1. Chapter 5: Business Organizations

2. 5-1: BUSINESS IN THE U.S. ECONOMY
Key Terms:
Contingent workers
Intermediary
Service Business

3. The Changing U.S. Job Market
Employment Data
In 2007, 144 million people had jobs
2014 estimated 165 million
“baby boomers” were born (dominate labor market until they retire in late 2010s)
Average age of worker in 2020 will be over 50
Currently, white non-Hispanic make up 70%
Will drop to 66% by 2014
By 2014, almost half (47%) of jobs will be women

4. Pressure on Employees Downsizing by many companies
Take on new tasks / work extra hours
Pay decreased
Now, 7 of 10 parents felt they didn’t spend enough time with their kids
Increase number of contingent workers
No contract for long-term employment
5% (6 million) made up of contingent workers
Take because they cannot find permanent employment

5. Business and the Economy
Make the goods and services you use daily
Almost 24 million businesses produce things for our daily use

6. Size of Businesses Must U.S. businesses are small
19.5 million have no employees except owner
4.5 million have less than 20 people
26,000 have people
107,000 have 100+ workers

7. Roles of Business Provide employment for millions of people
Employee wages are used to purchase goods
Most businesses pay taxes to federal and state
Taxes spent on streets, police/fire, schools, hospitals
** make/distribute products needed by consumers, government and other businesses**

8. Impact on a Community When a new business opens, provides jobs
Buys goods from other businesses in area
When larger businesses open, others will relocate
Contribute more jobs and income

9. Business Activities Generate Ideas (improve/develop new ideas)
Raise Capital (need $ to operate and hire)
Employ/Train Personnel (recruiting, training)
Buy Goods/Services (to be used for their product)
Marketing Goods/Services (getting word around)
Maintain Business Records (track performance)

10. Types of Businesses Producers Create the products
Use resources to make something for people
Extractor: takes resources from nature for products (pump oil, mine coal, cut timber)
Farmers: cultivate land, grow crops, raise livestock
Manufacturers: get supplies from other producers and turn them into products; sell products to others

11. Intermediaries
Businesses involved in selling goods of producers to other businesses
Most common types are retailers/wholesalers
Include: advertising agencies, storage centers, sales offices

12. Service Businesses
Does not make products; provide something intangible—not able to touch/hold
Include: dentists, doctors, lawyers, painters, pet sitters, furniture movers, internet providers
Fastest growing part of economy
Over 60% of employment is in service businesses

13. 5-1 Assessment The largest number of U.S. businesses employ
>100 people
people
10-20 people
No employees except owner
Which is NOT one of the common business activities
Producing goods/services
Employing/training personnel
Marketing goods/services
Maintain business record
A retailer is an example of
Extractor
Producer
Intermediary
Service business

14. 5-2 Forms of Business Ownership
Key Terms
Proprietorship
Partnership
Corporation
Partnership agreement
Articles of incorporation
Franchise

15. Business Ownership (3 forms)
Proprietorship ** most common**
Business owned and run by 1 person
Easiest to start and end
(+) Sole control over all business decisions
(-) Also responsible for all debts incurred
Don’t need any government license or permits
Register business name with state, local and federal government

16. Partnership Owned/controlled by 2 or more people in an agreement
Partners share in profits
Each is responsible if business fails
Can be verbal or written
Partnership agreement: written among all owners; rules/guidelines of ownership and operations
(+) can split investment and work required
(-) no protection for personal assets of any partner

17. Corporation
Owned by shareholders (stocks) and managed by board directors
Started by legal documents turned in to state
Most have several owners
More difficult to start; board directors/shareholders make decisions
Must follow the laws of the state they are in
Articles of Incorporation: written, legal document that defines ownership/operating procedures for business
Must create corporate bylaws (procedures for business)
(+) business can easily expand/grow and new owners be added
(-) decision making shared among many managers/owners

18. Other Forms of Ownership
Specialized Partnerships and Corporations
Limited liability partnership (some people invest but have no say in day to day decisions, won’t lose any money)
Joint Ventures (two or more businesses join together for a short time for a specific project)
S-Corporation (all income goes through owners based on how much money each person invested)
Limited Liability Company (LLC-combo or partnership/corporation; owners are protected from losses, no bylaws are needed)
Nonprofit Corporation (benefits public; do not pay taxes, raise funds)

19. Cooperatives and Franchises
Cooperative is owned by its members, serves the needs of its people
Members form this so they can buy things cheaper as a group as they can individually
Franchise (written contract that gives permission to a business to sell its products in a certain way. )
Franchiser: the company who gives the rights to use
Franchisee: the company who pays for rights to run company
EX: Jiffy Lube, Century21, Merry Maids, Others??

20. 5-2 Assessment
The form of ownership that gives 1 person sole control over all business decisions:
T/F All investors in a partnership have full responsibility for debts of business
The people who make the majority of policy and financial decisions in a corporation are:
A special form of business organization that combines corporation and partnership:

21. 5-3 Organizational Structure for Business
Key Terms
Mission statement
Goal
Policies
Procedures
Organization chart

22. Design an Effective Business Organization
Many new businesses fail in the first few years
FEW businesses stay successful during lifetime of the owner
Need: skilled managers, good employees, enough resources, effective procedures

23. Setting Direction
Mission Statement: short, specific written statement of why business exists and what it wants to achieve
Set Goals: exact statement of results the business expects to achieve
Sets Policies/Procedures
Guidelines used in making consistent decisions
Description of the way work needs to be done

24. Effective Organization
Responsibility (obligation to complete specific work)
Authority (right to make decisions about how responsibilities should be accomplished)
Accountability (taking responsibility for results achieved)
Unity of Command (clear relationship and definition of the leader for all staff to know)
Span of Control (# employees assigned to a certain task or manager)

25. Types of Organizational Structure
Who reports to who?
Organizational Chart: diagram that shows the structure of an organization, classifications of jobs and how they are related (p117)
Functional Organizational Structure-work is arranged into production, operations, marketing, human res.
All people within category will work together
Little contact with people in other categories
Matrix Organizational Structure-work organized by specific projects, products or customer groups
People with diff backgrounds may work together to help same customer or complete same project

26. 5-3 Assessment
T/F The direction for a business comes from its policies and procedures
The obligation to complete work is called:
Which is NOT shown on organizational chart:
Structure of organization
Work relationships
Job descriptions
Classifications of jobs