Chapter 6

Business Ownership and Operations

Section 6.2

Types and Functionsof Businesses

Read to Learn

Differentiate the six types of businesses.

Describe the five functions of business.

Discuss how the five functions of business relate to each other.

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Types of Businesses

Functions ofBusinesses

• Producers• Processors• Manufactures• Intermediaries and

Wholesalers• Retailers and Service

Businesses

• Production and Procurement

• Marketing• Management• Finance and

Accounting

Producers

producera business that gathers raw goods

A producer may be found in industries such as agriculture, mining, fishing, or forestry.

Example – Grows the cotton

Processor

processora business that changes raw materials into more finished products

A processor may, for example, turn crude oil into gasoline.

Example – turns the cotton into fabric

Manufacturers

manufacturera business that makes finished products out of processed goods

Cars, CDs, and computers are examples of goods that are made by a manufacturer.

Example – uses thefabric to make a shirt

Intermediaries and Wholesalers

intermediarya business that moves goods from one business to another

An intermediary buys goods, stores them, and then resells them.

Example – Sells theshirt to Gap

Intermediaries and Wholesalers

wholesalera business that moves good from one business to another

A wholesaler of clothing may buy thousands of jackets from several manufacturers, divide the large quantities into smaller ones, and sell them to retailers.

Retailers and Service Businesses

retailera business that purchases goods from a wholesaler and sells them to consumers, the final buyers of the goods

A record store is an example of a retailer.

Example – Sells the shirt to you

Retailers and Service Businesses

Service businesses perform tasks rather than provide goods.

Service businesses employ about three-quarters of the workforce and are rapidly increasing in numbers.

Functions of Business

The five main functions of business are:

Production and procurement

Marketing

Management

Finance

Accounting

Production and Procurement

productionthe process of creating, expanding, manufacturing, or improving goods and services

Production and procurement are closely related functions of business.

procurementthe buying and reselling of goods and services that have already been produced

Marketing

marketingthe process of planning, pricing, promoting, selling, and distributing ideas, goods, and services

Marketing involves getting consumers to buy a product or service.

To Advertise or Not

Advertising is used to influence consumers to buy one product or service over another.

Management

managementthe process of achieving company goals by planning, organizing, directing, controlling, and evaluating the effective use of resources

Management is an important function of business.

Finance and Accounting

financethe business or art of money management

Finance requires analyzing financial statements to make future decisions.

Finance and Accounting

accountingmaintaining and checking records, handling bills, and preparing financial reports for a business

Accounting requires attention to detail and accuracy.

How the Functions of Business Are Interdependent

The functional areas of a business depend on each other.

Sometimes, the functional areas of a business conflict with each other.

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Example of How Functional Areas Depend on Each Other

A furniture maker’s sales are decreasing.A furniture maker’s sales are decreasing.

The accounting and finance department notice decreasing sales.The accounting and finance department notice decreasing sales.

If the furniture is too highly priced, more efficient procedures will have to be implemented.If the furniture is too highly priced, more efficient procedures will have to be implemented.

A new marketing plan is created.A new marketing plan is created.

The accounting and finance department will monitor the effects of new marketing efforts.The accounting and finance department will monitor the effects of new marketing efforts.

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Example of How Functional Areas Conflict with Each Other

Management wants to increase sales by 20 percent within three years.Management wants to increase sales by 20 percent within three years.

The production department suggests improving quality.The production department suggests improving quality.

The marketing department requests more funds for projects.The marketing department requests more funds for projects.

Accounting says there is not enough money for either plan.Accounting says there is not enough money for either plan.

The final plan involves ideas from all the functions of business.The final plan involves ideas from all the functions of business.

1. What is the difference between a producer and a processor?

A producer gathers or creates raw products. A processor changes raw products into more finished products.

2. Identify the five functions of business.

production and procurement, marketing,management, finance, and accounting

3. Give an example of how the accounting and finance functions can affect a business’s marketing and production processes.

If the financials show little profits, newmarketing plans may be developed and new production procedures may be implemented.

Chapter 6

Business Ownership and Operations

Section 6.2

Types and Functionsof Businesses

End of