3Why is it beneficial to start a business by yourself? SOLE PROPRIETORSHIP: business owned by one person.
4SOLE PROPRIETORSHIP Strengths Weaknesses easy to start - unlimited liability responsible for all loses and debtseasy to manage - difficult to raise financial capitalmake all profits - size and efficiencyno business income tax - owners may lack “business sense”personal freedomof self employment - hard to find qualified employees- limited life
7PARTNERSHIP Strengths Weaknesses Easy to establish - responsible for acts of partnersEasy to manage - limited lifeLack of business - conflicts betweentaxes partnersEasier to get fundsMore efficientAttract talented employees
8Why is it beneficial to go into business with a partner? PARTNERSHIP: business jointly owned by two or more people.General partnership: all partners are responsibleLimited partnership: one partner is not active in daily management but contributes funds ($)Limited liability: only responsible for your share of the investmentArticles of partnership: contract between partners
9CORPORATION: 90% of business organized as separate legal entities right to buy and sell propertyenter legal contractsue and be suedneed permission from the national gov’t – charter
10Corporation Stock: partial ownership of the firm Dividends: earnings or profitBonds: “loan” to the companyCommon Stock: “coach”Preferred Stock: “first class” extra benefits
11Corporation Strengths Weaknesses__________ easy to get financial capital - charter is difficult to gethire the best management - shareholders have little voicelimited liability - must pay taxes on(sucks for stockholders) businesseasy to transfer - unlimited life subject to gov’t regulations
13In some industries, there are no substitutes and there is no competition. In a market that has only one or few suppliers of a good or service, the producer(s) can control price, meaning that a consumer does not have choice
14Monopoly:a market situation with only one seller of a particular economic product that has no close substitute.
15Monopoly:A. Natural Monopoly: a market structure in which there is only one producer/seller for a product.1. Franchise: Gives a company the exclusive right to do business in a certain area without competition.a. example: water or gas companiesB. Geographic Monopoly: no other business in the immediate area offers any competition.
16Monopoly:C. Technology Monopoly: special privileges are given to those who invent a new product or process lead to another kind of monopoly.1. Patent: an exclusive right to manufacture, use or sell any new and useful product. (Plants also included)2. Copyright: gives an author or artist the exclusive right to publish, sell, or reproduce their work for a lifetime.D. Government Monopoly: a business the government owns and operates.
17Utility and plant patents are granted for a term which begins with the date of the grant and usually ends 20 years later.a design patent lasts for 14 years
19Oligopoly:a market situation in which a few very large sellers of a product dominate.
20Oligopoly:A. Price fixing: agreeing to charge the same or similar prices for a product.B. Price War: a series of price cuts by all producers that may lead to unusually low prices in the industry.
21Example of OligopolyAs an example, consider the market for cellular phones in the United States.There are four major players that account for approximately 90% of the total national cellular phone market.These companies are:Sprint-NextelT-MobileVerizonAT&T
23Top 10 Franchises for 2009 1. Subway 2. McDonald's 3. Liberty Tax Service4. Sonic Drive In Restaurants5. InterContinental Hotels Group6. Ace Hardware Corp.7. Pizza Hut8. UPS Store, The/Mail Boxes Etc.9. Circle K Papa John's Int'l. Inc.
29AdvantageDisadvantage1 Standardized quality1 Limited Production line2 National Advertising2 Strict operating standards and purchasing restrictions3 Financial assistance3 High Franchising fees and royalties4 Centralized buying power5 Management training and support
30Legality:Franchising falls under the jurisdiction of a number of state and federal laws.There is no federal registry of franchising or any federal filing requirements for information,Franchisors are required by the Federal Trade Commission to have a Uniform Franchise Offering Circular to disclose potential franchisees about their purchase.
31Major SportsIn sport, a franchise is a club given permanent rights to play in a specific league.Major League Baseball ("MLB") is a legal cartelThe only way for new entrant to participate is to buy an existing club and this is known as "buying the franchise“Also, all major sports teams franchise their name and logos to be used in all kinds of merchandise.
32Pure Competition:There are two extreme forms of market structure: monopoly and, its opposite, perfect competition.Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes.In a perfectly competitive market, should a single firm decide to increase its selling price of a good, the consumers can just turn to the nearest competitor for a better price.
33Five Conditions of a Purely Competitive Market. 1. Large amount of buyers and sellers must exist.2. Buyers and sellers deal in identical products.3. Each buyer and seller acts independently4. Buyers and sellers are reasonably well informed5. Buyers and sellers are free to enter into, conduct, or get out of business.