Business in Our Economy

10/23/14

Do Now

• Where do jeans come from?

Four kinds of Businesses

• Extractors• Manufacturers• Marketers• Service Businesses

Extractors

• 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

Extractors

• Some products are ready for sale when extracted

– Clams in New England

– Potatoes in Idaho

– Pecans from Georgia

Manufacture

• 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

Manufacturers

• 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.

Processing

• Changes the form of materials so they can be consumed or used to manufacture other products

Marketers

• 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

• 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

VS

• Many firms have research and development personnel who work full time creating, researching, and developing new ideas that hopefully result in new products and services

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 products

• 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 resources

– Recruiting or finding workers

– Interviewing and testing applicants

– Selecting employees

– Training and developing new and experienced workers

– 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 system

• Records of

– Sales, returns, debts, repairs, rent, salaries

• Records are important for

1. Determining whether a business is making or losing money

2. Providing information for management decisions

3. Supplying data for government reports (taxes etc.) and investor reports

Exit icket

• 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