3 Types Of Business Operations | 4 mins read

The 3 Types of Business Operations

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Hanh Truong

By Hanh Truong

Introduction to 3 Types of Business Operations

In order for an organization to thrive and grow exponentially, its leaders need to establish what their business operations are. This entails the daily activities that help the company run smoothly and generate profit. For example, business operations for a restaurant would be restocking inventory and serving customers. Determining the business management of a company will also help owners achieve their objectives and stay on track.

3 Types of Business Operations

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There are different types of business operations that organizations generally adhere to. Owners of organizations need to determine which operation they align to, to ensure they are sticking to their goals and values. In turn, they will effectively maximize their sales, profit margins, and customer satisfaction. Identifying the right business operations will also help a company's operational strategy and productivity.

For instance, a small business in the service sector can focus their investments towards consumer-facing marketing campaigns, rather than warehouse management since they do not have bulk inventory to stock. In this way, the entrepreneur will cut down on unnecessary spending and boost their profitability.

The 3 types of business operations that organizations should be aware of include the following.

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1. Service Business

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Service businesses are organizations that sell intangible products, which are goods that cannot be physically touched or seen by customers. These items include insurance, coaching, cleaning services, and accounting. Professionals that provide consulting and legal advice are also considered types of service businesses. The following are other examples of companies in the service business industry.

  • Airlines
  • Banking
  • Movie theaters
  • Event planning
  • Repair or maintenance specialists
  • Bookkeeping
  • Pet sitting or grooming services
  • Medical care
  • Financial services

Since service companies provide intangible goods, entrepreneurs in this sector do not have to invest in large-scale inventory. Since there is less of a need to maintain a warehouse and stock, business owners will have flexibility in their budgets. This means the company can focus on marketing campaigns, social media strategies, and in-house layouts.

2. Merchandising Business

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On the other hand, merchandising businesses sell tangible goods to their customer base. Many people will typically patronize a merchandising establishment to buy clothes, electronics, and groceries. Other common companies in this type of business operation include the following.

  • Retail stores
  • Car dealerships
  • Grocery stores and supermarkets
  • Electronics store
  • Pet store
  • Fast food restaurants
  • Coffee shops
  • Hardware store

Unlike service businesses, a merchandising store must hold inventory and ensure they have optimal levels of stock every day to provide for their customers. Therefore, entrepreneurs in this sector must create comprehensive budgets and track their expense accounts. Additionally, to make sure profit margins are maximized, business owners must regularly assess their gains, losses, and net revenue.

However, a key similarity between merchandising and service businesses is that they both hire employees to operate their establishments. They also serve customers directly by engaging with them in stores or online and by completing transactions in person. Additionally, they invest in equipment, such as chairs, shelves, and carts, to efficiently function.

3. Manufacturing Business

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Manufacturing businesses transform raw materials into end products that people can use. These establishments also need human labor and machinery to assemble and create goods. Modern manufacturers will invest in advanced systems and technology, as well, to streamline and automate processes. The most common types of manufacturing businesses create products such as textile, smartphones, canned food, and automobiles. The following are the most popular companies in the manufacturing sector.

  • Apple
  • Pfizer
  • Nestle
  • Apple
  • Volkswagen
  • PepsiCo
  • Unilever
  • Procter and Gamble
  • Samsung

Small business manufacturers are becoming increasingly popular in today's market. For example, companies that handmake jewelry from beads or make canned fruits are considered manufacturing business operators. Organizations in this sector are similar to merchandising and service industries, in that they sell goods to people.

However, the key differentiating factor of manufacturing operations is that these establishments use raw materials to create an entirely new product. On the other hand, a merchandiser would purchase an item and sell it as it is. For instance, a cell phone manufacturer will buy metal, glass, and screws to create a phone. A cell phone merchandiser will buy a phone from a supplier and sell it to their customers.

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Key Takeaways to 3 Types of Business Operations

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  • Business operations refer to all the daily activities a company must engage in to maximize profit margins and maintain value.
  • Understanding which business operation an organization aligns to will help with goal execution and business plan strategizing.
  • The 3 main types of business management include service, merchandising, and manufacturing.
  • Although all 3 forms of business operations entail selling goods to people, they all have different key features.

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