UNIT 3: Business Types

Lesson 1: Industries

Vocabulary

retailing industry: is the group of businesses that sell products to end consumers. The consumers might be individuals or businesses.

service industry: is the group of businesses that provide services to individual consumers, other businesses, or both.

Distribution: is the process of getting a product to the consumer.

Direct distribution: is when a product is sold from the manufacturer to the end consumer, with no wholesale or retail companies in between.

Indirect distribution: is when a product goes through other companies, such as wholesale and retail companies, before reaching the consumer

trade: is a specific type of industry that requires skilled labor.

tradesperson: is a person with special skills in a certain type of industry. A tradesperson has gone through special education or training in order to do this type of work.

contract: is a legal agreement in which a person or business agrees to perform a task for another person or business.

contractor: is the person or business who agreed to perform the task

subcontracting industry: is made up of people and businesses that sign a contract agreeing to do all or part of another person's or company's contract.

cottage industry: is the group of businesses that are home-based. This means the product or service is created or provided in a person's home.

nonprofit industry: is the group of organizations that do not have a profit motive. They exist to help society or the planet.

Industrial goods: are materials and equipment purchased by businesses for producing other products.

Consumer goods: are purchased for personal, family, or household use, or for gifts.

Convenience goods: are goods that consumers don't want to spend much time and effort on. They are widely available, easy to find, and not usually expensive.

Staple Goods: are considered by consumers as necessary to everyday life. When people run out of staple goods, they buy more.

Impulse Goods: are not necessities, and people do not always keep a supply of them available. They are things that people see in a store and decide to buy in the moment.

Shopping goods: are products that consumers spend more time deciding on.

Specialty goods: are items that the consumer considers special and luxurious. The consumer is willing to seek out this unique product and probably pay more for it.

unsought: that means it is not something people particularly want, look for, or seek out.

Unsought goods: are things that people sometimes need but don't usually think about buying.

Lesson 2: Business Structures

Vocabulary

Liability: is a legal term for being held accountable and obligated to fulfill a commitment.

Taxpayers: are people who pay taxes. The federal government has an income tax, and many states do, too.

sole proprietorship: has a single business owner.
partnership: has two or more owners.

corporation: is a separate legal business entity. It is legally independent from its owners.

limited liability company (LLC): is a newer form of business entity. It is not a corporation.

C corporation: is the standard, normal type of corporation.

S corporation: is a corporation with special tax status. There are restrictions on the types of companies that can get this status.

Franchising: is a way of turning a company into a parent company with smaller retail outlets owned by independent operators

franchisee: is an independent operator of a franchise business.

franchisor: is the parent company.

Choosing a Structure

How many owners will there be?

The number of owners might affect the type of structure you decide to use.

How important is liability protection?

The type of company you are starting will determine how important liability protection is to you.

How important is tax status?

The tax status of the company will determine how much of the company's income is taxed.

How important are company-funded benefits?

Company-funded employee benefits allow owners and employees to get health insurance, life insurance, retirement plans, and other benefits paid for by the company.

Is the organization providing a charitable or public service?

If the organization provides a charitable or public service, it might qualify for nonprofit status.

How much control do you want?

This includes control over business decisions, the company's direction and future, finances, and access to the money earned by the company

How much complication are you willing to put up with?

Complication includes complexity of setting up the business and operating the business

Franchises

Franchises are especially common in the service, retail, restaurant, and hospitality industries.

 You might want to create a company and turn it into a franchise, so that other people can start up outlets, and you can receive money from each of them.

 Or you might want to be a franchisee and start a new business that is already part of an established franchise.

  EXAMPLE: There are many popular franchises in the U.S., such as:

•         McDonald's®

•         SUBWAY®

•         Dunkin' Donuts®

•         Cold Stone Creamery®

•         7-Eleven®

•         Days Inn®

•         Great Clips®

•         Sylvan Learning®

•         Gymboree®

•         Jiffy Lube®

•         Molly Maid®

•         H&R Block®

•         The UPS Store®

•         RE/MAX®

•         Anytime Fitness®

Lesson 3: Business Organization

Vocabulary

Identify stage: the entrepreneur identifies a business opportunity and decides whether to pursue it.

Plan stage: is when the entrepreneur researches the business idea and prepares a written business plan.

Start stage: the company gets up and running.

Operate stage: is when the business is established and running. The product is being sold and delivered to customers.

Improve stage: happens after the business has been established. In this stage, the company learns about how to do things better or how to satisfy customers more.

Exit stage: is when the entrepreneur gets out of the day-to- day commitment of running the company.

production department: is the part of the company that manufactures the product or provides the service that the company is selling.

finance department: is the part of a company that handles the money. This is also known as accounting.

marketing department: is the part of a company that promotes the products and services.

sales department: devoted to selling the product or service to customers.

customer service: area of a company is the part of the company that interacts with customers after they have purchased the product or service.

human resources (HR) department: handles things like employee hiring, firing, insurance and retirement benefits, payroll, and employee complaints.

information technology (IT) departments: The IT department manages technology and systems, such as a computer network, database, or phone system.

legal department: to handle legal paperwork and lawsuits, and to provide legal advice.

tax department: as a part of the finance or accounting department. This department focuses on tax issues and paperwork.

organizational chart: shows the organization of the company and the relationships between people and departments in the company.

Flat organization: means there are few or no levels of managers in between the top people who run the company and the employees. This type of organization is common in small companies.

Hierarchical organization: means that the company has many different levels of management, and each person in the company reports to one other person. This type of organization is common in large companies.

Matrix organization: means the company is organized by both product and function, so each employee reports to two or more managers.

Market saturation: is when the amount of a product in the market has reached the point where demand and sales are no longer increasing, and this is not likely to change unless the market changes in some way.

Introduction stage: is when the product is first being introduced to the market.

Growth stage: customers are growing more aware of the product and its benefits. Demand increases, and sales increase.

Maturity stage: the product reaches its highest point of demand and sales. The market is getting closer to saturation, so the number of potential new customers is limited, and competition increases.

Saturation and Decline stage: sales stop increasing, so profitability is lowered. As long as there is still demand, competition remains strong, so the main way to achieve profitability is by becoming more efficient, instead of selling more units.

 Organization

• When a company is organized by function, it is grouped into departments based on the type of work the people do. This means each department has its own specialty, such as production, marketing, sales, programming, or accounting.

• When a company has many different products or services, it may be grouped into teams based on the different products or services.

• A company with many different locations and branches may be organized by location.

• If a product is produced through a long process with many stages, the company might be grouped by those stages
  A company might be organized based on the type of customer being served.