1. BUSINESS ORGANIZATION
CHAPTER 5
BUSINESS ORGANIZATION

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

3. 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

4. 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. 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

6. 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

7. 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)

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

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

16. 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)

17. 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)

18. 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)

19. 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.

20. 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.

21. 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

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

23. 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.

24. 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

25. 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

26. 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.

27. Business Organization Chart

28. 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

29. Functional Organization Structure

30. 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

31. Matrix Organizational Chart