Marketing Essentials Chapter 5

 Our nation is built upon freedom ◦ Freedom  What to purchase  Where to work  How to spend our money  To organize and negotiate  Where to invest our money  To own and operate our own business- FREE ENTERPRISE SYSTEM

 Encourages individuals to start and operate own business ◦ Entrepreneur  Have idea and dream  Willing to take risk  Government does intervene at times ◦ not a pure system, but modified  System allows us the freedom of ownership ◦ Personal property: home, car, computers ◦ Business: private sector  Able to do what we want with our property as long as it is legal.

 Protected in Free Enterprise System ◦ Protects consumer from someone stealing idea or concept ◦ Must apply for  Patent  Trademark  Copyright

 Struggle for customers ◦ Businesses try to attract new customers and keep old ones ◦ Other businesses try to take those customers away  Essential part of FES  Competition benefits the consumer ◦ Lower prices ◦ More product choices ◦ Better quality products

 Direct  Indirect

 Price Competitive ◦ Focus on sale price being low  Non Price Competitive ◦ Compete on the basis of factors that are not related to price. These factors include: quality of products, service, financing, business location, and reputation.

 Competition causes risk  Risk is the potential for loss or failure  As potential earning increases, so does risk  Open own business ◦ Put up own money to start ◦ If fails, you lose that money  Risks of Bad Publicity  Risk of Natural Disasters  85% of new products fail in the first year

 Money earned after all costs and expenses are paid ◦ P=R-C ◦ Only 5% percent of sales is actually profit ◦ 95% of revenues goes to pay costs, expenses, and business taxes.  Profit is the motivation for taking the risks  Profit is the driving force of Free Enterprise Center.

 Determines prices and quantities of goods and services to be produced.  Supply: amount suppliers are willing to make and sell. ◦ If prices increase, supply will increase  Demand: consumers willingness and ability to buy ◦ If prices increase, demand will decrease  Equilibrium ◦ Supply and Demand are equal  Market Price

 Surplus- More supplied than demanded  Shortage- More demanded than supplied