Question

Just to get us started on this discussion, can anyone discuss the differences between a manufacturing company versus a merchandising company? And beyond that, how is a service company different from both of these? Also, if you can think of any examples of any one of these types of companies that would be good to add to your posting.

Answer 1

Below are some differences which differentiates these 3 Type of companies :

Manufacturing Company	Merchandising Company	Service Company
A Manufacturing company Produces or Manufactures a product	In Contrast Merchandising company does not produce or manufacture a product, they just purchase products from manufacturers and sell them	Service Company niether produce a product nor sells it they just provide services to ultimate consumers
A Manufacturing company normally known as Manufacturers	Merchandising companies normally known as Wholesalers or Retailers. Wholesalers are those who normally sells products to retailers and not the ultimate costomer. Retailers are those who sells products directly to ultimate customer.	A Service company normally known as Service providers
Manufacturing Company maintains three type of Inventories : 1st: Raw Materials, 2nd: Work in Progress, 3rd: Finished Goods	Merchandising companies maintains only Finished goods Inventory	Service Company does not maintain any type of Product related Inventory
Manufacturing company have Cost of Goods sold in Income statement which includes cost of raw material purchased, cost of Labour incurred on material and Cost of Expenses and overhead incurred to turn raw material into finished goods.	Merchandising Company also have Cost of Goods sold in income statement but that comprises onny purchase cost of products and some selling and distribution expenses.	Service Company does not have Cost of Goods sold in Income statement, rather they have Revenue from Services provided and related expenses in Income Statement
Manufacturing Company earns profit by selling the product at the price higher than total cost incurred to produce the product	Merchandising Company earns profits by adding a mark up on the purchase price of the products	Service Company Sells Time, Skill and Knowledge to customers, so Service Company Earns revenue from customers that is against the services provided by them.
Manufacturing company holds a Large amount of fixed assets as Manufacturing plants and machinary	In Contrast Merchandising company holds some wholesale and retail stores as fixed asset	Service Company holds Fixed assets in forms of Office Buildings and Furnitures where they normally provide there services to customers.
Manufacturing Company uses Labour force to produce a product	In Contrast Merchandising company uses Labour force to sell its products	Service Company uses Skilled Persons who have knowledge in some specific field
Examples : Apple Inc. (Produces Iphones),	Examples : Amazon (They purchase Iphones from Apple Inc. and sell them to Customer.	Example : Accounting Firms (They provide services of Accounting to their customers)