1. LESSON 5-2

2. Business Opportunities Objectives Recognize the difference between for-profit and nonprofit organizations Distinguish between the public and private sectors List the major types of businesses in the industrial market

3. Three Types of Business Classifications To work or invest in a business, you need to understand how to classify a business: 1.By Size and scope 2.By Purpose 3.By Place within the industry (Note: a business can be classified in more than one)

4. 1. Size and Scope SIZE: the easiest way to classify a business a. Small Businesses: Operated by one or a few individuals Generally fewer than 100 employees Approximately 95% of all U.S. businesses Employs more than ½ all private sector employees b. Large Businesses: Usually has more than 500 employees (note: midsize businesses 101- 499 employees)

5. Size and Scope SCOPE: by the extent (range) of its business operations a. domestic business A business that sells its products only in its own country growth opportunities limited to customers within that country b. global business: A business that sells its product to more than one country growth opportunities and customers unlimited

6. 2. Purpose Businesses have the different purposes a)For Profit b)Nonprofit c)Public d)Private

7. For-profit business  a business that seeks to make a profit from its operations Nonprofit organization  uses the money it makes to fund the cause identified in its charter These business raise money through: Gifts and donations Selling goods or services Don’t pay taxes on their income Still have to pay all expenses such as supplies, production costs, salaries, and rent Have volunteer and paid employees Purpose - Profit or Not

8. Purpose - public & private public sector - Government-financed agencies and services: Operate like a business but not intended to make a profit Purpose is to provide service to the country’s people Purchase 1/3 of all goods and service in the US Examples Public schools Public libraries Military agencies (such as the Army and Air Force) Social agencies (such as Social Security and Medicare) Regulatory agencies (such as the Environmental Protection Agency)

9. private sector Business not associated with government agencies Purpose - public & private

10. 3. Industry and Markets Businesses are often classified by the: Industry they represent Products they sell Markets they target

11. Industry An industry  consists of a group of establishments primarily engaged in producing or handling the same product or group of products or in rendering the same services. Products Sold NAICS: Six-digit coding system to classify all economic activity into 20 sectors based on what is sold Ex: Communications Publishing Motion pictures Internet companies

12. Consumer, Industrial and Service Markets Consumer markets: consumers buy goods for personal use Industrial markets: businesses that buy goods for use in their operations Service markets: provide intangible products to both consumer and industrial markets

13. Industry and Markets Industrial businesses include: Manufacturing: Producers of goods (use the raw materials and put them together to create our products) Wholesalers  : Businesses that obtain goods from manufacturers and resell them to industrial users, other wholesalers, and retailers Retailers  : Businesses that buy goods from wholesalers or manufacturers and resell them to the consumer

14. The Functions of Business There are four main functions involved in an organization’s operation: Production or procurement Marketing Management Finance & Accounting Marketing Essentials Chapter 5, Section 5.2

15. production The process of creating, growing, manufacturing, or improving on goods and services. The Functions of Business

16. procurement Involves buying an reselling goods that have already been produced.. The Functions of Business

17. marketing All the activities from the time that a product leaves the producer or manufacturer until it reaches the final consumer (Utility, 4ps, etc.) The Functions of Business

18. management The process of achieving company goals by effective use of resources through planning, organizing, and controlling.

19. Management includes the following: a. Planning: Forming company objectives and strategies to meet them. b. Organizing: Scheduling, delegating, and other specific operations. c. Controlling: Overseeing and analyzing operating budgets and suggesting more efficient measures for a company. Management

20. The Functions of Business finance The function of business that involves money management.

21. The Functions of Business accounting The discipline that keeps track of a company’s financial situation.

22. Finance and Accounting When analyzing a company’s finances, review the following Accounting reports A balance sheet reports a company’s assets, liabilities, and owner’s equity Assets: Things owned by a company Liabilities: Money owed by a business to its creditors Owner’s equity: The difference between assets and liabilities (the value of the business to the owner) Profit and loss statements - reflect the ongoing operations of a firm Income from sales revenue and investments Costs and expenses for doing business

23. The major functions of a business–production or procurement, marketing, management, and finance–are a basis for determining the strengths and weaknesses of a company as part of a SWOT analysis.

24. The Functions of Business Marketing Essentials Chapter 5, Section 5.2 While every business does the functions differently, all are essential to running a business and for a business to be successful

25. The Functions of Business Examples of How Each of These Functions Might Be Applied

26. The Functions of Business Examples of How Each of These Functions Might Be Applied

27. SECTION 5.2 REVIEW

28. Business Opportunities Study Organizer In charts like those below, record the various ways to classify businesses and the major functions of business. Marketing Essentials Chapter 5, Section 5.2 Types of Businesses Functions of a Business