TYPES OF BUSINESS

ACCORDING TO
ACTIVITIES
 A business is an
organization that converts
inputs or resources such as
material, labor, and
overhead into outputs which
are usually either goods or
services.
THREE MAJOR TYPES OF
BUSINESS
Service companies
Merchandising companies
Manufacturing companies
SERVICE COMPANIES

are firms that generally use their

employees to provide intangible
products or services to
customers.
The primary source of revenues
of service companies is the
performance of services, often
referred to as service revenues.
SERVICE COMPANIES

Advantages
 absence of inventory
 no production facilities

Disadvantages
 Inability to standardize services
 Maintaining human capital

Examples: Accounting and law firms

MERCHANDISING
COMPANIES
This type of business buys finished
or almost finished goods from the
suppliers and resells the same to
customers.
Merchandising companies primarily
earn revenues from the sale of the
goods or merchandise, also knwn as
sales revenue or sales.
MERCHANDISING
COMPANIES
Two types
 retailers - sells good directly to
customers
 wholesalers - sells goods to retailers

* Inventory - goods ready for resale.

MERCHANDISING
COMPANIES
Advantages
 visible products
 less conversion, time, and effort

Disadvantages
 managing inventory

Examples: supermarkets, convenience

store
MANUFACTURING
COMPANIES
or simply manufacturers
firms that create their own
product.
MANUFACTURING
COMPANIES
Advantages
 Quality control
 visible products

Disadvantages
 generally need production facilities
 high conversion costs

 cost of quality control

 managing inventory

Example: Car companies