TYPES OF

BUSINESS
ACCORDING TO
ACTIVITIES
(WEEK 5)

OCTOBER 4,2020
 INTRODUCTION

A business is an In this chapter, we will

organization that discuss the different
converts inputs or types of business
resources such as according to activities,
material, labor, and their business
overhead into outputs requirements, and their
which are usually either advantages and
goods or services. disadvantages.
THREE MAJOR TYPES OF BUSINESS

SERVICE COMPANIES MERCHANDISING MANUFACTURING

COMPANIES COMPANIES
 Service companies are firms that
SERVICE generally use their employees to
C O M PA N I E S provide intangible products or
services to customers.
These services include professional
skills, advice, expertise, and other
related products.
(e.g. accounting firms, law firms,
trucking services, entertainment, etc.)
 Pays
O P E R AT I N G Cash on employees
hand and other
CYCLE OF expenses
SERVICE
C O M PA N I E S Receives
payment Performs
from services
customers
MERCHANDISING
C O M PA N I E S
• Merchandising companies sell tangible
products. This type of business buys
finished or almost finished goods from
their suppliers and resell the same to
customers.
• Primarily earn revenues from the sale of the
goods of merchandise, also known as sales
revenue or sales.
 TWO TYPES OF
M E R C H A N D I S I N G C O M PA N I E S

Wholesaler is a
merchandising company that Retailer is a merchandising
company that sells goods
sells goods to retailers. directly to customers.
 M A N U FAC T U R I N G
C O M PA N I E S

Manufacturing companies or simply

manufacturers, buy materials, convert
them into products, and then sell the
products to other companies or to
the final consumers.
O P E R AT I N G
CYCLE OF
MANUFAC -
TURING
CO M PA N I E S
A D VA N TA G E S & D I S A D VA N TA G E S
TYPE ADVANTAGES
Service • Absence of inventory
• No production facilities
Merchandising • Visible products
• Less conversion, time, and
effort
Manufacturing • Quality control
• Visible products
DISADVANTAGES
• Inability to standardize
services
• Maintaining human capital
• Managing inventory
• Generally needs production
facilities
• High conversion costs
• Cost of quality control
• Managing inventory
 TYPES OF
BUSINESS
ACCORDING TO
ACTIVITIES
(WEEK 5)

OCTOBER 4,2020