We have already learned that businesses take scarce resources (factors of production) and use them in the production process to produce the goods and provide the services that are in high-demand on the market. Without the business activity of many kinds there would be no products and services available for purchase after all.
Here is another classification of businesses. This time, instead of looking at sectors of the economy, we are going to consider grouping various businesses based on the type of product which an enterprise produces. Specifically, we will be considering four different types of business organizations providing: consumer goods, consumer services, producer goods or producer services.
A good is something that you can use or consume like: food, CDs books, cars or clothes. You buy a good with the idea that you will use it, either just once or over and over again.
A service is something that someone else does for you like: a hairdresser giving you a haircut, a chef fixing you dinner or even a teacher teaching you about business management. You do not really get something solid, like a book or a CD, but you do get ‘something done‘ for you that you need or want.
Type of product: Consumer goods
Consumer goods are products sold to the general public, individual customers, rather than to other businesses or governments. They can be further split into two types of consumer goods including durable consumer goods and non-durable consumer goods:
1. Durable consumer goods – Durable goods last for a long time and can be used repeatedly, for example business books, flat-screen TVs, sports cars, designer furniture, gaming computers or leather armchairs.
2. Non-durable consumer goods – Non-durable goods need to be consumed fast right after their purchase. They cannot last for a long time and cannot be reused as they do not last long, for example fresh fruits and vegetables, fruity smoothies, herbal medicine, daily newspapers or weekly magazines.
Type of product: Consumer services
Consumer services are intangible products provided by businesses to the general public, individual customers, rather than to other businesses or governments.
They are not tangible in nature, but their results, outcomes, are tangible. Meaning, when taking a bus ride, we can see and touch the bus which transports us from Point A to Point B. But, we are not buying that particular bus. We are using a service which that bus (and the bus driver) provides. And, this service of ‘being moved’ from one place to another cannot be touched.
Other examples of consumer services include personal banking, investments and financial services, private education, Michelin-star dining, healthcare, etc.
Type of product: Producer goods
Producer goods are physical products that are bought by other businesses or governments to help them produce other, their own, goods, or help provide services.
Examples of producer goods include commercial buildings, computers, machines, tools, delivery trucks and minivans, specialist equipment for putting together the assembly line, etc. Producer goods can also be divided into durable producer goods and non-durable producer goods:
1. Durable producer goods – Durable goods last for a long time and can be used repeatedly, for example a desk and an armchair to furnish the CEOs office, delivery vehicle or security cameras.
2. Non-durable producer goods – Non-durable goods need to be consumed fast right after their purchase. They cannot last for a long time and cannot be reused as they do not last long, for example email databases of potential customers, industry monthly magazines, fresh fruits and snacks for weekly board meetings.
Type of product: Producer services
Producer services are intangible products provided by businesses to other businesses or governments to help them run their businesses on daily basis.
The producer services are not tangible, but their results are. Examples of producer services include legal services, accounting services, security guards, transportation services, corporate banking, etc.
