Business Principles

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 commercial. Industrial businesses produce goods used by other businesses or organizations 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 buildings, 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 manufacture 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 business 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 employed 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 documents prepared by authors. The automotive industry includes all manufacturers of automobiles, trucks, and other vehicles as well as the producers of related automotive 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 provided by local, state, and federal governments.