Chapter 5: Business in the U.S. Economy

Goals: 1. Describe the changing status of employment in the

U.S.2. Discuss the role of businesses in the U.S. economy3. Describe three types of businesses

The Changing U.S. Job Market Decline of traditional manufacturing and

agricultural jobs .com boom Baby Boomers- Born between 1946 and

1964 Retiring in 2010’s Asian, Hispanics, and African Americans will

gain more jobs in the next ten years

Job Market Statistics

Total employment grew by nearly 17 percent from ’92 to ’02

Projected to increase 15 percent by 2012 What will the economy do to this projected

increase? By 2012 nearly half (48%) of the workforce is

projected to be women

Economic Affects on Businesses Downsizing

Has it affected your family? Streamlining Contingent Worker = One who has no explicit

or implicit contract for long term employment (5% of the present workforce)

Business and the Economy

Nearly 18 million businesses have no employees other than the owner

What do employ wages do for the economy? What do profits earned by businesses do for

the economy? Most important role of businesses is to make

and distribute products and services needed by consumers, government, and other businesses

Business Activities

1. Generating Ideas: Ideas must always be developing

2. Raising Capital: What does Nike use their capital for

3. Employing and Training Personnel: What are human resources?

4 Buying Goods and Services: What goods and services does Nike have to buy?

Business Activities cont..

5. Marketing Goods and Services: How does Nike market their products?

6. Maintain Business Records: What kind of jobs would be available in this area?

Nike Case Study: 1950-Present

Nike 1950-1979

1950- Summarize who, what, and why. How did they Generate Ideas?

1960’s- Summarize who and what happened. How did they raise capital? Who did they hire and train?

1970’s- More ideas and marketing. Where did the waffle design come from? Who was Steve Prefontaine? Why would they choose him? What goods and services did they have to buy?

Nike Case Study cont…

1980’s- Summarize decade, what did they miscalculate? how did they re-market their product? What campaigns did they use? Why would maintaining business records be important at this time for Nike?

1990’s- What did they build in Oregon? Who was the new face of their company? What other areas did they venture into?

2000’s- What new products did they develop? What is their new integrated approach? What is the future for Nike?

Types of Businesses

Producers: Create the products and services used by individuals and other businesses. Use Resources Extractor- A business that takes resources from

nature to develop products Coal miners, farmers, etc…

Types of Businesses Cont…

Intermediaries: Businesses involved in selling goods and services of producers to consumers and other businesses.

-retailers and wholesalers-Examples?

Service Businesses: Offer something intangible to consumers.

-What is tangible and intangible?-fastest growing part of the economy- >60% in current economy

Forms of Business Ownership Proprietorship: Owned and run by one

person Total control Easy to get started with few legal and capital

requirements Owner receives all profits However, incurs all debts as well

Business Ownership cont…

Partnership: Business owned and operated by two or more people who have entered in a written agreement. Similar to proprietorship BOTH owners are responsible for key business

decisions Each partner is liable. Amount of liability depends

on contract

Business Ownership cont…

Corporation: Separate legal entity formed by documents filed with your state. Owned by shareholder(s) and managed by a

Board of Directors (BOD) Difficult to form More capital and legal requirements Corporations protect the liability of stockholders to

only the amount that the person has invested

Choosing a Form of Business Ownership Proprietorship:

Components: Need to obtain government licenses and permits Easy to start Must register business name

Advantages = Total control of business, Tax advantages (income taxed as personal income), huge rewards

Disadvantages= Owner and business are seen as one by government (taxes), debts are responsibility of owner, giant risk

Partnership

Components Can be formed verbally, but written agreement is better

(partnership agreement) Partnership Agreement= business name, investments,

ownership and profit percentage entitlements, authority and responsibility of each

Advantages: More start-up capital, More expertise, good for persons who share a common idea

Disadvantages: No protection for personal assets of each partner, if one person leaves or dies the partnership is usually ended

Corporation

Components: more difficult to form than other two, most common form of business, subject to many laws and regulations, articles of incorporation, corporate bylaws, stockholders Advantages: Treated as an “individual” by the

government, limited liability, debt does not matter, hands-off approach to ownership (stockholders)

Disadvantages: Focused decision making, many more records and laws, must pay corporate taxes on profits earned, investors also pay taxes

Other Forms of Ownership

Limited Liability Partnership: Identifies some investors who cannot lose more than the amount of their investment, but they are not allowed to participate in day-to-day management of the business.

Joint Venture: Two or more businesses operate for a limited time and for a specific project (a type of partnership)

Other Forms of Ownership cont… Limited Liability Company: Provides liability

protection for owners. Non-Profit Corporation: Group of people who

join together to perform a function that benefits the public.

Free from income tax Receive grants and donations Must be government approved

Cooperatives

Owned by members, serves their needs, and managed by their interest

Members form a consumer cooperative Purchase goods and services cheaper as a group Large numbers form greater bargaining power than

individual businesses MFA

Franchises

Written contract granting permission to operate a business to sell products and services in a set way. Franchiser vs. Franchisee Expands a business using the investments of

others Franchiser still maintains control over the name,

product quality, and operating procedures Monthly or Annual fee paid to franchiser in return

for operating assistance Jiffy Lube, Century 21, McDonalds

Mission Statements

Provides a written direction for a business Short and specific statement for the reason(s) a

business exists and what it wants to achieve Samples are:

Bristol-Myers Squibb Company

Slogan/Motto: extending and enhancing human life

Mission Statement:

Our company's mission is to extend and enhance human life by providing the highest-quality pharmaceutical and related health care products.

More sample mission statementsBurlington Northern Sante Fe CompanyMission Statement: Our vision is to realize the tremendous potential of The

Burlington ' expectations Northern and Santa Fe Railway by providing transportation services that consistently meet our customers

Ford Motor CompanyMission Statement:? We are a global family with a proud heritage

passionately committed to providing personal mobility for people around the world.

Harley-Davidson, IncMission Statement: We fulfill dreams through the experience of motorcycling,

by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.

Business’ Organizational Structure Organizational Chart: A diagram that show

the structure of an organization, classifications of work and jobs, and the relationship among the classifications Hierarchy of order and control P. 117 of book

Summary Questions

What are baby boomers? When were they born? What is the most important role of businesses in our

economy? What are the 6 steps of Business Activities? What are the 3 types of businesses? What are the 3 main forms of business ownership? What is the easiest business to form? What is the role of stockholders in a corporation? What are the advantages of a partnership?

Summary Questions

How do cooperatives get cheaper prices for goods and services?

What is the difference between a franshiser and a franchisee?

What are the advantages and disadvantages of franchising?

How are business organizations structured? What are the key components of a mission

statement?

Written Assignment Number Four Due on Monday, February 9th