LESSON 5-2. Business Opportunities Objectives Recognize the difference between for-profit and nonprofit organizations Distinguish between the public

LESSON 5-2

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

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)

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

employeesb. Large Businesses:

• Usually has more than 500 employees

(note: midsize businesses 101- 499 employees)

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

2. Purpose

Businesses have the different purposes

a)For Profit

b)Nonprofit

c) Public

d)Private

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

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)

• private sector Business not associated with government agencies

Purpose - public & private

3. Industry and Markets

Businesses are often classified by the:

• Industry they represent

• Products they sell

• Markets they target

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

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

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

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

productionThe process of creating, growing, manufacturing,or improving on goods and services.


procurementInvolves buying an reselling goods that have already been produced..


marketingAll the activities from the time that a product leaves the producer or manufacturer until it reaches the final consumer (Utility, 4ps, etc.)



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

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


financeThe function of business that involves money management.


accountingThe discipline that keeps track of a company’s financial situation.

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

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.



While every business does the functions differently, all are essential to running a business and for a business to be successful


Examples of How Each of These Functions Might Be Applied


Examples of How Each of These Functions Might Be Applied

SECTION 5.2 REVIEW

Business Opportunities

Study Organizer

In charts like those below, record the various ways to classify businesses and the major functions of business.


Documents

LESSON 5-2. Business Opportunities Objectives Recognize the difference between for-profit and nonprofit organizations Distinguish between the public