Lesson 6 - The Private Enterprise EnvironmentThe Rise of Industry in the U.S.Stage 1: Agricultural EconomyAgricultural Economy:An economy heavily dependent onagriculture. Most jobs are rooted infarming and ranching.

Timeframe: Early 1700’s to the mid 1800’s• Most of the U.S. population is working on farms.

Noteworthy inventions during the 18th Century:Mercury Thermometer, Diving Bell, Steam Engine,Steamboat, Lightning Rod, Spinning Jenny, CarbonatedWater, Piano, Sextant, Submarine, Flush Toilet, Guillotine

The Rise of IndustryStage 2: Industrial EconomyIndustrial Economy:An economy made up of manufacturingenterprises. Industries might includetextiles, automotive, computer, chemical.It generally includes anything that is mass-produced.

Timeframe: 1840’s – 1950’s, Birth of the factory in the U.S.• There is a move towards manufacturing goods

domestically.• Power driven machinery allowed more goods to be

produced at lower prices.• At lower prices, more people could afford them and

demand increased.

Stage 2: Industrial Economy (cont.)

Noteworthy inventions during the 19th Century:Battery, Steam-Powered Locomotive, Assembly Line,Electric Light, Tin Can, Propeller, Telegraph, Calculator,Sewing Machine, Colt Revolver, Pasteurization,Dishwasher, Elevator, Plastic, Dynamite, Four-StrokeInternal Combustion Engine, Typewriter, Facsimile, AirBrakes, Mail-Order Catalog, Toilet Paper, Radar, BarbedWire, Telephone, Diesel Engine, Bicycle, Motion-PictureCamera.

And the list goes on … and on … and on.Without many of these, the IndustrialRevolution is not possible.

The Rise of IndustryStage 3: Service EconomyService Economy:An economy primarily devoted to serviceindustries such as financial services, education,sales, research, hospitality, food service, andentertainment.

Timeframe: 1950’s - 1990’s• Inventions of the 19th Century lead to increased

leisure time in the 20th Century• Increased leisure leads to a greater need for service

industry jobs.• This trend continued to grow through the 1990’s.

Stage 3: Service Economy (cont.)

Noteworthy inventions during the 20th Century:Scotch Tape, Frozen Foods, Neoprene, Analog Computer,Jet Engine, FM Radio, Drive-In Movies, Tape Recorder,Helicopter, Electron Microscope, Color TV, Computer,Teflon, Slinky, Silly Putty, Atomic Bomb, MicrowaveOven, Mobile Phone, Transistor, Velcro, Credit Card,Optic Fiber, Super Glue, Computer Modem, Laser,Integrated Circuit, Microchip, Compact Disk, ATM,Kevlar, LCD, Microprocessor, VCR, MRI, Ethernet,Internet, Laser Printer, Virtual Reality, Super-conductor

We see a definite movement towards information andtechnology which hail our entry into Stage 4.

The Rise of IndustryStage 4: Information EconomyInformation Economy:An economy with an increased emphasison informational activities andinformation industries.

Timeframe: 1990’s – Current Day• Demand for accurate information• Most jobs depend on buying and selling information.• Less than 2% of our labor force works on farms.• There is a loss of skilled labor. As fewer people

engage in arduous tasks, fewer people are taught theskill – sewing, cooking, carpentry, etc.

The Rise of IndustryStage 5: What Lies Beyond the Information Age?

That is the key question.If we could figure that out,

we’d be wealthy.

Some say we’re moving into aFeedback Economy.

Others say that it will be the Imagination Age.What we do know is that E-Commerce ischanging the face of business all over the

world.

Research Assignment:Choose any one of the inventions listed on theprevious slides or select one of your own.Research the invention and tell how it influencedthe development of business in the U.S.

Your report should be no longer than one double-spacedpage. Business writing is concise and to the point.Include:1. The year of discovery/patenting2. The inventor3. A brief description of the item4. Summary of how it changed business in America5. Citation for your credible source

Development of the U.S. Economy over timehas lead to our Private Enterprise system.

Characteristics of thePrivate Enterprise System:1. Right to Own Property2. Freedom to Start New Businesses3. Freedom to Make Agreements4. Right to Enter Into Agreements for

Producing Goods & Services5. Right to Enter Into Labor Agreements6. Right to Compete on the Free Market

There are different types of businesses eachgrouped according to their function.

Types of Businesses:1. Producers2. Processors3. Manufacturers4. Intermediaries5. Distributors/Wholesalers6. Retailers7. Service Businesses

Producer:A business which grows agricultural productsor manufactures crude materials.

• Creates or gathers products & services fordistribution.

• Activities are related to raw goodsRaw Goods:Materials gathered fromtheir original state such asland and water.

• Agricultural, mining,fishing, and forestrybusinesses.

Processor:A business which converts raw materials intoprocessed goods.

• Change natural materials or raw goods intomore finished forms.

• Are involved in processing raw goods.• Paper mills, oil refineries, steel mills• Make processed goods

Processed Goods:Goods made from raw goodsthat may require furtherprocessing.

Manufacturer:A business which produces finished goods readyto sell to the consumer.

• Turn raw or processed goods into finished goods.Finished Goods:Goods that require no furtherprocessing and are ready forthe market.

• Bakery, Automobile Factory

Intermediary:A business which acts as a link between otherbusinesses but does not take ownership of theproduct or service.

• Also called brokers or agents.• Facilitate business between two

parties by providing specificexpertise or connections.

• Most are financial intermediaries.• Real Estate Agents,

Stock Brokers, Banks.

Distributor/Wholesaler:Distributor:A business who supplies goods to stores and otherbusinesses that sell to consumers.Wholesaler:A business that buys large quantity of goods frommanufacturers and resells to retailers in smaller lots.

• Also called middlemen.• Take ownership of the product.• Moves goods from one business

to another.• Also may buy goods, store them,

and then resell them.

Retailer:A business that purchases goods from awholesaler or other supplier and resellsthem directly to consumers.

• Most goods are sold through retailers.• Gas Stations• Department Stores• Car Dealers• Groceries

Service Business:A business which provides a service insteadof a good to consumers.

• What they sell is intangible• Some operate to fulfill the need for

informationNewspapersTelevision StationsOn-Line Services

• Other service businesses includeMovie Theaters, Car Washes,Airlines, Lawn Care,Mechanics, Doctors

Small Group Activity: Name that Business TypeDirections:1. Divide into groups of 4.2. Select someone to record your answers for your group.3. One a blank sheet of paper, head seven columns as

follows:1) Producers, 2) Processors, 3) Manufacturers,4) Intermediaries, 5) Distributors/Wholesalers,6) Retailers, and 7) Service Businesses

4. Sort the following list of companies into their properheadings. There are 5 companies under each heading.

5. Meet as a class to discuss and turn in your groupfindings.

Small Group Activity: Name that Business TypeFord Motor CoYellow Cab CompanyTyson FoodsHersheyGrocer’s Supply CoCentury 21 RealtyKraft FoodsKrogerColgate-PalmoliveFirst Republic BankChevronAmazon.comSam’s ClubSyscoArch Coal, IncCambell’sMartinizing Drycleaning

A.T. Kearney Executive SearchRitz-Carlton HotelsCoca Cola, IncFantastic Sam’s Hair SalonWalMartExxon MobileHeinzCostcoAnheuser-BuschMerrill Lynch & CoToys R UsMcDonald’sWhirlpoolLand O’ LakesGeneral Mills FoodsGEICOSearsGeneral Food Service (GFS)

Small Group Activity: Name that Business Type

ProcessorsGeneral Mills FoodsKraft FoodsCoca Cola, IncHersheyAnheuser-Busch

ManufacturersCambell’sHeinzWhirlpoolFord Motor CoColgate-Palmolive

Wholesaler/DistributorsSyscoCostcoSam’s ClubGrocer’s Supply CoGeneral Food Service (GFS)

ServicesMartinizing DrycleaningRitz-Carlton HotelsMcDonald’sFantastic Sam’s Hair SalonYellow Cab Company

ProducersExxon MobileChevronArch Coal, IncTyson FoodsLand O’ Lakes

RetailersWalMartKrogerSearsAmazon.comToys R Us

IntermediaryCentury 21 RealtyMerrill Lynch & CoA.T. Kearney Executive SearchFirst Republic BankGEICO

AnswerKey

How Businesses OperateBusinesses, large and small, operate bycompeting for consumer dollars.

Basic Types of Competition:1. Price2. Non-Price

Price Competition:Rivalry between suppliers basedsolely on price.

Price Competition Choices:1. Make the same product at a

lower cost.2. Make a better product at the

same cost.3. Make a better product at a

lower price.

Non-price Competition:Rivalry involving the use of such factors aspackaging, delivery, or customer servicerather than price to increase demand for aproduct.

• Sellers must set theirproduct apart from thecompetitors.

• Competition is based onFeatures or Quality.

Monopoly:A situation where one business has all oralmost all of the market for a particularproduct or service.

• Monopoly exists when there are few to nocompetitors for a given product market.

• The firm will set its own price.• Government often steps in to

regulate and protect the consumerfrom outrageous pricing.

Power CompaniesTelephone Companies