STAGES IN THE PRODUCTION PROCESS

The final way to distinguish business organizations A final way to distinguish business organizations is by their stage in the production process Raw goods producer: engages in providing natural resources and raw materials to manufacturers Manufacturer: produces a finished product from the raw materials Wholesaler: A middleman who distributes goods and services from manufacturers to retailers Retailers: Sells the products or services directly to consumers (or to other businesses who, in turn, sell directly to consumers)

A few examples… Raw goods producer: coal and diamond mining, oil drilling, lumber industry Manufacturer: Diamond cutters, oil refinery, carpenters, furniture makers Wholesalers: Diamond merchants and auction, Ashley furniture design, IBM Retailers: Zales Jewelry, Gallery Furniture, Best Buy

Mergers… Horizontal: a combination of two or more firms in the same industry at the same stage in the production process (i.e. two banks, two grocery stores, two department stores) Two firms in same industry (air travel) at same stage (retail, direct to consumers)

Vertical Merger: Two or more firms involved in different stages of the production process of a product or line of products Example: a raw goods producer (lumber company) and a manufacturer (furniture maker) Another example: Manufacturer (clothing) and a retailer (clothing store)

Conglomerations Conglomerations occur between firms that are seemingly unrelated Example: A peanut farm and an automobile dealership Another example: Taco Bell and Shell gas station