Essential Question 1: What is the purpose of business? Standard 1: Purpose of Business Essential Question 1: What is the purpose of business?

Purpose of Business Businesses fulfill the needs and wants of consumers. Consumers use goods and services Customers purchase goods and services Businesses sell goods, services or both to consumers Goods—clothing, cars, computers, CDs Services—hairdresser, dry cleaner, lawn care, babysitting

What motivates people to start a business? Profit motive—desire to make money; see the opportunity to make money in the marketplace. Opportunity to meet wants and needs of consumers. Businesses are investment opportunities for individuals—future income.

Standard 1: Purpose of a Business Essential Question 2: What are the characteristics of for-profit business, non-profit, service and goods-producing business?

Non-Profit Businesses Can earn a profit, but cannot be run for the sole purpose of earning a profit; profits must be used to benefit the purpose of the organization Cannot be run for the financial gain of the members or directors Donors’ Contributions are tax deductible Some well-known Non-Profit Companies: American Red Cross Salvation Army Meals on Wheels Homeless Shelters St. Jude’s Children’s Hospital

For-Profit Businesses Motive is making a profit (earning more revenue than expenses) Produce and distribute goods and services based on consumer demand Examples Apple Computer Sony Domino’s Pizza Abercrombie and Fitch Target

Service Businesses A service is something that is done for the consumer Some service businesses meet needs (medical clinics, law firms) Some service businesses provide wants (taxi companies, Nail Salon) Examples Barber shop Dry Cleaners Car repair shops

Product (or Goods) Businesses A product is a tangible item Some businesses may sell goods to consumers and to other businesses Retailers and distributors are product businesses Examples Old Navy Best Buy Dick’s Sporting Goods

Combination Product and Service Some businesses are both product and service businesses—they sell a product and provide a service. Examples Automobile dealerships Hair salons Appliance stores Can you think of others?

What is the most profitable for-profit company? What is its current value? What is the most profitable non-profit company? THINK ABOUT IT? FIND THE ANSWER!!

Standard 1— Purpose of a Business Essential Question 3: What are the four main business types?

Sole Proprietorship Owned by one person Advantages Examples Easy to start Owner is his/her own boss Owner keeps all profits Examples Floral shops Bookstores Farms Disadvantages Unlimited liability—owner has full responsibility for company’s debts and can lose entire investment as well as personal assets Owner must pay for everything needed for the business Difficult to obtain capital needed to start Owner might lack business skills

Owned by two or more people Partnership Owned by two or more people Advantages Relatively easy to start Easier to obtain capital than in a sole proprietorship Partners share skills and talents Partners share risks Examples Law firms Medical practices Auto Body Repair Disadvantages Partners share unlimited liability—all partners share the responsibility of a bad decision made by one partner (including debts) Partnership agreement is needed to start Partners might not get along well Partners must share profits Partnership must be reorganized if one partner quits

Corporation Owned by many people—stockholders, but treated by law as one person (can own property, pay taxes, make contracts) Advantages Corporations can raise money by selling stock Limited liability—stockholders can only lose what they have invested Corporation continues when stockholders sell stock Corporation can always make money by selling more stock Disadvantages Corporations are taxed on their profits Government closely regulates corporation More difficult to start a corporation Must obtain a corporate charter from the state in which headquarters is located Examples: Nike, IBM, Google

Franchise Franchise is a contractual agreement to sell a company’s products or services in a specific geographic area Advantages Easy to start Franchisee can rely on good name and expertise of the parent company Franchisee can get needed guidance in operating the business from franchisor Disadvantages Some franchisors are strict about how the business is run Franchise is limited in what products or services can be sold Franchise must operate like every other franchise Examples Taco Bell Subway McDonald’s

Standard 1: Purpose of a Business Essential Question 4: What are the six functions of every business?

Accounting and Finance Accounting—recording and reporting financial activity and transactions Examples Paying bills Collecting money from customers Paying taxes Preparing employee payroll checks Reconciling bank statements Investing cash Purchasing inventory

Management Makes sure that the entire organization meets its goals and obligations Effectively works with people in the organization Uses available resources to accomplish the organizations’ goals

Marketing Satisfies the needs and wants of consumers through exchange Based on four “P’s” Product Price (establishing the price of the product) Placement (placing the product in attractive and convenient sales locations) Promotion (advertising)

Information Technology Uses technology to share knowledge, facts, and data to others (co-workers, customers, and suppliers) Examples: Maintains e-mail accounts Maintains software applications Maintains processing systems Maintains hardware for all technology used

Operations Considered the “back office” Involves behind the scenes paperwork required to complete all transactions Found in both the service and the manufacturing sector

Human Resources Manage “people” relations within the company Help workers develop the skills and knowledge needed to be successful on the job Responsible for hiring and firing of employees Selects employee benefits and enrolls all employees in the benefits (insurance, retirement, etc.) Help employees pursue educational opportunities