Presentation Transcript

1. 1.01CSummarize Characteristics of a Free Enterprise System

2. Free enterprise is… Also referred to as Private Enterprise. Allows the market to determine supply and demand. Encourages entrepreneurs to start and operate a business with limited government involvement.
3. Principles of Free Enterprise Freedom of Ownership Competition Risk Profit
4. Freedom of Ownership Ability to choose ownership. (house, car, job, business) John likes golf driving range May be restricted where business can be operated. (zoning)
5. Competition A rivalry between two or more businesses to gain market sales or customer acceptance. Direct competition Indirect competition Price competition Non-price competition Monopolies
6. Direct Competition Two or more companies that use the same type of business format. (McDonalds vs. Burger King) (Lowes vs. Home Depot)
7. Indirect Competition Two or more companies that use different types of business formats to sell similar goods. McDonalds vs. Applebee’s
8. Price Competition Focuses on the selling price of a product. Consumers prefer to buy products that are lowest in price. (Wal-Mart promotes its company as having great value at everyday low prices)
9. Non-price Competition Based on factors not related to price: quality of products, customer service, location, reputation and salespeople qualifications. (Nordstrom’s reputation for excellent customer service)
10. Monopolies When one company has exclusive control over a product or the means of producing it. (Only one gas station in the whole town)
11. Risk The potential for loss or failure. (Starting a new business…..no guarantee of success)
12. Profit The money earned from conducting business after all costs and expenses have been paid. -Profit for many businesses is 1-5% of sales. - 95-99% of the selling price goes to pay costs, expenses and business taxes.