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

2. 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

3. 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.

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

5. 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

6. 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

7. 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

8. 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

9. 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?

10. 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!!

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

12. 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

13. 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

14. 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

15. 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

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

17. 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

18. 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

19. 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)

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

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

22. 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