Description of Business Firms

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In terms of what they produce for society, business firms can be divided into 2 (two) main types of the firms.

1. Those that goods : merchandising firms and manufacturing firms  
2. Those that produce services : service companies

a. 1. Merchandising firms

1. A Merchandising firm buys goods which are already in salable form and sell them to their customers to make profit.
2. For example: grocery stores (Carrefour, Alfamart, Hero, etc)

 a. 2. Manufacturing firms

1. A manufacturing company obtains raw materials and supplies of various kinds and then turns these raw materials into a different finished product
2. For example: cigarette enterprise, like Gudang Garam, Ltd, Co.

 b. Service Firms

1. The service firms produce services and sell them to their customers to make a profit.
2. They don’t produce tangible goods
3. For example: hotel, travel bureau, etc

 F. The Form of Company Organization
Most businesses can be classified by their legal form of organization into 3 (three) group:

1. The proprietorship
2. The partnership  
3. The corporation

 a. The proprietorship

1. It is the simplest kind of organization and usually the smallest
2. This is a business organization with just one owner
3. It is not difficult and not necessary too much money to manage them
4. It has limited sources of fund. It comes from an individual owner

 b. The partnership

1. It is a form of organization that is only slightly more complex than a proprietorship
2. The owners – the partners – are simply two or more individuals who combine their efforts to meet common goals
3. The sources of fund in this company come from some owners

 c. The corporation

Get Money

1. The formers of the corporation have to attend a government regulation
2. The corporation issues stock certificates which are written evidence of the owners’ (stockholders’) investment
3. This company can has a large number of investors – owners to invest their money in the corporation and thereby raise capital for it