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Chapter 6

Business Ownership and Operations

Section 6.2

Types and Functionsof Businesses

Read to Learn

Differentiate the six types of businesses.

Describe the five functions of business.

Discuss how the five functions of business relate

to each other.

The Main Idea

There are many different types of businesses.

The five functions of business are involved in

every one.

Key Concepts

Types of Businesses

Functions of Business

How the Functions of Business Are

Interdependent

Key Term

producer

processor

a business that gathers raw goods

a business that changes raw materials

into more finished products

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Key Term

manufacturer

intermediary

a business that makes finished

products out of processed goods

a business that moves goods

from one business to another

Key Term

wholesaler

retailer

a business that distributes goods

a business that purchases goods

from a wholesaler and sells them to

consumers, the final buyer of the

goods

Key Term

production

procurement

the process of creating,

expanding, manufacturing, or

improving goods and services

the buying and reselling of goods

that have already been produced

Key Term

marketing

management

the process of planning, pricing,

promoting, selling, and distributing

ideas, goods, and services

the process of achieving company

goals by planning, organizing,

directing, controlling, and evaluating

the effective use of resources

Key Term

finance

accounting

the business or art of money

management

maintaining and checking

records, handling bills, and

preparing financial reports for a

business

Graphic Organizer

Types of Businesses

Functions ofBusinesses

• Producers

• Processors

• Manufactures

• Intermediaries and

Wholesalers

• Retailers and Service Businesses

• Production and

Procurement

• Marketing

• Management

• Finance and Accounting

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Producers

producera business that gathers raw goods

A producer may be

found in industries

such as agriculture,

mining, fishing, or

forestry.

Processor

processora business that changes raw materials into more finished products

A processor may, for

example, turn crude

oil into gasoline.

Manufacturers

manufacturera business that makes finished products out of processed goods

Cars, CDs, and

computers are

examples of goods

that are made by a

manufacturer.

Intermediaries and Wholesalers

intermediarya business that moves goods from one business to another

An intermediary buys

goods, stores them,

and then resells them.

Intermediaries and Wholesalers

wholesalera business that moves good from one business to another

A wholesaler of

clothing may buy

thousands of jackets

from several

manufacturers, divide

the large quantities into

smaller ones, and sell

them to retailers.

Retailers and Service Businesses

retailera business that purchases goods from a wholesaler and sells them to consumers, the final buyers of the goods

A record store is an

example of a retailer.

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Retailers and Service Businesses

Service businesses perform tasks rather

than provide goods.

Service businesses employ about three-

quarters of the workforce and are rapidly

increasing in numbers.

Functions of Business

The five main functions of business are:

Production and procurement

Marketing

Management

Finance

Accounting

Production and Procurement

productionthe process of creating,

expanding, manufacturing, or

improving goods and services

Production and

procurement are

closely related

functions of business.

procurementthe buying and reselling of

goods and services that have

already been produced

Marketing

marketingthe process of planning, pricing, promoting, selling, and distributing ideas, goods, and services

Marketing involves

getting consumers to

buy a product or

service.

To Advertise or Not

Advertising is used to influence consumers to buy one product or service over another.

Management

managementthe process of achieving company goals by planning, organizing, directing, controlling, and evaluating the effective use of resources

Management is an

important function of

business.

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Finance and Accounting

financethe business or art of money management

Finance requires

analyzing financial

statements to make

future decisions.

Finance and Accounting

accountingmaintaining and checking records, handling bills, and preparing financial reports for a business

Accounting requires

attention to detail and

accuracy.

How the Functions of Business Are Interdependent

The functional areas of a business depend on

each other.

Sometimes, the functional areas of a business

conflict with each other.

Graphic Organizer

Example of How Functional Areas Depend on Each Other

A furniture maker’s sales are decreasing.

The accounting and finance department notice decreasing sales.

If the furniture is too highly priced, more efficient procedures will have to be

implemented.

A new marketing plan is created.

The accounting and finance department will monitor the effects of new marketing efforts.

Graphic Organizer

Example of How Functional Areas Conflict with Each Other

Management wants to increase sales by 20 percent within three years.

The production department suggests improving quality.

The marketing department requests more funds for projects.

Accounting says there is not enough money for either plan.

The final plan involves ideas from all the functions of business.

1. What is the difference between a producer and a processor?

A producer gathers or creates raw products. A processor changes raw products into more finished products.

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2. Identify the five functions of business.

production and procurement, marketing,management, finance, and accounting

3. Give an example of how the accounting and finance functions can affect a business’s marketing and production processes.

If the financials show little profits, newmarketing plans may be developed and new production procedures may be implemented.

Chapter 6

Business Ownership and Operations

Section 6.2

Types and Functionsof Businesses

End of