The Free Enterprise System
Market-Oriented
Economic Systems
Objectives
 Explain the characteristics of a free enterprise system
 Distinguish between price and non-price competition
 Distinguish between the public and private sectors
 Explain the role of the government in a free enterprise system
 Discuss the importance of international trade and government
methods to encourage or discourage it
 Explain how businesses can get involved in international trade,
and what factors they should consider before doing so.
 Tell what a business is, and explain its basic functions
 Identify and classify different types of businesses
Basic Principles
Free Enterprise System
Basic Principles
 Freedom of
Ownership
 Business Ownership
 Intellectual Property
Rights
 Patent
 Trademark
 Copyright
 Trade Secret
Licensing Agreements
When a company wants
to use another's name,
symbol, creative work, or
product, it must get
permission to do so and
pay a fee for the use.
Basic Principles
 Competition
 Price Competition: focuses
on the sale price of a
product.
 Nonprice Competition:
businesses choose to
compete on the basis of
factors not related to price.
 Monopolies: exclusive
control over a product or
the means of producing it.
Basic Principles
 Risk: the potential for loss or failure
 Profit: money earned from
conducting business after all costs and
expenses have been paid
 Economic Cost of Unprofitable Firms
 Economic Benefits of Successful Firms
 Supply & Demand
 Surpluses
 Shortages
 Equilibrium
Types of Business
Size & Scope
Purpose
Industry &
Markets
Types of Businesses
Size & Scope
Large VS. Small
Businesses
Domestic VS.
Global
Types of Businesses
Purpose
 For-Profit VS.
Nonprofit
Organizations
 Public VS. Private
Types of Businesses
Industry &
Markets
 NAICS
 Consumer,
Industrial, and
Service Markets
The Functions of Business
Production and Procurement
Marketing
Management
Finance & Accounting
Production and Procurement
 Production: The process of creating, expanding,
manufacturing, or improving on goods and services.
 Procurement: Involves buying and reselling goods that
have already been produced.
 SWOT Analysis, Wholesalers, and Retailers
 The five “rights” of merchandising are having:
 The right goods
 At the right time
 In the right place
 At the right price
 In the right amount
Marketing
 All activities from the time that a product
leaves the producer or manufacturer until it
reaches the final consumer.
 All related marketing activities support the
buying and selling functions.
 Promotion helps to educate potential
customers about a company’s products and
is used to stimulate sales.
Aeropostale
Management
 The process of achieving company goals by
effective use of resources through
planning, organizing and controlling.
Finance & Accounting
 Finance is the function of business that involves
money management. Accounting is the
discipline tat keeps track of a company’s financial
situation.
 Balance Sheet
 Profit and Loss Statements
 Cash Flow Statement
REVIEW
What are the key
characteristics of
a free enterprise
system?
The key
characteristics are
ownership of
property (both
business and
intellectual),
competition,
risk and profit.
REVIEW
Provide
examples of
price and
nonprice
competition.
Wal-Mart is one example
of price competition with
its slogan, “Save money.
Live better.” Neiman
Marcus, with high
quality merchandise and
excellent service,
exemplifies nonprice
competition.
Review
What are the
three major
categories for
classifying
businesses?
The three major
categories are
size and
scope,
purpose, and
industry and
markets.
REVIEW
 How do forprofit businesses
and nonprofit
organizations
differ?
For-profit businesses
strive to make
money; nonprofits
use the money make to
fund the causes
listed in their charters.
DECA’s money it
makes is used to
further the education
of marketing students.
REVIEW
What is the
differences
between the
public and
private sectors?
The public sector
includes all
government
agencies; the
private sector
includes all
nongovernment
al organizations
and businesses.
The Free Enterprise System
Market-Oriented
Economic Systems