Types of Businesses 4 Types of Businesses Are

Types of Businesses 4

Types of Businesses » Are classified by the work activities performed » Include: – producers – processors – manufacturers – intermediaries – service firms – non-profit organizations 5

Producers » Develop products for distribution from raw goods – materials derived from natural resources » Examples include: – farming – forestry – mining 6

Processors » Change raw goods into a more finished form » Produce processed goods » Examples include: – cotton mills – oil refineries – textile mills – food processors 7

Manufacturers » Change raw or processed goods into finished goods » Examples include: – juice factories – clothing factories – automobile factories 8

Intermediaries » Are referred to as the middleman » Move finished goods from one business to another » Buy, store and resell goods » Examples include: – wholesalers • buy finished goods from manufacturers in large quantities and sell them to businesses in smaller quantities – retailers • buy finished goods from manufacturers or wholesalers and sell them directly to the consumer 9

Service Firms » Provide services to consumers and other businesses » Examples include: – beauty salons – landscaping companies – plumbing companies 10

Non-profit Organizations » Provide goods and services to businesses and individuals » Operate on donations, volunteers and philanthropists rather than income/profit » Examples include: – Salvation Army – United Way of America – American Red Cross – YMCA and YWCA 11

Business Departments » Human Resources » Management » Finance and Accounting » Marketing » Production and Distribution 12

Human Resources & Management 17

Human Resources » Requires following laws and proper procedures » Requires people with strong human relation and communication skills » Responsibilities include: s e c r u o s e R – maintaining the employment process – training and developing staff n a m u H 18

Employment Process » Is carried out by human resources » Goal: – to obtain qualified employees who are wellmatched to the open position » Steps: 1. 2. 3. 4. s e c r u o s e R assess employment needs recruit potential employees select employee who fulfills goals help employee get oriented n a m u H 19

Employment Process » Step one: assess employment needs – determine what openings in the company need to be filled – analyze what the open position involves – obtain or write job description, including: • qualifications • duties • responsibilities n a m u H s e c r u o s e R 20

Employment Process » Step two: recruit potential employees – look within the company first – contact and utilize the following: • newspaper and/or Internet advertising • colleges, universities, and technical or vocational schools • applications on file • employment agencies and/or labor and professional organizations n a m u H s e c r u o s e R 21

Employment Process » Step three: select employee who fulfills goals – review applications, resumes and cover letters of applicants – choose applicants appearing to best match company opening and conduct interviews s e c r u o s – review all obtained information and select best e R applicant n a m u H • if there is not an appropriate applicant, start again at recruiting potential employees 22

Employment Process » Step four: help employee get oriented – introduce to coworkers – help fill out new employee paperwork – answer questions about company pay, benefits, policies, etc. – assist during adjustment phase n a m u H s e c r u o s e R 23

Training & Developing » Is also performed by human resources » Goal: – maintain well-trained, qualified employees » Is accomplished through: s e c r u o s e R – training – evaluating performance – focusing on motivation and cooperation n a m u H 24

Training » Can be done individually or in groups » Includes the following techniques: – on-the-job training • companies train employees while they work • employees have hands-on practice with supervision • occurs typically on an individual basis – group training s e c r u o s e R • companies teach new skills to several employees at once • employees listen and learn from each other • employees get the opportunity to express ideas and share experiences 25 n a m u H

Evaluating Performance » Is often achieved through performance appraisals – managers evaluate employee performance – managers provide feedback to employees » Helps when making decisions, including: – transfers – layoffs – promotions – terminations n a m u H s e c r u o s e R 26

Focusing on Motivation » Can help meet employees needs » Includes two types: – extrinsic – motivation through outside sources • for example: money, benefits, recognition – intrinsic – motivation occurring internally s e c r u o s e R • for example: challenge, enjoyment, accomplishment What motivates you to do well in school or hobbies? Are they extrinsic or intrinsic motivators? n a m u H 27

Motivation » Can be ensured by meeting employees’ needs, including: – hierarchy of needs proposed by Abraham Maslow: Self-Actualization Self-Esteem Belonging & Love n a m u H Safety Basic Needs – realizing full potential s e c r u o s e R – feeling skilled, useful, etc. – feeling accepted, loved, etc. – physical & emotional – food, shelter, etc. 28

Focusing on Cooperation » Improves the output produced by working together in groups » Is needed to ensure high work quality and employee job satisfaction » Requires effective communication in order to: s e c – enhance group dynamics r u o – ensure employees know and understand s e R their roles n a – encourage employees to contribute ideas m u H 29

Management » Is the process of reaching a company’s goals and objectives by utilizing its resources » Has these four main functions: – planning – organizing – directing – controlling t n e m e g a n a M 30

Planning » Is management’s first main function » Means determining a direction for the company » Includes the following: – setting long- and short-term goals – determining strategies to utilize company resources – creating a written plan t n e m e g a n a M 31

Organizing » Is management’s second main function » Means obtaining and coordinating resources to meet company goals and objectives » Includes the following: – creating structure – dividing up the workload – arranging resources – coordinating activities t n e m e g a n a M 32

Directing » Is the third main function of management » Is leading employees to carry out their assigned tasks » Includes the following: – staffing – motivating – influencing – guiding t n e m e g a n a M 33

Controlling » Is management’s fourth main function » Is ensuring results meet expected goals and objectives » Includes the following: – evaluating employee performance – solving problems – setting standards for desired performance t n e m e g a n a M 34

Management » Is most effective when all four functions play an important role » Is responsible for making sure the company runs smoothly » Must remember to evaluate progress regularly and provide feedback to the appropriate personnel t n e m e g a n a M 35

Finance & Accounting 40

Finance & Accounting » Are vital because a business cannot exist without cash flow » Focus on the following: – creating up-to-date, accurate financial statements – making a plan to create profits – managing and utilizing company resources e c n a n i F g n i t n u o c c A & 41

Accounting » Is a system used to record, classify, summarize and report the financial position of a business » Responsibilities include: g n i t n u o c c A & – recording financial transactions – creating financial statements e c n a n i F 42

Financial Transactions » Are financial entries affecting the financial position of a business » Include these classifications: – assets – items of value owned by a business g n i t – liabilities – debts or obligations of a business n u o c c A – owner’s equity – amount of capital invested by & owners e c n a n i F • examples include: cash, land, buildings, equipment • examples include: credit, mortgage payments • total value of assets minus liabilities 43

Financial Transactions » Include the accounting equation: assets = liabilities + owner’s equity (both sides of the equation must balance) g n » Are recorded, classified and summarized, i t n u providing information used too create c c financial statements A & e c n a n i F 44

Financial Statements » Are the reporting process of accounting » Are used to make financial decisions » Include two main types: – balance sheet – reports totals in asset, liability and owner’s equity accounts – income statement – reports net income or net loss of a company e c n a n i F g n i t n u o c c A & • net income – when revenue is greater than expenses • net loss – when expenses are greater than revenue 45

Financial Statements – Balance Sheet Example Kay’s Kloth Shop Balance sheet Assets Cash in bank $4, 000. 00 Cloth $8, 000. 00 Supplies $2, 000. 00 Total assets $14, 000. 00 e c n a n i F Liabilities Accounts payable $ 4, 000. 00 g n i t n u o c c A & Owner’s Equity Capital from Kay $10, 000. 00 Total liabilities and owner’s equity $14, 000. 00 46

Financial Statements – Income Statement Example Kay’s Kloth Shop Income Statement Revenue: Cloth Sales Expenses: Advertising Utilities Rent Payroll Total expenses Net Income: e c n a n i F $6, 000. 00 g n i t n u o c c A & $100. 00 $300. 00 $600. 00 $3, 000. 00 $4, 000. 00 $2, 000. 00 47

Finance » Goal: – determine use of company resources and funds » Responsibilities include the following: g n i t n u o c c A & – managing use of company funds – obtained needed funds – creating a financial plan e c n a n i F 48

Finance » Funds are used to do the following: – buy resources used to create goods and services – pay expenses required for operation g n i t n u o – purchasing assets to help the company grow c c – paying unexpected or. A high expenses & – investing c to e obtain profit n a n i F » When available, excess funds can be used in many ways including: 49

Finance » Sources of funding include: – borrowing funds – selling stock – looking for new investors – increasing owner contributions g n i t » The financial plan does the following: n u o – specifies what funds are needed c c A – documents period funds are needed & e – is crucial to the success of a business c n a n Fi 50

Finance & Accounting Assessment 51

Assessment 1. According to the presentation, why is the Finance and Accounting department important to a business? A. Controls hiring decisions B. Businesses cannot exist without cash flow C. Focuses on the worth of the company D. Controls the Human Resources department 2. Items of value owned by a business are known as which of the following? A. Assets B. Liabilities C. Owner’s equity D. Bonds 52

Assessment 3. Which of the following are the debts or obligations of a business? A. Assets B. Liabilities C. Owner’s equity D. Bonds 4. Which of the following is NOT a responsibility of the Finance department? A. Managing the use of company funds B. Obtaining needed funds C. Creating a financial plan D. Establishing external relations 53

Assessment 5. Which of the following is NOT a source of funding? A. Borrowing funds B. Selling stocks C. Investors D. Decreasing owner contributions 54

Marketing, Production & Distribution 55

Marketing » Goal: – to create products meeting consumer wants and needs based on the marketing mix – to guide products through the product life cycle, capitalizing on opportunities in each stage – to understand consumers through marketing research g n i t e k r a M 56

The Marketing Mix » Consists of four interrelated marketing strategies used to meet consumer needs 1. Product – is a good and/or service designed to meet consumer wants and needs – is determined by conducting studies and surveys 2. Price – must be low enough to attract consumers – must be high enough to cover costs and create profit 3. Promotion – activities to persuade consumers they need the product g n i t e k r a M – includes packaging, commercials, trials, etc. 4. Place – is a location where products and/or services are sold – includes stores and location within a store 57

Product Life Cycle aw n; r d : io t s n u Foc er atte ct m rodu o t cus uild p ness Stage 1 b e r a aw Introduction Focus : eval cost/p uate rofit relatio nship ; deci produ de ct’s fu ture Stage 4 Decline Foc u sati s: buil sfac d cu stom com tion; reco peti e tors gniz r Stage 2 mar enteri e ng ket Growth Stage 3 Maturity at e b s: u ; c n o i Fo t ti e t; p c u m od co r p e v les o r a p s im ease 58 incr

Understanding Consumers » Means understanding the needs they attempt to meet when making purchases, including: – physical • for necessities, safety, security and health • includes food, clothing, transportation, etc. – social • to feel loved and accepted • includes fancy clothing, make-up, cologne, etc. – psychological • for prestige and approval • includes luxury items which make the consumer feel important g n i t e k r a M Remember Maslow’s hierarchy of needs pyramid? These apply for consumers too. 59

Production & Distribution » Goal: – to produce and distribute goods and services in the most efficient and cost-effective manner » Consists of three roles: n o i t u b i r t 2. processing – changing or combining resources to s i D create a product or service & n o i t 3. people – invaluable human resource c u d ro 1. facilities – physical elements needed for production • need a good layout and location • adds value by transforming resources into products • plan, operate and supervise the process 60

Production » Must be effective and efficient by doing the following: – forecasting demand – scheduling production of goods and services – managing inventory – controlling quality 61

Distribution » Is getting produced goods and services to consumers in a timely manner » Is typically from producers to wholesalers and retailers » Uses the following four modes of transportation: – waterways – railroads – trucks – airlines 62

Marketing, Production & Distribution Assessment 63

Assessment 1. Which of the following is NOT a component of the marketing mix? A. Product B. Price C. Promotion D. Perception 2. Which of the following are the activities used to persuade consumers they need the product? A. Product B. Price C. Promotion D. Perception 64

Assessment 3. Which of the following is NOT a stage of the product life cycle? A. Introduction B. Growth C. Evaluation D. Maturity 4. Which of the following correctly lists the needs of consumers which should be attempted to be met? A. Physical, social, psychological B. Physical, psychological, economic C. External, internal, social D. External, internal, psychological 65

Assessment 5. Which of the following is NOT a role of production and distribution in a company? A. Facilities B. Processing C. Marketing D. People 66

Final Assessment 67

Assessment 1. Which type of business produces processed goods by changing raw goods into a more finished form? A. B. C. D. Intermediaries Service firms Processors Producers 2. Which of the following is an example of a non-profit organization? A. B. C. D. Beauty salon Salvation Army ITT Technical Institute Amazon 68

Assessment 3. The employment process is carried out by which department? A. B. C. D. Marketing Distribution Management Human resources 4. Intrinsic motivation occurs internally and includes enjoyment and accomplishment. A. True B. False 5. Group training gives employees hands-on practice with supervision. A. True B. False 69

Assessment 6. A system used to record, classify, summarize and report the financial position of a business is known as which of the following? A. Management B. Distribution C. Accounting D. Human resources 7. Which of the following is the goal of the finance department? A. Setting prices high enough to make profit but low enough to attract customers B. Motivating employees and focusing on cooperation within the business C. Producing goods in the most efficient and costeffective manner D. Determining the use of company resources and funds 70

Assessment 8. The focus of the maturity stage (stage 3) in the product life cycle is to build customer satisfaction and recognize competitors entering the market. A. True B. False 9. Psychological needs are those for necessities such as safety, security and health. A. True B. False 10. Which of the following is NOT one of the modes of transportation distribution typically uses for transportation? A. Cable B. Railroads C. Trucks D. Waterways 71

Acknowledgements Krista Scott Amy Hogan Production Coordinator Megan O’Quinn Brand Manager Jennifer Donaldson Graphics Editor Jessica Odom Technical Writer Geoff Scott Production Manager G. W. Davis Executive Producer © MMXIV CEV Multimedia, Ltd. 72