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Market-Oriented Economic Systems The Free Enterprise System Slide 2 Objectives Explain the characteristics of a free enterprise system Distinguish between price and non-price competition Distinguish between the public and private sectors Explain the role of the government in a free enterprise system Discuss the importance of international trade and government methods to encourage or discourage it Explain how businesses can get involved in international trade, and what factors they should consider before doing so. Tell what a business is, and explain its basic functions Identify and classify different types of businesses Slide 3 Analyze the Ad Is the ad promoting a football game or an insurance company? Why would State Farm Sponsor this annual matchup between two Louisiana football teams? Research 3 large insurance companies and note their slogans and messages to consumers. List 2 ways the companies you selected try to set themselves apart. Slide 4 Basic Principles Free Enterprise System Slide 5 Basic Principles Freedom of Ownership Business Ownership Intellectual Property Rights Patent Trademark Copyright Trade Secret Slide 6 Licensing Agreements When a company wants to use another's name, symbol, creative work, or product, it must get permission to do so and pay a fee for the use. Slide 7 Basic Principles Competition Price Competition: focuses on the sale price of a product. Nonprice Competition: businesses choose to compete on the basis of factors not related to price. Monopolies: exclusive control over a product or the means of producing it. Slide 8 Basic Principles Risk: the potential for loss or failure Profit: money earned from conducting business after all costs and expenses have been paid Economic Cost of Unprofitable Firms Economic Benefits of Successful Firms Supply & Demand Surpluses Shortages Equilibrium Slide 9 Risk & Profit T-shirt business Each of you have $100 to invest or keep How much would you invest? Slide 10 Types of Business Size & Scope Purpose Industry & Markets Slide 11 Types of Businesses Size & Scope Large VS. Small Businesses Domestic VS. Global Slide 12 Types of Businesses Purpose For-Profit VS. Nonprofit Organizations Public VS. Private Slide 13 Types of Businesses Industry & Markets NAICS Consumer, Industrial, and Service Markets Slide 14 The Functions of Business Production and Procurement Marketing Management Finance & Accounting Slide 15 Production and Procurement Production: The process of creating, expanding, manufacturing, or improving on goods and services. Procurement: Involves buying and reselling goods that have already been produced. SWOT Analysis, Wholesalers, and Retailers The five rights of merchandising are having: The right goods At the right time In the right place At the right price In the right amount Slide 16 Marketing All activities from the time that a product leaves the producer or manufacturer until it reaches the final consumer. All related marketing activities support the buying and selling functions. Promotion helps to educate potential customers about a companys products and is used to stimulate sales. Slide 17 Aeropostale Slide 18 Management The process of achieving company goals by effective use of resources through planning, organizing and controlling. Slide 19 Finance & Accounting Finance is the function of business that involves money management. Accounting is the discipline tat keeps track of a companys financial situation. Balance Sheet Profit and Loss Statements Cash Flow Statement Slide 20 REVIEW What are the key characteristics of a free enterprise system? The key characteristics are ownership of property (both business and intellectual), competition, risk and profit. Slide 21 REVIEW Provide examples of price and nonprice competition. Wal-Mart is one example of price competition with its slogan, Save money. Live better. Neiman Marcus, with high quality merchandise and excellent service, exemplifies nonprice competition. Slide 22 Review What are the three major categories for classifying businesses? The three major categories are size and scope, purpose, and industry and markets. Slide 23 REVIEW How do for- profit businesses and nonprofit organizations differ? For-profit businesses strive to make money; nonprofits use the money make to fund the causes listed in their charters. DECAs money it makes is used to further the education of marketing students. Slide 24 REVIEW What is the differences between the public and private sectors? The public sector includes all government agencies; the private sector includes all nongovernment al organizations and businesses. Slide 25 Market-Oriented Economic Systems The Free Enterprise System