Understanding business can be confusing, especially for young people. There’s so much going on, how can anyone generalize? Easy, let’s start with basics. The outputs are only twofold: goods and services. Business is either selling something you can touch or providing a service. That’s why we have two types of companies, and some that are a mix.
Types of companies
Product companies make and sell hard goods; service companies concentrate on the benefits of labour. Product companies are either involved in natural resources, manufacturing, or distribution. Service companies include law firms, dental clinics, and repair shops. And some do a little of both (like a car dealership).
Service companies deal direct with the end user, while product companies employ a delivery system where multiple companies touch the goods. The traditional flow for retail (e.g., food and clothing) is:
Manufacturer ==> Wholesaler ==> Retailer ==> Consumer (the public)
The delivery system to get products to a business or institution (e.g., schools and hospitals) is:
Manufacturer ==> Distributor ==> Business or Institution
Types of people
In terms of personnel, you’re either a product person, a marketer, or in administration.
Product people work closely with the goods or service. They include lawyers and factory workers, those who design things (like, engineers and architects), and everyone in shipping (warehouse staff, truck drivers). The marketing department holds people who generate potential customer interest and then interface with them. True marketers generate the interest (say, through advertising) and sleazy salespeople close the deal.
Administrators include accountants, secretaries, bankers, clerks, H/R folks, and anyone else who pushes a pencil. These folks never work directly with a product, service, or customer.
Globalization
When globalization moved repetitive manufacturing overseas, those jobs were lost. Jobs associated with the distribution and repair of those products remained at home, and so did the jobs pertaining to custom manufacturing. But the simpler employment of repetitively performing the same duty over and over, moved away.
Globalization also affected the service industry. For example, many computer programming and support positions moved to countries like India. The more difficult task of design (the architecture) stayed behind, but the programming and support components (the bricklaying) got moved.
We’ll talk more about globalization in a future article. For now, understand there are two kinds of companies and globalization affected both.
Breadth of skills
Many businesses (especially smaller ones) suffer from a lack of skills. They could be strong in product or service, but only marginal in the other two. For example, Marty was a great carpenter who opened his own shop, only to find he knew nothing about marketing or admin.
Larger companies also suffer from this condition. Their people are usually only able in one area. So if your president is an administrator, the company may be weak in product vision or sales.
And different types of people fit different kinds of positions. Those attracted to sales typically have strong people skills. They sense the ways of others and know how to effectively communicate. But salespeople are commonly light in terms of technical skills and admin. Product people are usually specialists. They love delving into details but aren’t necessarily good at interacting with others. And administrators are crazy in their own way. So it takes a variety of people with a variety of skills to run a business (and few of us cross over, which is a problem).
Summary
Young people entering commerce should always know who they’re talking to and what type of business they’re in. Then they should develop skills across departments because that’s mostly what’s lacking. Good luck.