Shutting inefficient sites increases capacity utilisation at the remaining ones, raising productivity
However, fewer factories, outlets or warehouses can increase delivery times
Additionally, a reduction in output may weaken supplier relations and forfeit bulk-buying discounts
E.g. Ford Motor Company closed its Bridgend (UK) engine plant in 2020, reducing overheads but meaning parts for engine production needed to be sourced from more distant sites
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