3.02 Explain the concept of competition.

1. 3.02 Explain the concept of competition.

2. Competition • The rivalry between two or more businesses to gain as much of the total market sales or customer acceptance as possible.

3. Competition continued . . . • Helps to maintain reasonable prices, provides consumers with new and improved products, and results in a wide selection of products from which to choose. • Forces businesses to operate efficiently. • http://www.youtube.com/watch?v=up3nCNlu28E

4. Types of competition • Direct competition • Indirect competition • Price competition • Non-price competition • Monopolies

5. Direct competition • Involves two or more companies that utilize the same type of business format. • Example Coke and Pepsi http://www.youtube.com/watch?v=POgDUEXrG6M&feature=related

6. Indirect competition • Between two or more retailers that employ different types of business formats to sell the same type of goods. • Example: Playing Putt-Putt versus an 18 hole golf course.

7. Price Competition • Focuses on the selling price of a product. • Preferring to buy the products that are the lowest in price. • Purchasing clubs at Wal-Mart versus a golf specialty store.

8. Non-price competition • Based on factors not related to price. • Includes: quality of products, customer services, business location and qualifications of salespeople.

9. Monopolies • Exist when one company has exclusive control over a product or the means of producing it. • The free enterprise system prohibits monopolies except when it is wasteful to have more than one company. • Ex. There is only one football team per area. • In 1986, the USFL (having recently decided to compete directly with the NFL) filed an anti-trust lawsuit against the National Football League. The NFL was found to have violated anti-monopoly laws. However, the USFL was awarded a judgment of just $1 which, under anti-trust laws, was tripled to $3. The USFL finally received a check for $3.76 in damages in 1990, the additional 76¢ representing interest earned while litigation had continued. Notably, that check has never been cashed • http://www.youtube.com/watch?v=Jrtkr3gmAwQ&feature=results_video&playnext=1&list=PL743456C9EBA1F745

10. Monopolies • In 1986, the USFL (having recently decided to compete directly with the NFL) filed an anti-trust lawsuit against the National Football League. The NFL was found to have violated anti-monopoly laws. However, the USFL was awarded a judgment of just $1 which, under anti-trust laws, was tripled to $3. The USFL finally received a check for $3.76 in damages in 1990, the additional 76¢ representing interest earned while litigation had continued. Notably, that check has never been cashed. • http://www.youtube.com/watch?v=Jrtkr3gmAwQ&feature=results_video&playnext=1&list=PL743456C9EBA1F745

11. Profit • The money earned from conducting business after all costs and expenses have been paid. • Profit for most businesses is 1-5% of sales. • 95-99% of the selling price goes to pay costs, expenses and business taxes.

12. Loss • A decrease in a potential profit. • Potential for loss or failure. • Risk Management – how to effectively manage losses due to risk. http://player.discoveryeducation.com/index.cfm?guidAssetId=A72C694F-7C5D-4DCB-9432-6CEA486DF3C3&blnFromSearch=1&productcode=US

13. Sources of revenue • Admission • Food and beverage sales • Parking • Merchandise sales • Sponsorships • Naming rights

14. Sources of expenditures • Performer fees • Rental or leasing of facilities • Advertising • Incentives or in-game promotions • Food and beverage services • Security staff

15. Competition debate Divide students into groups and assign half the students to support the view that competition harms society and the other half the view that competition benefits society. Encourage students to look at all types of competition, from the business world to sports and even academics.