BUSINESS ORGANIZATION CHAPTER 5 BUSINESS ORGANIZATION

BUSINESS IN THE U.S. ECONOMY SECTION 5-1 BUSINESS IN THE U.S. ECONOMY

5-1 BUSINESS IN THE U.S. ECONOMY The Changing U.S. Job Market Employment Data 2008: 138 million people held non-farm jobs 2009: Recession resulted in 775,000 jobs lost 2011: Wave of retirement from baby boomers 2020: Average age of U.S. worker will be 50 2018: Asian, Hispanic, African-American workers will grow roughly 4% 2018: 47% of all jobs will be held by women

5-1 BUSINESS IN THE U.S. ECONOMY The Changing U.S. Job Market Pressures on Employees Economic stress has led to downsizing Companies streamlined production and implemented other cost-cutting procedures Businesses required employees to take on new tasks and work extra hours Full-time jobs were reduced to part-time Wage rates decreased Increased use of contingent workers – no explicit or implicit contract for long-term employment

5-1 BUSINESS IN THE U.S. ECONOMY Business and the Economy Size of U.S. Businesses In 2009, all businesses worldwide produced more than $70 TRILLION of goods and services The U.S. is responsible for 20% of that production

5-1 BUSINESS IN THE U.S. ECONOMY Business and the Economy Size of U.S. Businesses 19.5 million businesses have no employees other than the owner 6.5 million businesses employ fewer than 20 people 182,000 businesses employ 100 or more workers 890 businesses employ more that 10,000 workers

5-1 BUSINESS IN THE U.S. ECONOMY Business and the Economy Role of Business Make and distribute products and services needed by consumers, government and other businesses Provide employment Pay taxes (local, state, and federal)

5-1 BUSINESS IN THE U.S. ECONOMY Business and the Economy Impact on a Community Pays wages to workers Buys goods and services from other businesses Successful businesses contribute to more jobs, more income, and a thriving economy

5-1 BUSINESS IN THE U.S. ECONOMY Business and the Economy Business Activities Generating Ideas A business begins with an idea for a product or service Businesses must improve and develop new ideas to remain competitive Research & Development teams discover new product, service and operating ideas Raising Capital Businesses need financial resources to operate Capital is obtained through loans, investors and reinvested profits

5-1 BUSINESS IN THE U.S. ECONOMY Business and the Economy Business Activities Employing and Training Personal Businesses need human resources They pay wages, benefits, and employment taxes Employees receive training in order to preform their jobs correctly Buying Good & Services Businesses use purchases for their own operations Other purchases are resold

5-1 BUSINESS IN THE U.S. ECONOMY Business and the Economy Business Activities Marketing Goods & Services Activities directed at providing the goods and services wanted by customers They must satisfy customers who usually can choose to buy from competitors Maintain Business Records Owners use records to track performance and make decisions Customers need information about orders and payments Businesses are required by government to keep records and submit information

5-1 BUSINESS IN THE U.S. ECONOMY Types of Businesses Producers Create the products and services used by individuals and other businesses Extractors – pump oil, mine coal, cut timber Farmers – cultivate land and use other natural resources to grow crops and raise livestock Manufacturers - get supplies from other producers and convert them into products

5-1 BUSINESS IN THE U.S. ECONOMY Types of Businesses Intermediaries Businesses involved in selling the goods and services of producers to consumers and other businesses The most common type of intermediaries are wholesalers and retailers

5-1 BUSINESS IN THE U.S. ECONOMY Types of Businesses Service Businesses Carries out activities that are consumed by its customers They offer something intangible (no physical qualities) Fastest growing part of the U.S. economy More than 60% of all U.S. employment is in service-producing businesses

Forms of Business Ownership SECTION 5-2 Forms of Business Ownership

5-2 FORMS OF BUSINESS OWNERSHIP Proprietorship A business owned and run by one person It is the easiest form of business to start and end 71.53% of all business (2012, U.S. Census)

5-2 FORMS OF BUSINESS OWNERSHIP Partnership A business owned and controlled by two or more people who have entered into an agreement Each partner is liable for all of the debts 9.55% of all business (2012, U.S. Census)

5-2 FORMS OF BUSINESS OWNERSHIP Corporation A separate legal entity Owned by one or more shareholders and managed by a board of directors 18.93% of all business (2012, U.S. Census)

5-2 FORMS OF BUSINESS OWNERSHIP Other Forms Ownership Specialized Partnerships and Corporations Limited liability partnership – investors who cannot lose more than the amount of their investment, but they are not allowed to participate in the day-to-day management of the business. Joint venture – A business organized by two or more other businesses for a limited time for a specific project. S Corporation – all income is passed through to the owners based on their investment and is taxed on their individual tax return.

5-2 FORMS OF BUSINESS OWNERSHIP Other Forms Ownership Specialized Partnerships and Corporations Limited liability company – Provides liability protection for owners. It has a simpler set of organizing and operations requirements than a corporation. Nonprofit corporation – a group of people who join to do some activity that benefits the community.

5-2 FORMS OF BUSINESS OWNERSHIP Other Forms Ownership Cooperatives and Franchises Cooperative – Owned by its members, serves their needs, and is managed in their interest. Members form a consumer cooperative so that they can purchase goods and services more cheaply as a group. Franchise – a written contract granting permission to operate a business to sell products and services in a set way. Franchiser – the company that owns the product or service and grants the rights to another business Franchisee – The company purchasing the rights to run the business

Organizational Structure for Business SECTION 5-3 Organizational Structure for Business

5-3 ORGANIZATIONAL STRUCTURE FOR BUSINESS Designing an Effective Business Organization Setting Direction Mission Statement – A short specific, written statement of the reason a business exists and what it wants to achieve. Goal – A precise statement of results the business expects to achieve. Policies – Guidelines used in making consistent decisions. Procedures – Descriptions of the way work is to be done.

5-3 ORGANIZATIONAL STRUCTURE FOR BUSINESS Designing an Effective Business Organization Principles of Effective Organization Responsibility– The obligation to complete specific work Authority – The right to make decisions about how responsibilities should be accomplished Accountability – Taking responsibility for the results achieved

5-3 ORGANIZATIONAL STRUCTURE FOR BUSINESS Designing an Effective Business Organization Principles of Effective Organization Unity of Command– A clear reporting relationship for all staff of a business Span of Control – The number of employees who are assigned to a particular work task and manager

5-3 ORGANIZATIONAL STRUCTURE FOR BUSINESS Types of Organizational Structures Organizational Chart – A diagram that shows the structure of an organization, classification of work and jobs, and the relationship among those classifications.

Business Organization Chart

5-3 ORGANIZATIONAL STRUCTURE FOR BUSINESS Types of Organizational Structures Functional Organization Structure – Work is arranged within main business functions such as production, operations, marketing, and human resources. People work with others who have the same skills People become more focused on their specific function that on the success of the whole business

Functional Organization Structure

5-3 ORGANIZATIONAL STRUCTURE FOR BUSINESS Types of Organizational Structures Matrix Organization Structure – Work is structured around specific projects, products, or customer groups. Can be interesting and motivating as employees work with many different people Can be confusing and inefficient without effective leadership and communication

Matrix Organizational Chart