Advantages and Disadvantages of Different Types of Business

Vocabulary flashcards covering the key concepts, advantages, and disadvantages of service, merchandising, and manufacturing businesses.

Service Business

A type of business that provides intangible value to customers through personal skill, expertise, or labor rather than physical products.

Service Business Inventory Advantage

The elimination of inventory, warehousing, and distribution costs because the business operates without product inventory and requires only minimal essential supplies.

Service Business Personal Time Disadvantage

The lack of flexible personal time caused by needing to be directly involved in delivering the service to a customer, as services cannot be stocked in advance.

Service Business Capital Requirement

The minimal start-up capital needed because the business primarily sells the owner's individual skill set rather than raw materials or machinery.

Economic Sensitivity of Service Businesses

The tendency of service businesses to suffer first from demand declines during economic difficulties because most services are treated as luxuries rather than survival necessities.

Cost of Errors in Service Businesses

The high cost of mistakes in service delivery, where errors directly damage reputation and cannot be fixed by simply replacing a product.

Merchandising Business

A business type that purchases finished goods from suppliers and resells them directly to customers without altering the products.

Price Fluctuation Advantage in Merchandising

The opportunity to buy merchandise at discounted sale prices and resell the items at a higher price to increase profit margins.

Cost Flexibility Disadvantage in Merchandising

The inability to easily reduce product costs because the cost of goods is controlled by supplier purchase prices rather than internal process redesigns.

Lower Cost of Quality in Merchandising

An operational advantage stemming from the principle that 'what you buy is what you sell,' allowing a merchant to stop buying poor-performing items and switch brands easily.

Merchandising Inventory Risks

The operational burden and added costs associated with tracking inventory, spoilages, theft, breakages, damages, and obsolescence.

Manufacturing Business

A business model that converts raw materials into finished tangible goods through labor, tools, machinery, and processing.

Brand Longevity in Manufacturing

The opportunity to build an established, recognizable product brand that can endure longer than the founder's lifetime.

Mass Production Pricing Advantage

The ability to offer competitive pricing strategies because large-scale manufacturing reduces the cost per unit produced.

Manufacturing Retail Store Advantage

The advantage of not requiring a prime retail storefront location, as products can be distributed directly to wholesalers and distributors.

Start-up Capital Requirements in Manufacturing

The substantial initial investment required to acquire production machinery, secure large manufacturing space, buy raw materials, and hire staff.

Technology Risk in Manufacturing

The risk of losing product demand if a business fails to continually innovate when competitors create better or cheaper technological alternatives.