Business Careers Background
The practice of conducting business is as old as civilization itself. As long as people have been exchanging goods and services for payment of some sort, business transactions have been a part of life. Business was, in fact, one of the factors that led to America’s independence, when the early settlers, who wanted to develop their own businesses and industries, rebelled against England’s economic constraints.
Early businesses typically took one of two forms: private ownership or partnership. In a privately owned company, the person who established the business was solely responsible for the services provided, the employment of any workers, and the profits or losses of the business. Most of these early sole proprietorships evolved from a trade or skill the owner possessed. For example, a person skilled in working with iron might open a blacksmith shop, while a person skilled at sewing would open a tailor’s shop.
Partnerships were businesses owned jointly by two or more individuals. In these business ventures, the partners usually pooled their resources to open and run a business, sharing in the profits and risks. In some cases, partners might equally split the financial cost of starting a business. In other cases, one partner might provide the funding, or capital, to start the business while another partner provided the idea, the managerial skills, the labor, or other less tangible assets. Partnerships were especially common in family businesses, with two siblings often starting a business together. Often, the younger family members were trained on the job to follow their parents into the business when they were old enough to take over.
Corporations, today’s common form of business, were developed in the early Middle Ages as a legal alternative to private businesses or partnerships. What made corporations significantly different from sole proprietorships or partnerships was that a corporation was considered its own entity in the business world independent of its controlling members. The first corporations were religious orders, universities, and town governments.
A very important change in the legal structure of businesses took place in England in the 15th century. New limited liability laws were passed, mandating that no individual could be held financially responsible for the debts incurred by a corporation. If a corporation ran into financial trouble, the courts would not pursue the personal earnings of any one member or members of the corporation. The only money that the corporation founders could lose was the money they used to start and run the company.
Between 1600 and the mid-1700s, some corporations took on the added responsibility of maintaining law in territories where they held a monopoly. The East India Company, a British firm in India, and the Hudson’s Bay Company in North America were two such firms that regulated what eventually developed into British colonies. In their applications for incorporation, these companies had to state their goals for the advancement of public welfare.
The American concept of business changed dramatically with the American Revolution, however. The newly independent American colonists rejected the idea of business as a government regulator. Even so, most of the new corporations chartered in the early 1800s were involved in public service of some kind, such as constructionof water routes, banking, and insurance. Eventually this changed, and commerce and manufacturing firms became the predominant applicants for charter in the United States.
With the burgeoning of the industrial revolution in the late 18th century, businesses became more mechanized and more specialized. Earlier companies had typically involved just a few people who together executed all the tasks necessary to manufacture a product or provide a service. As machinery made it possible for businesses to produce more materials faster, businesses expanded in size and scope. More workers were hired to keep up with the increased pace, and as a result, more management personnel were hired to oversee the workers and handle the financial aspects of the company. As they grew, companies began to structure themselves in different ways.
Departments were formed to handle very specific aspects of the business: financial, marketing, personnel, etc. This departmentalization of business responsibilities became a significant feature of the modern corporation. A new way of structuring a business emerged in the late 19th century, when the Singer Corporation first allowed individuals to sell its sewing machines in particular regions. Soon afterward, General Motors started selling cars in the same manner, as did Coca-Cola with its soft drinks. This method of doing business is called franchising.
Fast-food restaurants soon got into the franchising business. Dairy Queen, one of the oldest fast-food franchises, opened in 1940 and began selling franchises in 1944. During the 1950s, franchising became very prevalent. Among the most well-known franchisers to emerge at that time were McDonalds, Dunkin’ Donuts, and Aamco Transmission. McDonalds was one of the first franchisers to establish guidelines for what the stores could look like, what products could be sold, and what types of promotions could be run. In this way, the corporation was able to maintain strict control over the quality of the product line, guaranteeing consistency across the country and building brand recognition and loyalty.
Originally, most franchises were offshoots of goods-producing companies, like Singer sewing machines. Eventually, however, franchising spread into many other kinds of industries. Today, the trend is toward service-industry franchises, such as real estate offices, law offices, insurance agencies, and cleaning services.
Today, the business world is more diverse than ever. In addition to the more traditional ways of structuring companies, factors such as technological improvements, loosening of trade restrictions, and changing demands on the part of employees have created new ways of doing business. One of the most important trends in today’s business is that of doing business remotely, via the Internet. This type of business, called e-commerce, means that businesses can advertise their goods and services, take orders, and receive payment electronically. Businesses conducting e-commerce can often reach a far broader range of clients and customers than they would otherwise, at far less marketing and advertising cost.
Many companies have built e-commerce Web sites and are conducting business online in addition to their more traditional methods of doing business. For example, many manufacturers and merchandisers who have traditionally displayed their goods in actual stores or customer showrooms now also maintain Web sites through which customers can order and pay for items. Some companies have even taken e-commerce one step further and have done away with the actual, physical store altogether. These companies, sometimes called virtual companies, operate only via the Internet. These companies save enormous amounts of money by not having to maintain and staff a store.
Technological advances, along with changing employee expectations, have contributed to another trend in today’s business world—working at home. There are two subtrends in the movement toward working at home: home-based businesses and telecommuting. Home-based businesses are, essentially, very small organizations that conduct all their business from the owner’s home. Many home-based businesses are one- or two-person operations, although some have more employees. They may be goods-producers or service businesses. Property managers, lawyers, public relations and marketing professionals, cleaning services, artists, sign makers, photographers, and many other business people have opted to run their businesses from home. By taking advantage of modern communications technology, these home-based businesses can market their goods across the country and even internationally by building Web sites, taking orders, and shipping their goods to the appropriate destinations.
Telecommuting, another at-home working trend, involves a company’s employees working off-site, in their own homes, rather than at the company’s offices. According to a survey by the International Telework Association and Council, of the 44 million people who worked away from the office in 2004, 54 percent worked from home at least one day per month, and 22 percent worked at home daily or nearly every day. Of those who telecommute from home, 16.5 million are self-employed.
A final important trend is the increasingly global nature of business, as numerous firms take advantage of loosened trade restrictions to expand their operations into overseas markets. Many U.S. firms, for example, have targeted new and emerging markets by expanding into Latin America, India, Russia, China, and other countries. Commonly, a U.S. firm maintains its headquarters in the United States, and has satellite offices or branches in various other countries. Corporations that operate in more than one country at a time are called multinational corporations, and they are becoming increasingly common.
Business Career Field Structure
All businesses can be defined as organizations that provide customers with the goods and services they want. Most businesses attempt to make a profit, that is, to make more money than it takes to run the business. Some businesses, however, attempt only to make enough money to cover their operating expenses. These businesses, which are often social service agencies, hospitals, foundations, or advocacy groups, are called nonprofits or not-for-profits.
There are three main types of businesses in the U.S. economy: manufacturers, merchandisers, and service providers. Manufacturers produce products of all kinds. From skateboards to limousines, from paper plates to soda, from shoelaces to designer suits, virtually everything around you comes from a manufacturer of some sort. Many manufacturers make only small parts, rather than complete, finished products. These manufacturers, often called suppliers, provide their parts to larger manufacturing firms, who use them to construct finished products. For example, an airplane manufacturer purchases the parts needed to make an airplane from a number of other manufacturers, who specialize in making those parts.
Merchandisers are businesses that help move products through a channel of distribution to the consumer or end-user. There are two types of merchandisers: retailers and wholesalers. Wholesalers purchase goods from manufacturers and then sell them to buyers, who then resell them to consumers. Retailers are the businesses that actually sell the goods directly to the consumer. Grocery stores, office supply stores, and mall stores are all examples of retailers.
The third main type of business is the service provider. Service providers are businesses that do not sell an actual product but rather perform a service for a fee. Common examples of service providers are banks, restaurants, dry cleaners, hotels, and hairstylists.
Many U.S. businesses are defined as small businesses, businesses with fewer than 500 employees. According to statistics from the U.S. Small Business Administration, there are approximately 24 million small businesses in the United States. These businesses employ 50 percent of the private workforce and pay more than 44 percent of the total U.S. private payroll. Small businesses are usually started by an individual or group of individuals with an idea for a product or a talent or expertise in a certain area. Typically, these entrepreneurs fund a new business partly with their own savings. They may also get a small business loan from a financial institution, such as a bank or a venture capital group. Venture capital groups are investment groups who invest in new or growing businesses that show promise.
Many of these small businesses are privately owned, which means that an individual or a small group of individuals own and operate the entire company, and are solely responsible for making its decisions. Other companies, especially larger ones, are publicly owned. Publicly owned companies are owned not by one or a few individuals, but by hundreds or thousands of individuals called shareholders. Each shareholder in a public company owns a part, or share, of that company. The amount of the company each shareholder owns is determined by how many shares of the company’s stock he or she owns. Each shareholder gets to cast votes on certain company decisions in proportion to how many shares of stock he or she owns. Publicly held companies are governed by an elected board of directors, who have the power to hire or fire the top-level management of the company. The board of directors has the responsibility of overseeing the company’s operations and its performance in the marketplace.
Frequently, small privately owned companies become publicly owned companies. For this to happen, the company’s owners decide to sell off part of their ownership to interested buyers in an initial public offering, or IPO. In an IPO, buyers purchase shares of the company’s stock. Shares of publicly held companies are bought and sold on the stock market. The increase or decrease in price of a company’s shares of stock is very important to a company’s value.
Although this is primarily a look at how business as a whole is structured, it is important to realize that there are certain structures in place within each individual business as well. There is a wide variety of corporate structures, but almost every successful company’s structure contains four main components: production, marketing, finance, and human resources.
Production includes the conceptualizing, designing, and creating of products and services. Depending upon the size of the company and the type of product or service it produces, production subcategories might include a research and development department, which develops and tests new products; and a quality control department, which monitors products or services for consistency and quality. Production also includes the actual workers and equipment used to produce the product. For example, the factories and factory workers who make automobiles are a part of production.
The second of the four components is marketing. Marketing is the process of distributing and promoting the company’s product to the right people at the right time. For example, a company’s marketing department might determine which magazine advertisements or television commercial time slots would best reach a particular product’s target consumer group. Marketing departments may develop marketing campaigns designed to catch consumers’ attention and interest, like Dairy Management’s “Got Milk?” and Nike’s “Just Do It” campaigns. A company’s marketing department is supported by advertising, public relations, and sales personnel.
The finance department of a company handles the management of money. Financial decisions, such as when to acquire new property, when to borrow capital, and when to raise or lower prices, are typically the responsibility of top-level management. In privately owned companies, the owners often oversee the finances. In larger, publicly held companies, a highly trained finance professional or staff may handle financial decisions.
Human resources management is the branch of a company that deals with employees. Recruiting, hiring, training, evaluating, disciplining, administering benefits packages, and firing employees are all activities that fall into this category. Many smaller companies do not have a specific department to handle human resources. Almost all larger companies do, however.
Business Careers Outlook
Because it is such a broad category, it is difficult to project growth for business as a whole. It is entirely possible, and even common, for one industry to suffer slow growth or decline while another industry thrives. There are certain trends, however, that affect business as a whole.
Almost all businesses are affected by changes in the economy. When the economy is thriving, consumers have more money to spend, which means that they buy more products and services. When the economy suffers a downturn, however, virtually all businesses suffer along with it, as consumers cut back on spending. During economically unsound periods, many companies lay off or terminate employees in order to stay afloat.
The economy is currently experiencing one of these unsound periods. During the early 2000s, there were a number of layoffs and mergers in Internet businesses, airlines and travel, retail, and computer and electronicsindustries. It remains to be seen what long-term effect the terrorist activity and ensuing military action will have on U.S. business. In addition, rising inflation, especially of oil and energy costs, together with recent declines in the housing market suggest a continued risk of an economic decline. Most businesses are being cautious and conservative in spending, hiring, and expansion.
Another trend that will affect many, if not most, businesses is that of increased use of technology. As every industry becomes more automated, workers who have technological skills become ever more important, and technology-related industries will continue to be an area of rapid expansion. It is becoming increasingly difficult for workers in almost every position to survive in the modern business world without basic computer literacy. In addition, as computers continue to cut down on human work, some jobs may be eliminated or combined to reduce costs.
Technology will continue to influence the way business is done in other ways as well. There is likely to be a continuation of the increased use of the Internet as a buying-and-selling medium. Telecommuting and entrepreneurial home-based businesses, too, are expected to continue to increase due to technological advances and the ease of communication between computers.
Recent years have seen some changes in the corporate structure, which may continue. In the last decade, many companies have cut positions in an effort to reduce costs and enhance organizational efficiency. Called downsizing, this trend has the largest effect on middle-management workers, but also creates increased workloads for remaining employees who must take on the duties and responsibilities that were previously handled by workers whose jobs have been eliminated. Another troubling trend for U.S. workers is the practice of outsourcing jobs to other countries, as technology, globalization, and political influence allow corporations to employ workers outside this country for significantly less money than American workers would be paid. This trend has especially affected workers in manufacturing, but increasingly affects those in other businesses as well.
Careers in Business:
- Accountants and Auditors
- Billing Clerks
- Bookkeeping and Accounting Clerks
- Business Managers
- Chief Information Officers
- Collection Workers
- Cost Estimators
- Cultural Advisers
- Customer Service Representatives
- Data Entry Clerks
- Event Planners
- Executive Recruiters
- Forensic Accountants and Auditors
- Internet Consultants
- Internet Executives
- Internet Store Managers and Entrepreneurs
- Internet Transaction Specialists
- Labor Union Business Agents
- Management Analysts and Consultants
- Office Administrators
- Office Clerks
- Public Relations Specialists
- Purchasing Agents
- Receptionists Secretaries
- Temporary Workers
- Typists and Word Processors