BUSINESS
ORGANIZATIONS AND
MARKET STRUCTURES

There are three main forms of business
organization in the United States – the
sole proprietorship, the partnership and
the corporation
Forms of Business Organization
A sole proprietorship is a business owned
by one person.
 Advantages include ease of starting up
and management, owner receives all the
profits, tax advantages and pride of
ownership.
 Disadvantages include unlimited liability,
difficulty in raising financial capital and
limited life.

Sole Proprietorship
A partnership is a business jointly owned
by two or more persons.
 Advantages include ease of management
and establishment, additional financial
capital and tax advantages.
 Disadvantages include unlimited liability,
limited life and potential conflicts between
partners.

Partnerships



A corporation is a form of business
organization recognized by law as a separate
legal entity having all the rights of an
individual.
Advantages include ease of raising financial
capital, professional managers hired by the
Board of Directors, limited liability, unlimited
life.
Disadvantages include the difficulty and
expense of incorporating, double taxation,
government regulation and potentially losing
control of the business.
Corporations

There are three different types of mergers
- horizontal, vertical and conglomerate.
Growth through Mergers

A horizontal merger takes place when two
or more firms that produce the same kind
of product join forces.
Horizontal Merger

A vertical merger takes place when firms
involved in different steps of
manufacturing or marketing join together.
Vertical Merger

A conglomerate is a firm that has at least
four businesses, each making unrelated
products, none of which is responsible for
the majority of sales.
Conglomerate Mergers

Multinational Corporations are businesses
that manufacture or service operations in
a number of different countries.
Multinational Corporations

A market structure is a market
classification according to number and
size of firms, type of product and type of
competition. The characteristics of
market structures include the ease of
entry into the market, influence over
price, product differentiation and
advertising.
Market Structures

There are four different types of market
structures – perfect competition,
monopolistic competition, oligopoly, and
monopoly.
Types of Market Structures

Perfect competition is characterized by a
large number of well-informed
independent buyers and sellers who
exchange identical products. Few, if any,
perfectly competitive markets exist today.
Perfect Competition

Monopolistic competition is the market
structure that has all the conditions of
perfect competition except for identical
products. Nonprice competition such as
advertising and promotional campaigns is
common in this market structure.
Monopolistic Competition

Oligopoly is a market structure in which a
few very large sellers dominate the
industry. Oligopolistic markets are
difficult for entrepreneurs to enter.
Product differentiation and advertising are
common.
Oligopoly

A monopoly is a market structure with
only one seller of a particular product.
Most monopolies are illegal. Natural
monopolies, a market situation where the
costs of production are minimized by
having a single firm produce the product,
are legal.
Monopoly