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Chapter 3 Free Enterprise System

Chapter 3 Free Enterprise System. Retail Marketing Mrs. Wilson Dayton High School. Q.O.D. 9/7/11. What do you think the word “free enterprise system” means?

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Chapter 3 Free Enterprise System

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  1. Chapter 3 Free Enterprise System Retail Marketing Mrs. Wilson Dayton High School

  2. Q.O.D.9/7/11 • What do you think the word “free enterprise system” means? • What do you think it means to own your own business in this country? Do you think this is a freedom everyone should have in every country of the world?

  3. Basic Principles • Business=Firms • When you work in the U.S. you have the freedom to make decisions on where to work and how you spend your money. • Free Enterprise System- • The U.S. Economic System • What does economic system mean? • Encourages people to start and operate their own businesses without government getting involved. • Workers compete for jobs, businesses compete for customers.

  4. Basic Principles • Freedom of Ownership • In the free enterprise system, you are free to own your car, home, clothing & land. • Other countries & other economic systems own most of the land and businesses. • In our free enterprise system, you can buy anything that is lawful. You can sell it, trade it, lease it or use it for yourself.

  5. Competition • Competition is healthy! It motivates people to improve themselves. • Businesses are no different • Attract new customers • Keep old customers • Competition- struggle between businesses for customers. • Competition is essential for businesses • Forces companies to create better goods and services at reasonable prices.

  6. Price and Non-price Competition • Price Competition- focuses on the sale price of a product. • Assumes that customers will buy products that are lowest in price. • Wal-Mart slogan- “Always low prices. Always.”

  7. Non Price Competition • Non Price Competition- businesses choose to compete on the basis that are not related to price. • Quality of product • Service of product • Business Location • Reputation • Example- Nordstrom Department Store • Sales associates and other personnel are instructed to do whatever it takes to satisfy the customers.

  8. Q.O.D.9/8/11 • What is the difference between price & non price competition?

  9. Monopolies • Monopoly- exclusive control over a product or the means of producing it. • Prohibited under a free enterprise system because they eliminate competition. • Without competition, a company can charge whatever it wants • It can also control the quality of a product and who gets it. • Some monopolies are allowed, however are regulated by the government. • Example- Utility companies, gas and electric companies • These companies must follow government regulations on

  10. Q.O.D.8.31.10 • We discussed three elements of our free enterprise system. What are they? • Explain each term and tell me what they mean.

  11. Risk • There are many benefits of owning your own business. However, there are risks involved. • Risk- the potential for loss or failure. • As the potential for making a lot of money increases, so does the risk. • Example • You might decide to place your money in savings because it’s safe there… OR…. You invest the savings in stock (ownership of a corporation.) • If the corporation or business is successful, you would make more money than just leaving your $$$ in savings. • However, if the company were unsuccessful, you could lose ALL your money, and have no $$$ in the bank.

  12. Profit • Profit- the $ earned from a business • After all the costs and expenses have been paid • Not the $ a company earns from sales • Range of profit is 1-5% of sales. • Remaining 95-99% goes to pay costs, expenses and business taxes. • Is this worth risking your money? A lot of people think so and have made millions!!!!

  13. Economic Cost of Unprofitable Firms • Businesses not making any money, can’t afford to pay their employees and bills • Examples???? • Linens N Things • Circuit City • Sofa Express • Washington Mutual (Bank) • Lay off of employees • Investor lose money if the value of their stock falls below what they paid for it.

  14. Economic Benefits of Successful Firms • Hire more people • Pay them well • Investors earn money from their investments • Vendors and suppliers make more money • Successful businesses attract competition which is beneficial to the customer (You!)

  15. Case Study • In your textbook, read page 34 about T.J. Izzo concerning the Izzo Golf Bag. • Answer the 3 questions in your notebook and label them “Izzo Golf.”

  16. Exit Slip [8.31.10] • Provide an example of a company that uses price competition and a company that uses non price competition.

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