Chapter 3.1 Types of Business

​Chapter 3.1
Types of Business

By Lydia Doty-Faulk

objectives

• Identify the four main types of business

• Examine trends in business startups in recent decades

• Explore growth expectations for business

Word Cloud

Describe what a business is to you in 1 to 2 words. Is it large or small? National or local? Retail or wholesale?

Types of Business

In general, businesses are divided into FOUR broad categories, depending on their primary function and the kinds of products they sell.

1. Manufacturing Businesses

2. Wholesaling Businesses

3. Retailing Businesses

4. Service Businesses

A manufacturing business (AKA manufacturer) converts materials into goods suitable for use and then sell those goods to others.

Manufactured products typically fall into two categories: industrial and consumer.

Most use a distributor to store and ship the finished products to other wholesalers or retailers, sop they can just focus on production.

manufacturing business

Products used by other businesses in the production of other goods or services.

• Raw materials like plastic parts, lumber, heavy machinery, steel, paper, chemicals, radiators, cement, cardboard, measuring and testing equipment, etc.

• Usually sold in bulk, involve contracts, and require multiple people in decision-making.

• 3M is involved in multiple industries like worker safety, healthcare, and consumer goods.

• General Electric (GE) is involved in aviation, healthcare and renewable energy worldwide.

Industrial goods

Manufacturing business

Products sold directly to consumers for personal use, satisfying their needs and desires.

• Small manufacturers that produce consumer goods sometimes sell directly to the consumer.

  • Baked goods, silk-screened T-shirts, hand made crafts (jewelry and furniture), etc.

• Large manufactures usually do not sell directly to consumers.

  • Boeing manufactures and sells commercial airplanes, rockets and other aerospace systems to airlines and defense contractors. The consumer might not want this, but Delta Airlines does!

• GE sells to directly to consumers AND other businesses!

  • Kitchenware, laundry appliances, water heaters, and even air filtration systems!

consumer goods

Manufacturing business

Boeing 737-800 series

Other large manufacturers are found in the other industries!

• Automobile: Toyota and Ford turn raw steel, glass, and plastic into vehicles.

• Food and Beverage: Nestlé, Coca-Cola, and Kraft Heinz.

• Household Items: Kimberly-Clark (Kleenex, & Huggies) and Clorox.

• Electronics: Apple (iPhones, Mac), Samsung, Sony, and LG Electronics.

consumer goods, cont.

Manufacturing business

Open Ended

What is one manufacturing good that another business might purchase?

Wholesaling Businesses

• A wholesaling business (AKA wholesaler) buys goods in large quantities, typically from manufacturers, and resells them in smaller batches to retailers.

• Wholesalers (AKA middlemen) provide a link between manufacturers and retailers, who sell goods to consumers.

• They do not typically sell to the public.

• Alibaba, Made-in-China, and IndiaMART.

Think about people who own a clothing business and have to speak to their wholesaler (vendor) via WhatsApp!

Retailing businesses

• A retailing business (AKA retailer) buys goods, often from wholesalers, and resells them directly to consumers.

• Retailing business include in-person and online stores.

• In most states, retailers must have a reseller's permit in order to purchase goods tax-free from wholesalers and collect sales tax from consumers.

• Trade business: Another name for a wholesale or retail business.

wholesale vs. retail

​Wholesale	vs​	​Retail
​B2B	​Target audience	​B2C
​Sells at lowers price per unit	​Pricing	Sells at higher markup price per unit​
​Buys and sells products in bulk	Inventory​	Buys and sells products based on consumer demand​
​Fewer overhead costs	Operational Costs​	Higher overhead costs​

product supply chain

Word Cloud

If retail businesses are stores, shops and boutiques (in-store and online), name a good they may sell to consumers.

Service businesses

• A service business provides a wide range of professional, technical, and everyday services that consumers need and want for a fee.

• Some examples include: engineering, legal, medical, accounting, garbage pick-up, package delivery, dry cleaning , auto-repair, etc.

• Most states and some local governments require licenses for certain professional services.

  • Hairstylists, doctors, dog walkers, auto mechanics, athletic trainers, and daycare providers.

Open Ended

Name one service business that was NOT mentioned on the previous slide.

Special Types of Businesses

• Farming is a special type of business, which is more like manufacturing and retailing.

• Farmers manufacture produce like grain that are used to create new products like bread and flour.

• On the other hand, they can still sell fruits and veggies directly to consumers.

Special Types of Businesses

• Mining is often referred to as an "extraction business" because it requires taking resources from the environment and converts them into a form that can typically be sold to manufacturers.

• Some examples are copper mining, oil drilling, and converting sea salt into table salt.

The U.S.'s dominant industry was manufacturing (based on national income and employees). Wholesale and retail businesses were somewhat important but not service businesses.

1950s and 1960s

Service, wholesale, and retail businesses accounted for the majority of the U.S.'s production.

>1970

Most businesses started in the 2000s were service and trade. However, the U.S. Department of Labor predicted that service businesses are expected to dominate the U.S. economy through 2020.

2000s

it's exit ticket time!