Chapter 5 - Business in our Economy

Business in Our Economy
Do Now
• Where do jeans come from?
Four kinds of Businesses
Service Businesses
• A business that grows products or takes raw materials
from nature
• Farmer who grows and sells cotton
• Silver, Copper, or Coal Miners
• King Crab Fishermen in Alaska
• Oil Co. in Texas
• Californian winery that grows their own grapes
• Lumber mills in Washington
• Some products are ready for sale when extracted
– Clams in New England
– Potatoes in Idaho
– Pecans from Georgia
• What does the word Manufacture mean?
– The process of converting raw
materials, components, or parts into finished goods
• MOST products need to be processed before consumers
purchase them
• This changes their form and adds value to the product
• Takes an extractor’s products or raw materials and
changes them into a form that consumers can use
• They “add value” to the raw material
• Some manufacturers are only part of the picture
Added Value
Added Value
Added Value
Added Value
Three types of manufacturers
• Custom manufacturing
• Mass Production
• Processing
Custom Manufacturing
• Building a specific and unique product to meet the needs
of ONE customer
Mass Production
• A large number of identical products are assembled
using a continuous, efficient procedure.
• Changes the form of materials so they can be consumed
or used to manufacture other products
• A business that moves goods from producers
(extractors/manufacturers) to consumers
• Activities Marketers Perform
– Transporting products
– Selling products
– Identify, develop, test new products
– Packaging products
– Storing products
– Promoting products
• Marketers make products available WHEN, WHERE and
at WHAT prices consumers want
• Without marketers you would have to get products
directly from producers
– You’d have to travel to South America for a banana
– You’d have to travel to Florida for an Orange
• Buying products that way is inefficient and expensive
Service Businesses
• A business firm that does things for you instead of
making or marketing products
– Can be business to business
– Or business to person
• Advertising Agency
» Landscaper
» Barber Shop
7 Business Activities
• Whether a large corporation, or a small start up
business, all companies perform seven basic activities
• Get into groups of 3
• Each group will be responsible for ONE business activity
• In your group, read and take notes on your activity
• Understand everything there is to know about it
• You will share your activity with 6 others and take notes
on the activities the others share with you
7 Business Activities
• Generate Ideas
• Raise Capital
• Buy Goods and Services
• Use Human Resources
• Market Goods and Services
• Produce Goods and Services
• Keep Records
Generating Ideas
• A business begins with someone’s idea for a good or
service that will meet consumers’ needs and wants
• Companies must continue to be innovative, developing
new ideas and products to stay relevant in our economy
• Many firms have research and development personnel
who work full time creating, researching, and developing
new ideas that hopefully result in new products and
Raising Capital
• In order to operate, businesses need capital resources
– Start-up money to begin a business
• From the owner, loans, or personal investors
– Capital to grow a business (buy equipment, build
new buildings or acquire a new business)
• Usually through loans or investors (stock)
Buying Goods and Services
• Companies have to buy goods and services both for
resale and for personal use
• Manufacturers purchase raw materials to produce their
• Retailers buy finished products from manufacturers to
sell in their stores
• Retailers buy registers, display cabinets, signs
• Companies buy advertising space, or cleaning services
Using Human Resources
• Businesses need people to operate
• All companies use some sort of system for carrying out
activities that attract, employ, and develop human
– Recruiting or finding workers
– Interviewing and testing applicants
– Selecting employees
– Training and developing new and experienced
– Evaluating job performances
Marketing Goods and Services
• Businesses must produce and sell a needed product or
service to succeed in the marketplace
• 5 P’s
– Product
– Place
– Price
– Promotion
– People
• Businesses use marketing to increase their effectiveness
and the profits they make
Producing Goods and Services
• Goods and services must be produced on time, at a
competitive cost, and at the appropriate quantity and
quality in order for the firm to be successful
Keeping Records
• All business must have some sort of record keeping
• Records of
– Sales, returns, debts, repairs, rent, salaries
• Records are important for
1. Determining whether a business is making or losing
2. Providing information for management decisions
3. Supplying data for government reports (taxes etc.) and
investor reports
• Tweet to me @rdonecker
• An APPROPRIATE acronym for the 7 business activities
that all companies perform
• HW 1-16 chapter 5 pg. 64
• Quiz on Thursday
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