1. Business Organization
C H A P T E R 5
Business Organization
5-1 Business in the U.S. Economy
5-2 Forms of Business Ownership
5-3 Organizational Structure for Business

2. 5-1 Business in U.S. Economy
Goals
Describe the changing status of U.S. employment
Discuss the role of business in the U.S. economy
Describe 3 major types of businesses

3. The Changing U.S. Job Market
The first decade of the 21st Century has seen periods of growth and decline in overall employment
Careers shifting from traditionally important jobs in manufacturing and agriculture to service jobs
Periods of job decline due to recessions

4. Employment Data From 2003 – 2008 total employment grew by 6%
In 2008, 138 million people held non-farm jobs
In 2009 resulted in a loss of more than 775,000 jobs
In 2011 the first wave of Baby Boomers started to retire
Currently white non-hispanic make up 68% of the labor force.

5. Pressures on Employees
Economic stress has led to downsizing of the number of people employed by many companies.
Businesses required employees to take on new tasks and work extra hours
Economic stress also resulted in the increased use of contingent worker.
One who has no explicit or implicit contract for long- term employment.
They can not find permanent employment
They like the flexibility it offers

6. Checkpoint #1
List several groups that will increase as a percentage of the total U.S. workforce in the next decade.
Younger workers (16–24 years of age)
Asian-, Hispanic-, African-American groups
Women

7. Business and the Economy
In 2009, all businesses worldwide produced more than $70 trillion of goods and services.
U.S. businesses were responsible for 20% of that production
25 million full and part time businesses produce those goods and services

8. Size of U.S. Businesses Most U.S. businesses are quite small
19.5 million businesses, have no employees other than the owner

9. Roles of Business
Business plays several key roles in the U.S. Economy:
To make and distribute products and services needed by consumers, government, and other businesses
Provide employment for millions of people
Businesses pay taxes to federal, state, and local governments

10. Impact on a Community
When a new business opens, it pays wages to its workers
It also buys goods and services from other businesses in the area.
The money spent may result in the need for more employees in the community
When a large business opens in an area, other businesses will often locate there to support.

11. Business Activities
Although there are many types and sizes of businesses, all firms perform 6 basic activities:
Generating Ideas
A business begins with a new idea
Continue to improve and develop ideas in order to remain successful
Raising Capital
Businesses need financial resources to operate

12. Business Activities Employing and Training Personnel
Businesses need human resources
Businesses have procedures for recruiting, hiring, and training employees.
Buying Goods and Services
Businesses use many of the purchases for their own operations
Marketing Goods and Services

13. Business Activities Marketing Goods and Services
Marketing refers to the activities directed at providing the goods and services wanted by business’s customers
Maintaining Business Records
Owners and mangers need records to keep track performance and make decisions

14. Checkpoint #2
What are the basic activities completed by all businesses?
Generating ideas
Raising capital
Employing and training personnel
Buying goods and services
Marketing goods and services
Maintaining business records

15. Types of Businesses Producers
Create products and services used by individuals and other businesses.
A business that takes resources from nature for direct consumption or for the use in developing other products is an extractor
Farmers cultivate land and use other natural resources to grow crops and raise livestock for consumption
Manufacturers get supplies from other producers and convert them into products

16. Types of Businesses Intermediaries Service Businesses
Businesses involved in selling the goods and services of producers to consumers and other businesses.
Retailors and wholesalers
Service Businesses
Carries out activities that are consumed by its customers
Dentists, physicians, lawyers

17. Checkpoint #3 How does a manufacturer differ from an extractor?
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.

18. 5-2 Forms of Business Ownership
Goals
Understand the 3 major forms of business ownership
Determine when each form of business ownership is most appropriate
Recognize other specialized business ownership forms

19. Business Ownership
Proprietorship – A business owned and run by just one person.
There a very few legal requirements regarding the business ownership or capital needs that must be met.
Sole control over all business decisions
Owner receives all profits
Responsible for all debts

20. Business Ownership
Partnership – A business owned and controlled by two or more people who have entered into an agreement
The owners are both responsible for key business decisions and functions.
Partners share both investments and profits based on the terms of the partnership agreement
Each partner is liable for all debts of the business

21. Business Ownership
Corporation – a separate legal entity formed by documents filed with a state.
Owned by one or more shareholders and managed by a board of directors.
Meet more legal requirements
Not all owners have direct involvement in decision-making about business functions
Corporations protect the liability of stockholders to only the amount of money they have invested

22. Business Ownership

23. Checkpoint #4
What are the differences between the three main forms of business ownership?
Business forms differ in the ways in which decision-making and investments are made and to whom liabilities are distributed.

24. Choosing a form of Business Ownership
Choosing a Proprietorship
Most businesses begin as a proprietorship
Just have to begin buying and selling as a business
Account for income and expenses and pay taxes on the profits of the business
Provides a tax advantage for the owner
All income is taxed as part of your personal income

25. Choosing a form of Business Ownership
Choosing a Partnership
Partnership Agreement – a written agreement among all owners
Identifies the business name, the investments, and other contributions of each partner.
Two or more people can contribute to the investment needed to start the business as well as the expertise required to run a business.
There is no protection for the personal assets of any partner

26. Choosing a form of Business Ownership
Choosing a Corporation
Most popular form of ownership for large businesses
Subjected to many more laws and more difficult to form than other forms of ownership
Articles of Incorporation – a written legal document that defines ownership and operating procedures and conditions for the business
Corporate bylaws – operating procedures for the corporation
Board of Directors – people who will make major policy and financial decisions for the business

27. Checkpoint #5
Which form of business ownership is the most complex and difficult to form?
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.

28. Other Forms of Ownership
Specialized Partnerships and Corporations
Limited Liability Partnership identifies some investors who cannot lose more than the amount of their investment, but they are not allowed to participate in the day to day management of the business.
Joint Venture is a unique business organized by two or more other business to operate for a limited time and for a specific project.
S Corporation offers the limited liability of a corporation
Limited Liability Companies provide liability protection for owners

29. Other Forms of Ownership
Nonprofit Organization is a group of people who join to do some activity that benefits the public
Cooperatives and Franchises
Cooperative is owned by members, serves their needs, and is managed in their interest.
Franchise - is a written contract granting permission to operate a business to sell products and services in a set way.
Franchiser
Franchisee

30. Checkpoint #6
What are the other specialized forms of business ownership?
Limited liability partnership
Joint venture
S corporation
Limited liability company (LLC)
Nonprofit corporation

31. 5-3 Organizational Structure for Businesses
Goals
Understand important principles in designing an effective organization
Compare alternative organizational structures for businesses

32. Designing an Effective Business Organization
Setting Direction
Mission Statement – a short, specific written statement of the reason a business exists and what it wants to achieve.
“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”
Goal – a precise statement of results the business expects to achieve.
Used to define what needs to be accomplished and to determine if the business is successful.

33. Designing an Effective Business Organization
Finally, the business sets policies and procedures for the organization.
Policies – guidelines used in making consistent decisions
Procedures – descriptions of the way work is to be done
Provides guidance and direction to people working in the organization

34. Designing an Effective Business Organization
Principles of Effective Organization
Responsibility, Authority, and Accountability
The obligation to complete specific work
The right to make decisions about how responsibilities should be accomplished
Taking responsibility for the results achieved
Unity of Command
There is a clear reporting relationship for all staff of a business

35. Designing an Effective Business Organization
Principles of Effective Organization
Span of Control
The Number of employees who are assigned to a particular work task and manager.
A balance of supervision and freedom to do their for employees

36. Checkpoint #7
What is the difference between a mission statement and a goal?
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.

37. Types of Organization Structure
Organization Chart – a diagram that shows the structure of an organization, classifications of works and jobs, and the relationships among those classifications.

38. Types of Organization Structure

39. Types of Organization Structure
Functional Organization Structure
Work is arranged within main business functions such as production, operations, marketing, and human resource.
Matrix Organizational Structure
Work is structured around specific projects, products, or customer groups.

40. Checkpoint #8
What problems can result from the use of a functional organizational structure?
Employees in a functional organizational structure may tend to lose 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.