5 Economic Decisions and Systems 5-1 Business in the U.S. Economy C H A P T E R 5 Economic Decisions and Systems 5-1 Business in the U.S. Economy 5-2 Forms of Business Ownership 5-3 Organizational Structure for Businesses

5-1 Business in the U.S. Economy Goal 1 Describe the changing status of U.S. employment. Goal 2 Discuss the role of business in the U.S. economy. Goal 3 Describe three major types of businesses.

KEY TERMS contingent worker intermediary service business

THE CHANGING U.S. JOB MARKET Employment data 6% increase from 06-14, an 8.8 mil job loss Baby boomers started retiring in 2011 Mini-boom of young workers  avg. working age will decrease More non-whites in work force (currently 36%) 1960’s: 35% of women worked; doubled by 2000; now makeup almost half work force

THE CHANGING U.S. JOB MARKET (continued) Pressures on Employees Downsizing  people work harder; more hours People need second jobs More education required (not typically a 4 year degree) tech jobs Not enough time with family People forced to take contingent work

Checkpoint  List several groups that will increase as a percentage of the total U.S. workforce in the next decade. Younger workers (16–24 years of age) Asian-, Hispanic- groups Women

BUSINESS AND THE ECONOMY Size of U.S. businesses Roles of business Impact on a community

PERCENT OF BUSINESSES BY EMPLOYEE SIZE

ROLES OF BUSINESS Make and distribute products and services Provide employment Owners/investors profit Pay taxes  money comes back to us in the form of government services

IMPACT ON COMMUNITY New businesses bring new money Pay wages  employees spend $ in town Buy goods/services  businesses spend $ Growing business attracts people from out of town Increased housing, food, and other needs Pay taxes to support community services Larger businesses attract small businesses

BUSINESS ACTIVITIES Generating ideas Raising capital Starting ideas, ideas for improvement Research & development (R&D) departments Raising capital Starting capital, daily operation, expansion Comes from loans, investors, and/or profits Employing and training personnel Hire and train new workers Train for added procedures & responsibilities

BUSINESS ACTIVITIES Buying goods and services Used in manufacturing, resold, operational Services needed to operate (delivery, adv., etc.) Marketing goods and services “Activities directed at providing the goods…” Not just trying to make the sale, but keeping customer happy after the sale Maintaining business records Track performance, tax records, order info, etc.

Checkpoint  What are the basic activities completed by all businesses? Generating ideas Raising capital Employing and training personnel Buying goods and services Marketing goods and services Maintaining business records

TYPES OF BUSINESSES Producers Intermediaries Service businesses Extractor: takes resources from nature Farmer: cultivates land and raises livestock Manufacturer: convert materials into products Intermediaries Wholesalers, retailers, specialized Service businesses Activities consumed immediately Growing fast (60% of U.S. employment)

Checkpoint  How does a manufacturer differ from an extractor? An extractor takes natural resources, such as oil or timber, for direct consumption or for use in developing other products. A manufacturer takes resources supplied by others and converts them into useable products.

5-2 Forms of Business Ownership Goal 1 Understand the three major forms of business ownership. Goal 2 Determine when each form of business ownership is most appropriate. Goal 3 Recognize other specialized business ownership forms.

KEY TERMS proprietorship partnership corporation partnership agreement articles of incorporation franchise

BUSINESS OWNERSHIP Proprietorship – owned by one person Partnership – two or more owners Corporation – many owners, called stockholders

Forms of Ownership U.S. Business Comparison by Form of Ownership Number of Businesses (2006) Total Revenue (Thousands) Percent of All Businesses Percent of Total Revenue Proprietorship 22,075,000 1,278,000,000 71.53% 4.06% Corporation 5,841,000 26,070,000,000 18.93% 82.82% Partnership 2,947,000 4,131,000,000 9.55% 13.12% Total 30,863,000 31,479,000,000 100.00%

Checkpoint  What are the differences between the three main forms of business ownership? Business forms differ in the ways in which decision-making and investments are made and to whom liabilities are distributed.

CHOOSING A FORM OF BUSINESS OWNERSHIP Choosing a proprietorship Easiest to start and end If fails, personal assets will be seized Choosing a partnership More capital to invest, more skills Must have partnership agreement Choosing a corporation

CORPORATE FACTOIDS Popular form of business for large companies A corp. is treated like an individual Need to submit articles of incorporation to state to become incorporated Corporate bylaws dictate operating procedures Board of directors makes major policy and financial decisions; issues stock

Checkpoint  Which form of business ownership is the most complex and difficult to form? The corporation is more complex to begin than other business forms. Forming a corporation requires much more bureaucracy, is more subject to government regulations, requires the organization of a board, and must have clearly defined bylaws.

OTHER FORMS OF OWNERSHIP Specialized partnerships and corporations Limited liability partnership Joint venture S corporation Limited liability company Nonprofit corporation Cooperatives: group of people combining for efficiency Franchises: have permission to operate a business a certain way

Checkpoint  What are the other specialized forms of business ownership? Limited liability partnership Joint venture S corporation Limited liability company (LLC) Nonprofit corporation

5-3 Organizational Structure for Businesses Goal 1 Understand important principles in designing an effective organization. Goal 2 Compare alternative organizational structures for businesses.

KEY TERMS mission statement goal policies procedures organization chart

DESIGNING AN EFFECTIVE BUSINESS ORGANIZATION Setting direction Mission statement vs. goal Policies vs. procedures Principles of effective organization Responsibility, authority, and accountability Unity of command Span of control

Checkpoint  What is the difference between a mission statement and a goal? A mission statement states the purpose of existence for a business and what it hopes to achieve. A goal is a more specific statement of what a business expects to achieve and may be used to measure a business’ success.

TYPES OF ORGANIZATIONAL STRUCTURES Functional organization structure More traditional; top-down oriented Focus on main business functions Problems? Matrix organizational structure Newer type of structure; more horizontal More collaborating to get specific projects done Needs clear direction though

BUSINESS ORGANIZATION CHART

Checkpoint  What problems can result from the use of a functional organizational structure? Employees in a functional organizational structure may tend to lose sight of overall corporate goals. Workers tend to be limited to specific duties and may not see their relationship to the organization as a whole. This can result in lack of interest and motivation over time.