PPT on forms of ownership for secondary education

1. Business Characteristics

2. What is a Business?
 Organization that produces or
distributes a good or service for profit
 Profit – difference between a
business’ revenue (income) and
expenses (costs)

3. Business Activities
 Each business participates in at least
three major activities
1. Production – making a product or
producing a service
 Manufacturing firms – produce goods (ex.
Ford Motor Company)
 Service firms – provide assistance to
accomplish specialized needs (ex. doctor,
real estate agent)

4. Business Activities (cont’d)
2. Marketing – how goods and services
are exchanged between producers
and consumers
3. Finance – money matters involved in
running a business

5. Types of Businesses
1. Industrial – produce goods used by
other businesses or organizations to
make things (ex. company that
produces medical products that are
used by hospitals)
 Industrialized nations (ex. U.S., Japan,
Germany) produce thousands of products
compared to the number of products
produced by third world nations
 Third world nations – few manufacturing
firms and relatively poor

6. Types of Businesses (cont’d)
2. Commercial – engaged in one of the
following activities
 Marketing (ex. wholesalers and retailers)
 Finance (ex. banks and investment
companies)
 Services (ex. doctors, fitness facilities,
and lawn care) – intangible products
that use primarily labor to satisfy
consumer needs

7. Industry
 Refers to all businesses within a category
 The Occupational Outlook Handbook breaks
down industries by occupations
 Ex. Business and Financial Operations
Occupations
 Click on this link to see the number of people
employed in certain occupational categories and
the individual occupations under each category

8. As Business Changes
 Constantly changing
 Businesses have advanced in many ways
 Ex. computers, used for many key business
functions
 Countries have become more industrialized
 Ex. U.S now purchases many goods from other
countries
 Growth in certain industries
 Ex. Services and retail trade has grown, while
wholesale trade and manufacturing has
remained unchanged

9. Effectiveness and Efficiency
 Effectiveness – making the right
decisions about what products or
services to offer customers and how
to produce and deliver them
 Efficiency – producing needed goods
and services quickly and at low cost
 Good managers focus on both

10. Achieving Effectiveness
 Knowing what your customers want
 Choice has increased over the years
 Domestic goods – products made by firms in the
U.S.
 Foreign goods – products make by firms in other
countries
 Information is gathered about customers to
determine what they like – market research
 Also want high quality products
 Total quality management (TQM) – commitment
to excellence that is accomplished by teamwork
and continual improvement

11. Achieving Efficiency
 Measure by output –
quantity produced within
a given time
 Productivity – producing
the largest quantity in
the least amount of time
by using efficient
methods and modern
equipment

12. Achieving Efficiency (cont’d)
 Three ways
 Specialization of effort – workers learn a
specific skill/task (Ex. Dell Computers –
putting the hard drive into the computer)
 Mass production – effectiveness can also be
improved this way; using up-to-date
equipment and assembly line methods to
produce large quantities of identical goods
 Better technology and innovation
 Reorganization of the company

13. Gross Domestic Product
 Often referred to as the GDP
 First measure of a nation’s economic
wealth
 Total market value of all goods and
services produced in a country in a
year
 Click this link to see a ranking of the
GDP for the U.S. and other countries
around the world

14. Individual Well-Being
 Second measure of a nation’s wealth
 GDP helps in judging the overall growth of
an economy; tells little about the economic
worth of individuals
 Increase income improves the level of living
of an average family
 Ex. number of families living in home they own,
number of adults receiving education after high
school

15. Entrepreneurship
 Entrepreneur – starts, manages, and
owns a business
 Growth of business within the U.S.
resulted from
 Individuals wanting to own their own
businesses
 Easy to start a business

16. Small Business
 Any business that is operated by one
or a few individuals
 Few small businesses produce goods
since it is costly
 Many are one-person or family
operations
 Examples – restaurants, gas stations,
consultants working from home with
the use of a computer

17. Franchise Business
 Franchise – legal agreement in which a distributor
buys the right to sell the franchising company’s
product or service under the company’s name and
trademark
 Examples – Subway, Bruster’s
 Franchisor – parent company of a franchise
agreement that provides the product or service
 Franchisee – distributor of a franchised product or
service
 5 to 10 percent of franchised businesses fail; much
lower than non-franchised businesses

18. Risks of Business Ownership
 Success depends on managerial
effectiveness
 Risk is the possibility of failure
 Competition from other businesses
 Changes in prices
 Changes in style
 Competition from new products
 Changes that arise from economic
conditions

19. Causes of Business Failures
 Almost two-thirds of businesses fail from
economic causes
 Industry weakness, low profits, and low sales
 Other causes of business failure include
 Finance causes (ex. expenses/debts)
 Disaster and fraud (ex. hurricanes/theft)
 Neglect causes (ex. poor work habits)
 Strategy causes (ex. overexpansion)
 Experience causes (ex. inadequate planning)

20. Intrapreneurship
 Intrapreneur – employee who is given
funds and freedom to create a special unit
or department within a company in order to
develop a new product, process, or service
 Largest corporations provide these types of
opportunities; valuable employees provide
the company with innovative products and
services
 Example of Company – 3M that makes
Post-It Notes

21. Reference
Evarard, Kenneth E., Burrow, James L.
(2001). Business Principles and
Management. Mason, OH: South-
Western.