ch 5-6 Flashcards
producers
a business that gathers raw goods (raw materials gathered in their original state from natural resources such as land or water)
ex : Agriculture, mining, fishing, and forestry are some of the industries that produce raw goods.
processors
changes raw materials into more finished products.
Processed goods are made from raw goods that require further processing.
ex: sugar cane to sugar
crude oil to gasoline
iron ore to steel.
manufacturer
a business that makes finished products out of processed goods.
Manufacturers turn raw or processed goods into finished goods.
ex: cars, CDs, and computers.
intermediaries vs wholesalers
An intermediary
- a business that moves goods from one business to another.
It buys goods, stores them, and then resells them.
A wholesaler / distributor
- distributes goods. A clothing wholesaler, for example, may buy thousands of jackets from several manufacturers. The wholesaler then divides the large quantities into smaller ones and sells them to retailers.
retailers and service businesses
retailer
- purchases goods from a wholesaler and sells them to consumers (final buyers of the goods)
ex: Service stations, record stores, and auto dealers
Service businesses
- perform tasks rather than provide goods.
Some service businesses meet needs, such as medical clinics and law firms. Others provide conveniences, such as taxi companies and copy shops.
Service businesses employ about three-quarters of the workforce and are rapidly increasing in numbers.
types of businesses
producers, processors, manufacturers, intermediaries and wholesalers, retailers and service businesses
functions of businesses
production and procurement, marketing, management, finance, accounting
production and procurement
Production
- is the process of creating, expanding, manufacturing, or improving goods and services.
Most retailers procure goods from producers for resale.
Procurement
- buying and reselling of goods that have already been produced. Wholesalers buy goods from producers to resell to retailers and other wholesalers.
marketing
the process of planning, pricing, promoting, selling, and distributing ideas, goods, and services.
Marketing involves getting consumers to buy a product or service.
Marketers make decisions based on market research of trends and consumer habits.
management
Management is the process of achieving company goals by planning, organizing, leading, controlling, and evaluating the effective use of resources.
finance and accounting
Finance is the business or art of money management.
analyzing financial statements to make future decisions.
Accounting involves maintaining and checking records, handing bills, and preparing financial reports for a business.
how functions of businesses are interdependent
For example, say a furniture maker’s sales have been decreasing. The accounting and finance departments have noted the drop in sales. If the products are too high-priced, then more efficient procedures will have to be implemented.
This will involve management and production. A new marketing plan may be required.
Accounting and finance will have to closely monitor the effects that new efforts have on profits.
Sometimes the functional areas conflict with each other. Suppose management wants to increase sales by 20 percent within three years. The production department suggests improving quality to attract more customers. However, changing the quality would add to costs. Meanwhile, the marketing department says the problem is that there is not enough marketing being done.
It requests more funds for projects. Accounting then says neither plan is good since both would lower profits by raising costs. It suggests improving production efficiency. The final plan involves ideas from all functions of business. Companies benefit when all functional areas work together.
three main types of business organizations
sole proprietorship, partnership, corporation
other means of owning a business
cooperative
- organization that is owned and operated by its members. When groups of businesses pool their resources, they form a cooperative.
The purpose is to save money on the purchase of certain goods and services. A cooperative can make marketing of goods and services more effcient and profitable.
nonprofit
focuses on providing a service, but not to make a profit.
Nonprofits must also register with the government. Because they do not make a profit, they do not pay taxes.
franchise
contractual agreement to use the name and sell the products or services of a company in a designated geographic area. have to invest money and pay franchise fees or a share of the profits. In return, the franchiser offers a well-known name and a business plan.
sole proprietorship advantages and disadvantages
business owned by one person
adv- easy, control, low taxes(taxed once),
dis- unlimited liability, limited access to credit, no diversity in skills, business ends when owner dies
partnership adv and dis
business owned by two or more ppl who share its risks and rewards. to start it u need a partnership agreement that outlines responsibilities and rights
adv - easy to start and obtain capital, not dependent on one person, banks like to lend money, taxed only once, diversity in skills
dis - share business risks, responsible for the other’s mistakes
corporations adv and dis
registered by a state and operates apart from its owners. needs a corporate charter (license to run a corp).
To raise money, the owners can sell stock, or shares in the company. The company also must have a board of directors
adv - limited liability(owners are responsible for no more than capital), business can continue if owner dies, money raised by selling stocks
dis - double taxation (them and stockholders), difficult and costly, more gov regulation
venture
venture is a new business undertaking that involves risk.
entrepreneur characteristics
persistent, confident, risk taking, restless, goal oriented, action oriented, responsible, self demanding, creative, independent, inquisitive, enthusiastic
small business
independently owned business that usually has the owner as its manager.
A small business serves a limited geographic area and employs fewer than 500 people.
virtual business/dot com company - business operating on the internet
rewards of entrepreneurship
being ur own boss, doing what u enjoy, being creative, starting an enterprise
challenges of entrepreneurship
getting funds, being responsible, feeling alone, uncertain income levels
businessplan
written description of a new business venture that describes all aspects of the business. It helps entrepreneurs focus on what they want to do, how they will do it, and what they expect to accomplish. The business plan is used by potential investors and financing agencies that new entrepreneurs go to for start-up funds.
checklist for starting a venture
What will I produce?
• Who are my main competitors?
• Why is my product or service needed?
• How much will my product or service cost to produce?
• How many people will I need to run the business?
• What physical facilities will I need?
• What licenses, permits, or other legal documents do I need?
• How much money will I need to get started?
