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Marketing - Chapter 5 - The Free Enterprise System

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Kevin Krizan

on 2 November 2017

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Transcript of Marketing - Chapter 5 - The Free Enterprise System

The Free Enterprise System
Basic Principles
Freedom to own property
Freedom to compete
Freedom to take risks
Freedom to make a profit
Private enterprise (free enterprise) - business ownership by ordinary people (not the government)
Price is determined through supply and demand

Supply > Demand Price

Supply < Demand Price
In the free enterprise system, people are free to own property (cars, computers, land, homes, businesses
Types of Ownership
Business Ownership - right to start and own your own business (restrictions?)
Intellectual Property Rights - legal protection to keep an idea or invention from being copied
Patent - exclusive rights to make, use, or sell an invention (good for 20 years)
Trademark - word, name, symbol, sound or colors that identifies a good or service (indefinite time period)
Copyright - involves anything that is authored by an individual (books, music, artwork) (good for life of author plus 70 years)

Licensing agreement - fee paid for use of another companies name,symbol creative work or product
Top Dead Celebrity Earners
$170 million Michael Jackson
$55 million Elvis Presley
$27 million Marilyn Monroe
$25 million Charles Schulz
$12 million John Lennon
$12 million Elizabeth Taylor
$10 million Albert Einstein
$9 million Theodor Geisel
$7 million Jimi Hendrix
$7 million Steve McQueen
$7 million Richard Rodgers & Oscar Hammerstein
$6 million George Harrison
$6 million Andy Warhol
- the struggle for customers
Price competition - focuses on the sale price of a product (Wal-Mart, Southwest Airlines)
Nonprice competition - businesses compete on factors not related to price (Abercrombie, Rolex, Ferrari)
quality, service, location, reputation
- exclusive control over a product or the means of producing it
not permitted in market economy (prevents competition)
Standard Oil Company / AT& T
Standard Oil broken into
Mobil (part of ExxonMobil)
Amoco (part of BP)
Conoco (part of ConocoPhillips)
Marathon Oil
and 28 other companies
Companies formed with the break up of AT&T in 1984
Ameritech – (acquired by SBC in 1999, now part of the AT&T Inc.)
Bell Atlantic – (acquired GTE in 2000 and changed its name to Verizon)
BellSouth – (acquired by AT&T Inc. in 2006)
NYNEX – (acquired by Bell Atlantic in 1996, now part of Verizon)
Pacific Telesis – (acquired by SBC in 1997, now part of the AT&T Inc.)
Southwestern Bell – (changed its name to SBC in 1995; acquired AT&T Corp. in 2005 and changed its name to AT&T Inc.)
US West – (acquired by Qwest in 2000, which in turn was acquired by CenturyLink in 2011)
Monopolies exist in industries where it would be wasteful to have more than one firm (Utilities - Vectren)
Business Risk
- the potential for loss or failure (1 or 3 businesses fail in the US after 1 year of operation)
- money earned from conducting business after all costs and expenses
Supply and Demand
Supply - the amount of goods producers are willing to make and sell
Demand - refers to consumer willingness and ability to buy a product
Surpluses - supply exceeds demand (bakery in a grocery store)(price decreases)
Shortages - demand exceeds supply (Super Bowl ticket (price increases)
Equilibrium - amount of a product supplied is equal to the amount that is demanded
Types of Business
Large vs. Small Businesses
small < 100 employees
large > 1000 employees
Domestic vs. Global
domestic business - business that sells it products only in its own country
global business - sells its products in more than one country
Most businesses exist to serve the needs of its customers in order to make a profit (for-profit business)
Non-profit organization - functions like a business but uses the money it makes to fund the cause identified in its charter (Boy Scouts, Red Cross)
Public vs. Private
public sector - government financed agencies (public school, EPA, IRS, Post Office)
private sector - businesses not associated with government (Wal-mart, McDonalds)
Industry and Markets
- obtain goods from manufacturers and resell them to retailers
- buy good from wholesalers or manufacturers and resell them to consumers
Derived Demand - organizational market demand is based on (derived) from, the demand for consumer goods and services (Wal-Mart demands more Iphones because Wal-Marts customers are demanding them
Functions of Business
Production - process of creating, growing, manufacturing, or improving on goods and services
Procurement - involves buying materials, products, and supplies needed to run a business
Marketing - promotion of the company, brand, product or service
Management - process of achieving company goals by effective use of resources through planning, organizing, and controlling
Finance- money management
Accounting - keeps track of a company's financial situation
Monopolies Padlet:
Full transcript