Page 18 - Business Principles and Management

Chapter 1 • Characteristics of Business

The price that Sara Inglish pays for Paul’s computer game will be based in
large part on supply and demand for the game. Supply of a product refers to the
number of similar products that will be offered for sale at a particular time and
at a particular price. If there are many similar products available, the price is
likely to be lower. Demand, on the other hand, refers to the number of similar
products that will be bought at a given time at a given price. If there are many
people looking to buy the same computer game, the price is likely to be higher.

CHECKPOINT
What is the difference between a manufacturing firm and
a service firm?

Types of Businesses

This book will focus on the various types of businesses and business activities
and what it takes to manage a business successfully. But before beginning that
study in detail, let’s take a look at the general nature of business.
Generally, there are two major kinds of businesses—industrial and commer-
cial. Industrial businesses produce goods used by other businesses or organiza-
tions to make things. Companies that mine coal or ore and that extract oil and
gas from the earth provide resources for use by other companies and consumers.
They are important industrial businesses. So are companies that construct build-
ings, build bridges, manufacture airplanes, or assemble televisions. Farmers and
other agricultural producers are considered industrial businesses because they
grow crops and raise livestock needed for the food we eat and used in the manu-
facture of a variety of products we use every day.
Unlike industrial businesses, commercial businesses are engaged in marketing
(wholesalers and retailers), in finance (banks and investment companies), and in
providing services (medical offices, fitness centers, and hotels) as their primary busi-
ness activities. Service businesses are a type of commercial business that use
mostly labor to offer mostly intangible products to satisfy consumer needs. For
example, lawn mowing is a service. Figure 1-1 shows the number of people em-
ployed in selected types of production and commercial industries including services.
Industry is a word often used to refer to all businesses within a category doing
similar work. For example, the publishing industry includes any business that deals
with producing and selling books, magazines, newspapers, and other printed docu-
ments prepared by authors. The automotive industry includes all manufacturers of
automobiles, trucks, and other vehicles as well as the producers of related automo-
tive products. Even government can be considered an industry, because it provides
fire and police protection, libraries and schools, and many other services required
by the citizens the government serves. This industry would include all services pro-
vided by local, state, and federal governments.

CHECKPOINT

List an example of an industrial business, a commercial business,
and a service business.

5