1. Business Organization
CHAPTER 5
3/11/2018
CHAPTER 5
Business Organization
5-1 Business in the U.S. Economy
5-2 Forms of Business Ownership
5-3 Organizational Structure for Businesses 5
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2. Business in the U.S. Economy
CHAPTER 5
3/11/2018
5-1
Business in the U.S. Economy
Goals
Describe the changing status of U.S. employment
Discuss the role of business in the U.S. economy
Describe the three major types of businesses 5
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3. Key Terms Contingent Worker (contract workers) Producer Intermediary
CHAPTER 5
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Key Terms
Contingent Worker (contract workers)
Producer
Intermediary
Service Business 5
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4. 38. THE CHANGING U.S. JOB MARKET
CHAPTER 5
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38. THE CHANGING U.S. JOB MARKET
Employment data
From , total employment grew by 14%
Babyboomers (born and began retiring in 2010s)
Average age of workers in 2020 will be over 50
Mini-boom (Millennials)
In 2009, 70% of labor force was white non-Hispanic workers
In 2014, that dropped to 66% with increasing growth rates for Asian, Hispanic, and African-American workers
Since the 1960’s women have joined the workforce and now account for holding about 47% of all jobs. 5
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5. 38. THE CHANGING U.S. JOB MARKET
CHAPTER 5
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38. THE CHANGING U.S. JOB MARKET
Pressures on employees
Technology was expected to become a time and stress saver – But the reality was opposite this expectation.
Contingent workers (contract workers) are on the rise as lay-offs, downsizing, and automation have reduced jobs.
Part-time work became the norm. 5
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6. 39. BUSINESS AND THE ECONOMY
CHAPTER 5
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39. BUSINESS AND THE ECONOMY
Size of businesses
Source: U.S. Census Bureau
Percent of Businesses by Employee Size 5
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7. 39. BUSINESS AND THE ECONOMY
CHAPTER 5
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39. BUSINESS AND THE ECONOMY
Roles of business
Employee and pay workers so they can afford to support themselves and their families
Pay taxes to federal, state, and local governments so needed services can be provided for citizens
Make and distribute products and services that are needed by consumers, government, and other businesses 5
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8. 39. BUSINESS AND THE ECONOMY
CHAPTER 5
3/11/2018
39. BUSINESS AND THE ECONOMY
Impact on a community
Domino effect –
When a large business opens in an area, other businesses will often locate there to support the larger business and the employees. Small businesses may be started to meet the needs of the residents and other businesses.
Successful businesses contribute to more jobs, more income, and a thriving economy in the communities where they operate. 5
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9. 39. BUSINESS AND THE ECONOMY
CHAPTER 5
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39. BUSINESS AND THE ECONOMY
Business Activities
Generating ideas
Raising capital
Employing and training personnel
Buying goods and services
Marketing goods and services
Maintaining business records 5
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10. 40. TYPES OF BUSINESSES Producers
CHAPTER 5
3/11/2018
40. TYPES OF BUSINESSES
Producers
Use resources to create products and services
Types: Extractors and Manufacturers
Intermediaries
Involved in selling the goods and services of producers to consumers
Types: Retailers and Wholesalers
Service Businesses
Carry out activities that are consumed by its consumers
Examples include: dentists, physicians, lawyers, painters, web designers, travel agents, dog walkers 5
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11. Checkpoint >> How does a manufacturer differ from an extractor?
CHAPTER 5
3/11/2018
Checkpoint >>
How does a manufacturer differ from an extractor?
Answer
An extractor takes natural resources, such as oil or timber, for direct consumption or for use in developing other products.
A manufacturer takes resources supplied by others and converts them into useable products. 5
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12. Forms of Business Ownership
CHAPTER 5
3/11/2018
5-2
Forms of Business Ownership
Goals
Understand the three major forms of business ownership
Determine when each form of business ownership is most appropriate
Recognize other specialized business ownership forms 5
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13. Key Terms proprietorship partnership corporation partnership agreement
CHAPTER 5
3/11/2018
Key Terms
proprietorship
partnership
corporation
partnership agreement
articles of incorporation
franchise 5
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14. CHAPTER 5
3/11/2018
41. BUSINESS OWNERSHIP
Proprietorship~ Business owned and run by just one person (Unlimited Liability)
Partnership~ Business owned and controlled by two or more people (Unlimited Liability)
Corporation~ Separate legal entity formed by documents filed with a state. Owned by one or more shareholders and managed by a board of directors (Limited Liability) 5
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15. Forms of Ownership Source: Internal Revenue Service CHAPTER 5
3/11/2018
Source: Internal Revenue Service
Forms of Ownership 5
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16. CHAPTER 5
3/11/2018
Checkpoint >>
What are the differences between the three main forms of business ownership?
Answer
Business forms differ in the ways in which decision-making and investments are made and to whom liabilities are distributed. 5
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17. CHOOSING A FORM OF BUSINESS OWNERSHIP
CHAPTER 5
3/11/2018
CHOOSING A FORM OF BUSINESS OWNERSHIP
Choosing a proprietorship~
Most businesses begin this way and remain this way
Total control is with the owner
Easy to begin- only requires gov’t licenses and/or permits
Tax advantage/disadvantage
ALL income is part of business and expenses can often be written off to reduce income
ALL debts are owner’s responsibility (Unlimited liability) 5
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18. 42. CHOOSING A FORM OF BUSINESS OWNERSHIP (continued)
CHAPTER 5
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42. CHOOSING A FORM OF BUSINESS OWNERSHIP (continued)
Choosing a partnership~
Can sometimes be formed by verbal agreement
BUT most of the time, a written partnership agreement is prepared
Details the rules and procedures that guide ownership and operations
Lists clearly the business name, investments, and partner contributions
Shows how profits and losses will be divided among partners
Defines authority and responsibilities granted to each partner
States how the partnership can be dissolved 5
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19. Partnership (continued
CHAPTER 5
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Partnership (continued
Advantages
More people contribute to the investment in the business
More expertise
Disadvantages
Each partner is responsible for the decisions of all other partners
No protection of personal assets of each partner
Unlimited Liability 5
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20. CHOOSING A FORM OF BUSINESS OWNERSHIP (42. continued)
CHAPTER 5
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CHOOSING A FORM OF BUSINESS OWNERSHIP (42. continued)
Choosing a corporation~
Not just an option for large businesses
Increasing in popularity of small businesses as well
Subject to many more laws and are more difficult to form 5
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21. Corporations (continued)
CHAPTER 5
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Corporations (continued)
Treated as an “individual” by gov’t
Must obey laws of the state and must file ‘articles of incorporation’
Written legal document that defines ownership and operating procedures (corporate bylaws) and conditions
A Board of Directors must be appointed
Must issue shares of stock to investors 5
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22. Corporation (continued)
CHAPTER 5
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Corporation (continued)
Advantages~
Liability is limited to the amount of money invested
Amount of debt of the business does not matter
People can invest in the business and receive part of the profits without having to take part in the day-to-day operations
Can be easily expanded 5
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23. Corporation (continued)
CHAPTER 5
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Corporation (continued)
Disadvantages~
Decision-making is shared among managers, board of directors, and shareholders
Many records are required and more laws regulate corporations than the other two forms of business ownership
Business pays corporate taxes to the government AND investors also pay taxes on individual earnings from the business 5
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24. CHAPTER 5
3/11/2018
Checkpoint >>
Which form of business ownership is the most complex and difficult to form?
Answer
The corporation is more complex to begin than other business forms.
Forming a corporation requires much more bureaucracy, is more subject to government regulations, requires the organization of a board, and must have clearly defined bylaws. 5
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25. 43. OTHER FORMS OF OWNERSHIP
CHAPTER 5
3/11/2018
43. OTHER FORMS OF OWNERSHIP
Specialized partnerships and corporations
Limited liability partnership
Identifies some investors who cannot lose more than they have invested, BUT they are not permitted to participate in the day-to-day management of the business
Joint Venture
Unique business organized by 2 or more businesses to operate for a limited time for a specific project 5
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26. 43. OTHER FORMS OF BUSINESS OWNERSHIP (continued)
CHAPTER 5
3/11/2018
43. OTHER FORMS OF BUSINESS OWNERSHIP (continued)
Specialized partnerships and corporations (continued)
S-Corporation
For small businesses
Offers the limited liability of a corporation
All income is passed through to the owners based on their investment and is taxed on individual earnings
Limited Liability Company (LLC)
Newer form of ownership
Combines partnership with corporation
Provides liability protection for owners
Simpler than a corporation
No articles or bylaws are needed 5
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27. 43. OTHER FORMS OF BUSINESS OWNERSHIP (continued)
CHAPTER 5
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43. OTHER FORMS OF BUSINESS OWNERSHIP (continued)
Specialized partnerships and corporations (continued)
Nonprofit corporation
Joined to do something that benefits the public
Education, health care, charity, the arts…
Free from corporate income taxes
Receive grants and donations from individuals and businesses
Must meet government requirements 5
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28. Cooperatives 43. OTHER FORMS OF BUSINESS OWNERSHIP (continued)
CHAPTER 5
3/11/2018
43. OTHER FORMS OF BUSINESS OWNERSHIP (continued)
Cooperatives
Cooperative~
Owned by members and serves their needs
Two types:
Consumers Cooperatives
Business (Producer’s) Cooperatives 5
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29. 43. OTHER FORMS OF BUSINESS OWNERSHIP (continued)
CHAPTER 5
3/11/2018
43. OTHER FORMS OF BUSINESS OWNERSHIP (continued)
Franchises
Written contract granting permission to operate a business to sell products and services in a set way.
Franchiser- company that owns the product or service and grants the right to another business
Franchisee- company that purchases the rights to run the business
Franchisee maintains day-to-day operations and receives profits
Pays fees and percentage of profits to franchiser 5
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30. CHAPTER 5
3/11/2018
Checkpoint >>
What are the other specialized forms of business ownership?
Answer
limited liability partnership
joint venture
S-corporation
limited liability companies (LLC)
nonprofit corporations.
franchise
cooperative 5
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31. Mini-Project
Find and list five franchises that interest you using
5 pts
For each franchise, answer the following questions: pts
How much liquid capital (minimum cash required) is needed to purchase the franchise?
Are training & support or financial assistance from the parent company provided?
Provide a brief description of the franchise (what the business does, their goals, mission, competitive edge, and other activities, etc.).
30 pts total 5

32. Organizational Structure for Businesses
CHAPTER 5
3/11/2018
Organizational Structure for Businesses
5-3
Goals
Understand important principles in designing an effective organization
Compare alternative organizational structures for businesses 5
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33. Key Terms (continued) Organization chart~
Diagram that shows the structure of an organization, classifications of work/jobs, and relationships among those classifications 5

34. 45. TYPES OF ORGANIZATIONAL STRUCTURES
CHAPTER 5
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45. TYPES OF ORGANIZATIONAL STRUCTURES
Functional organization structure
Work is arranged within main business functions such as production, operations, marketing, and human resources
All people with related jobs work together
Advantages and Drawbacks
Matrix organizational structure
Work is structured around specific projects, products, or customer groups
People with varied backgrounds are assigned together because their expertise is required for the project or to serve a customer
Groups may be temporary or long-term 5
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35. FUNCTIONAL Organization Chart
CHAPTER 5
3/11/2018
FUNCTIONAL Organization Chart 5
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36. FUNCTIONAL ORGANIZATIONAL CHART
Task D:
All Design Department Members
Task C:
All Sales Dept. members
Task B:
All Accounting/Finance Dept. members
Task A:
All Marketing dept. members
Marketing Dept.
Accounting/
Finance Dept.
Design Dept.
Sales
Dept. 5

37. MATRIX ORGANIZATIONAL CHART
Project D:
Marketing
Acct./Fin.
Sales
Design
Project C:
Project B:
Project A:
Marketing Dept.
Accounting/
Finance Dept.
Design Dept.
Dept. 5

38. 44. DESIGNING AN EFFECTIVE BUSINESS ORGANIZATION
CHAPTER 5
3/11/2018
44. DESIGNING AN EFFECTIVE BUSINESS ORGANIZATION
Setting direction (Leave 8 lines)
Mission Statement, Goals, Policies, and Procedures
Principles of effective organization (Leave 10 lines)
Responsibility, Authority, Accountability, Unity of Command, and Span of Control 5
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39. Setting Direction (Obj. 44 continued)
CHAPTER 5
3/11/2018
Setting Direction (Obj. 44 continued)
Mission statement~
Short, specific written statement of the reason a business exists and what it wants to achieve.
Goal~
A precise statement of results the business expects to achieve
Used to define what needs to be accomplished
Policies~
Guidelines used in making consistent decisions
Procedures~
Descriptions of the way work is to be done 5
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40. Principles of Effective Organization (Obj. 44 continued)
CHAPTER 5
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Principles of Effective Organization (Obj. 44 continued)
Responsibility~
Obligation to complete specific work
Authority~
Right to make decisions about how responsibilities will be accomplished
Accountability ~
Taking responsibility for the results achieved
Unity of command~
Clear reporting relationship for all staff - ‘chain of command’
Span of control~
Number of employees who are assigned to a work task and manager 5
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41. CHAPTER 5
3/11/2018
Checkpoint >>
What is the difference between a mission statement and a goal?
Answer
A mission statement states the purpose of existence for a business and what it hopes to achieve.
A goal is a more specific statement of what a business expects to achieve and may be used to measure a business’ success. 5
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42. CHAPTER 5
3/11/2018
Checkpoint >>
What problems can result from the use of a functional organizational structure?
Answer
Employees in a functional organizational structure may tend to loose sight of overall corporate goals.
Workers tend to be limited to specific duties and may not see their relationship to the organization as a whole.
This can result in lack of interest and motivation over time. 5
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43. Chapter 5-3 and Review
Page 118
1-3 and
Choose 4 or 5 5

44. Chapter 5 Review
Pages
1-23 and
Choose 1 from 24-31 5