businesses would merge for two reasons 1. the desire for the business to become bigger. 2....
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Businesses would merge for two reasons1. The desire for the business to become
bigger.2. Efficiency - Economies of Scale: the cost of
production falls as producer grows.
Business Combination
WHY IS NINO’S PIZZA
MORE EXPENSIVE THAN
PIZZA HUT’S PIZZA?
A Horizontal Merger is combining two or more firms that produce the same kind of product or service.
A Vertical Merger is combining firms involved in different steps of manufacturing a good.
Business Combination
Conglomerates – a firm that has at least four businesses, each making unrelated products.
Business Combination
GE
Multinational Corporations – a large corporation with branches in several countries.◦ Multinationals helped developing nations by… which can hurt workers in the U.S.
Business Combination
A Franchise is a business that licenses the right to SELL ITS products in a given area.
A franchisee is when a person buys the rights to sell the parent company’s products.
Franchise
Four types of food franchises: Fast Food – McDonalds, Burger King,
Wendy’s Pizzerias – Pizza Hut, Dominoes, Papa John’s
Ice Cream – Dairy Queen, Cold Stone… Coffee – Tim Horton’s, Dunkin’s, Starbucks
Franchise
An oligopoly is where a few companies control a large portion of a market.
The four largest companies total 40% of a given industry.◦ Cereal, Cell Service Providers…
Oligopoly
If a seller in an oligopoly lowers their prices, other producers in that industry will LOWER PRICES.
Oligopoly
A CARTEL is an organization of COMPANIES and COUNTRIES that agree to act together to set PRICES and limit PRODUCTION.
OPEC
OPEC altogether contributes 40% of the world’s oil production.
Cartel
ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES
Members of OPEC
Nigeria
Venezuela
Ecuador
Angola
Libya
Algeria
SaudiArabia
Iran
Qatar
UAE
Iraq
KuwaitFormer members include:
GabonIndonesiaIndonesiaGabon
1. Saudi Arabia2. Iran3. UAE4. Iraq5. Nigeria6. Kuwait
1. 2. 3. 4. 5. 6. 7. Venezuela8. Algeria9. Angola10. Libya11. Qatar12. Ecuador
OPEC Case Study
A COOPERATIVE is a business operated for the shared benefit or the owners, who are also its customers. ◦ Associated Press (News Co-Op)◦ Sunkist Growers (Farmers Co-Op)◦ BJ’s (Consumer Co-Op)
Cooperative
Non-Profit Organizations acts like a business organization.
It’s purpose is usually to BENEFIT SOCIETY.◦ Amnesty International◦ Red Cross◦ UNESCO◦ Salvation Army
Non-Profit Organization
There are five conditions:1. MANY BUYERS & SELLERS - no one can
dominate2. STANDARDIZED PRODUCTS - no quality
difference3. INDEPENDENT BUYERS/SELLERS -
competition reduces prices
Pure/Perfect Competition
1. 2. 3. 4. WELL INFORMED BUYERS/SELLERS - a
weakness*5. FREEDOM TO ENTER/EXIT THE MARKET -
anyone can enterThe closest example of perfect competition is FOOD.
Pure/Perfect Competition
Monopolistic competition is different as it:OFFERS SIMILAR BUT NOT STANDARD PRODUCTS.
Four ways monopolistic competition tries to gain business through non-price competition:◦ Many buyers and sellers◦ Similar but differentiated products◦ Limited control of prices◦ Freedom to enter/exit the market
Uses DIFFERENTIATION to distinguish products.
Monopolistic Competition
A monopoly is a MARKET STRUCTURE in which only ONE seller sells a product for which there are no close substitutes.
A monopoly is A PRICE SETTER, RESTRICTS THE MARKET and IS THE ONLY SELLER.
Monopoly
Monopoly
Government Monopoly Technological Monopoly
Natural Monopoly Geographic Monopoly
TYPES OF MONOPOLIES
When the costs of production are lowest if only one firm provides output.
i.e. Water Companies
When a firm controls a manufacturing method, invention or a type of technology.
i.e. Apple® Patents
When there are no other producers or sellers within a given region.
i.e. Buffalo Sabres
When the government either owns and runs the business or authorizes only one producer.
i.e. the Post Office
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