Unit I: Basic Principles of Economics
Have out HW and notebook work
from yesterday!!
Growth
•
There are two ways for a business to
grow and expand…and remain privately
owned!!
1. Growth through Reinvestment
2. Growth through mergers
Growth
• By the end of next week we will get into
the third way a company can expand, and
that is through becoming a publicly traded
company—selling of shares (stocks) of the
company.
1. GROWTH Through
REINVESTMENT
• After paying out all costs of the business
at the end of a cycle (monthly or
quarterly), an entrepreneur can take that
money and put it back into the business.
Reinvest PROFIT and buy
MORE RESOURCES: land,
labor & cap.goods. This will
move the PPF!!!
2. Growth Through Mergers
•
MERGER: a COMBINATION of 2 or
more companies to form a single
company
Why Merge?
1. More EFFICIENT
2. ELIMINIATE rival
3. Grow FASTER
4. Change IMAGE
5. ACQUIRE better product/resources
Two Different Types of Mergers:
a. Horizontal Mergers:
JOINING of companies that MAKE the SAME
product; take out competition
HSBC + Key Bank = HSKBC
Rockefeller ~ Oil
Growth Through Mergers
• Vertical Mergers:
– A JOINING of firms
involved in
DIFFERENT STEPS of
the manufacturing
PROCESS;
– Make production
better!
CARNEGIE ~
Steel
Wheat Farm
+
Cattle Ranch
+
Slaughter Plant
=
McDonald’s
Making Mergers
• Each group is given a listing of companies.
You have to make some mergers, both
horizontal and vertical. All companies
must be used, and you must have at least
three different vertical and three different
horizontal mergers.
Making Mergers
• Horizontal Mergers:
2: McDonald’s & Burger King
3: Reebok, Adidas, & Nike
4: Aeropostale, Banana Republic, Express,
& American Eagle
Making Mergers
• Vertical Mergers:
2: Byrnes Dairy & Perry’s Ice Cream
3: Mighty Taco, Frank’s Hot Sauce, &
Iceburg Lettuce
4: GM, Quaker State, Goodyear, & Sony
Other Business Terms
• Incorporated:
Anyone can incorporate
a business to take the
liability away from their
personal belongings.
• Franchise:
Opening a business that
already exists, paying
the original corporation
the right to use their
goods
http://www.timhortons.com/us/en/index.html
Other Business Terms
• Multinational:
Any firm that either
produces or sells goods
& services in more than
one country
• Conglomerate:
A firm that owns four or
more other companies
that make unrelated
products
www.yum.com
Unit I: Basic Principles of Economics
BE READY FOR TOP TEN FUN!!
Have out merger note sheet from Friday
Countries with the Most Gold
Reserves
Although less important
today, in the days of the
Gold Standard, this
provided a way of
measuring a country’s
wealth, guaranteeing the
convertibility of its
currency, and determined
exchange rates.
10. Taiwan
9. Russia
8. China
7. Netherlands
6. Japan
5. Switzerland
4. Italy
3. France
2. Germany
1. USA
Many, Many Mergers Later…
• Conglomerate:
–A firm that has at least 4
unrelated businesses, none of
which make a majority of the
money
–Ex) YUM! Corporation owns:
KFC, Taco Bell, Long John
Silvers, A&W, Pizza Hut,
www.yum.com
Many, Many Mergers Later…
• Multinational:
–A corporation that has
manufacturing or stores in a
number of different countries
–Ex) GM, HSBC, McDonald’s,
Disney, Sony, Nike….
Merger Matching Game!!
Homework to follow!! The quicker
you finish the match the faster
you can start the homework!!