The Free Enterprise System encourages individuals to start and operate their own businesses with...

The Free Enterprise System

The Free Enterprise System encourages individuals to start and operate their own businesses with little to no government involvement


Entrepreneur - a person who organizes and manages a business, usually with considerable initiative (self-effort, hardwork) and risk.

Risk – potential (possible) loss or failure Profit - the money earned from conducting

business after all costs and expenses have been paid


Competition - the struggle (fight) between companies for customers

Competition

Price Competition - focuses on the sale price of a product

Non-price Competition - such things as quality of the product, service and location are important here

Types of Competition

Supply - the amount of goods producers are willing to make and sell

Demand - consumer willingness and ability to buy products

Supply and Demand

Supply and Demand Curve

Surplus - this happens when supply exceeds (is more than) demand

Shortage - this happens when demand exceeds (is more than) supply

Equilibrium - the amount of product supplied is equal to the amount of product demanded

Supply and Demand

Imports - goods and services purchased from other countries

Exports - goods and services sold to other countries

Trade Surplus - this happens when a country exports more goods and services than it imports.

Trade Shortage (Trade Deficit) - this happens when a country imports more goods and services than it exports.

Supply and Demand

Types of Business Operations

Service Businesses – provide needed services for a

fee

Merchandising Businesses - buy finished products

and resale them to individuals or other businesses

Manufacturing Businesses – buy raw materials such

as wood or iron ore and transform them into finished

products. They then resale the finished products to

individuals or other businesses

Types of Businesses

Forms of Business Organizations

Sole Proprietorships – a business owned by one person

Partnerships - a business owned by two or more persons called partners

Corporations - a business recognized by law as having a life of it’s own. Must get special permission (Charter) from the government to operate.

Forms of Business Organizations

easy to start up full control of the business by the owner exclusive rights to profits by the owner

Advantages to a sole proprietorship:

unlimited liability by the owner sole responsibility of the owner to operate

the business limited growth potential for the business lack of longevity of the firm

Disadvantages to a sole proprietorship:

easy to form allow specialization lets partners share decision making shares business losses between partners

Advantages of a partnership:

unlimited liability by partners potential for conflict among partners lack of business longevity

Disadvantages of a partnership:

General partnerships:◦ Partners have equal decision-making authority.◦ Each partner has unlimited liability.

Limited partnerships:◦ Partners join as investors.◦ Partners have in inactive role in decision making.◦ Partners have limited liability.

Differences between general partnerships and limited partnerships:

Submit an application for the articles of incorporation and obtain a corporate charter.

To form a corporation:

limited liability separation of ownership from management ease of raising capital longevity

Advantages of organizing a corporation:

costly and difficult to obtain a corporate charter

number of government regulations to follow slow decision-making process

Disadvantages of organizing a corporation:

SCOTUS:

The Supreme Court of the United States (of America)

Appeals Court Process

Supreme Court Building

Supreme Court Justices

Corporations have a life of their own Corporations have a right to free speech Corporations can give unlimited funds

(money), for political election ads

Citizens United v. Federal Election Commission

Franchise - a business method that involves licensing of trademarks and methods of doing business, such as: ◦ Chain store, retail outlets which share a brand and

central management ◦ An exclusive right, for example to sell branded

merchandise


Licensing Agreement - protects the originator’s name and product(s)


A business owner can reduce the overall costs associated with starting a business because:◦ employee training is often provided by parent

company◦ advertising is sometimes paid for by parent

company◦ it can use the parent company’s name

Benefits of opening a franchise to a business owner:

Intellectual Property (IP) - a term referring to a creator’s exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; discoveries and inventions; and words, phrases, symbols, and designs.

Intellectual Property (IP)

A brand is a name used to identify and distinguish a specific product, service, or business.


A trademark or trade mark is a distinctive (special) sign used by an individual or business to identify that the products or services come from a unique source, and to distinguish its products or services from those of others.


Patent -a right granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement to the above.

Length of patent: 14 – 20 years (depending upon on thing being patented)


Copyright - is the exclusive right granted to the author of an original work, including the right to authorize or ban the publication, distribution and adaptation of that work. Copyright only lasts for a certain time period after which the work is said to enter the public domain

Length of copyright: Life of author + 70 yrs.


End of Chapter

The Free Enterprise System encourages individuals to start and operate their own businesses with...

Documents

Transcript of The Free Enterprise System encourages individuals to start and operate their own businesses with...