Transcript marketing i - Blue Valley Schools

MARKETING
Free Enterprise System
Chapter 5 Vocabulary
Free Enterprise System
•
A system that encourages individuals
to start and operate their own
businesses in a competitive market,
without government involvement.
o
o
Marketplace determines prices
Supply & demand
FREEDOM OF OWNERSHIP
Patent
•
•
•
Government issued
Exclusive right to make, use, or sell
an invention for up to 20 years.
U.S. Patent & Trademark Office
 Example:

Thomas Edison’s
Electric Lights
Trademarks
•
•
A word, symbol, sound, or color that
identifies a good or service but cannot
be used by anyone but the owner
Can be renewed forever if it is being
used by a business
Copyright
•
Involves anything that is authored by
an individual



•
•
Writings: books, magazine articles
Music
Artwork
Gives author exclusive right to
reproduce or sell the work.
Valid for the life of author + 70 years
Trade Secret
•
Protect proprietary information that
must be kept secret in order for a
business to profit.
o
Example:



Coca-Cola recipe
Colonel Sander’s secret recipe
Krispy Kreme recipe
Coke trade secrets case
'something out of a spy novel'
The suspects were arrested Wednesday — the day a $1.5 million
transaction was to occur. They are charged with stealing
confidential information, including a sample of a new drink, from
Coke and trying to sell it to Pepsi.
Williams, who worked as an administrative assistant for a Coke
executive at the corporate headquarters in Atlanta, is accused of
rifling through corporate files and stuffing documents and a new
Coca-Cola product into a personal bag. She has since been fired,
the judge said during Thursday's hearing.
The three suspects face charges of wire fraud and unlawfully
stealing and selling Coke trade secrets.
http://www.usatoday.com/money/industries/food/2006-07-05-coke-info_x.htm
Licensing Agreement
•
Protects the originator’s name and
products.
•
When a company wants to use
another company’s name, symbol,
creative work or product:
•
It must get permission to do so
•
Pay a fee for the use.
COMPETITION
Competition
•
The struggle for customers.
•
Forces businesses to:
o
o
o
o
•
Provide high-quality goods and services
Set reasonable prices
Continually develop new products and improve
old ones
Offer wider selection of products
Price Competition vs. Non-price Competition
Price Competition
•
Focuses on the sale price of a product.
•
Assumes that consumers will buy products
that are the lowest in price
•
Examples:
o
o
o
o
Southwest Airlines
Wal-Mart
ALDI
Price Chopper
Nonprice Competition
•
Businesses choose to compete on the basis
of factors that are not related to price.
o
o
o
o
o
o
Quality
Financing
Location
Reputation
Expertise
Customer Service
Monopoly
•
Exclusive control over a product or the
means of producing it.
o
o
•
No Competition
One firm has complete control
Not permitted in a free enterprise system
Risk
•
Business risk is the potential for loss or
failure.
•
The greater the risk, the greater the
return
•
85% of new products fail within the first
year
Profit
•
The money earned from conducting
business after all costs and expenses
have been paid.
•
Average range of profit: 1-5% of sales
Economic Cost vs. Benefits

Unprofitable Firms
o
o
o
o
o
Lay off employees
Investors lose $$
Less taxes paid to
government
Rise in
unemployment
Increase in cost of
social services

Profitable Firms
o
o
o
o
o
o
Hire more, better
benefits
More spending
Investors earn $$
More charitable
donations
Government gains
tax dollars
More competition
SUPPLY & DEMAND
Supply
•
The amount of goods producers are
willing to make and sell.

Law of Supply:
•
Economic rule that price & quantity
supplied will move in the same direction.
o
o
Price , Supply
Price , Supply
Demand
•
The consumer willingness and ability
to buy products.
•
Law of Demand:
•
The economic principle that price and
demand move in the opposite directions.
o
o
Price , Demand
Price , Demand
BUSINESS OPPORTUNITIES
Domestic vs. Global
Domestic Business
• A business that
sells products only
in its own country.
Global Business
• A business that
sells its products in
more than one
country.
For-profit vs. Nonprofit Business
For-profit business:
• Seeks to make a
profit from its
operations.
• Example:
o
o
o
o
Procter & Gamble
KPMG
Applebees
American Eagle
Nonprofit business:
• Functions like a
business, but uses
the money it makes
to fund the cause
identified in its
charter.
• Example:
o
o
o
Girl Scouts
Red Cross
United Way
Public vs. Private Sector
Public Sector
•
Government financed
agencies
•
Examples:
o
o
o
o
o
•
Public School
Public Libraries
Army
Medicare
Social Security
Purchase 1/3 of all
goods and services
supplied each year
Private Sector
•
Not associated with
government agencies
•
Examples:
o
Any business not
affiliated with the U.S.
Government
Industry
•
A group of establishments primarily
engaged in producing or handling the
same product or group of products or
in rendering the same services.
•
NAICS
o
North American Industry Classification
System
o
o
Uses a six-digit coding system
Classifies activity into 20 industry sectors
Consumer vs. Industrial Markets
•
Consumer Market:

•
Industrial Market:

•
Consists of consumers who buy goods
for personal use
Consists of business customers who buy
goods for use in their operations
These two markets are interrelated
because of derived demand.
Derived Demand
•
The demand for industrial goods
based on the demand for consumer
goods and services.
o
Example:
•
An increased demand for new homes results
in manufacturers experiencing derived
demand of materials needed to build a new
home.
Wholesalers
•
Obtain goods from manufacturers and
resell them to:
o
o
o
•
Industrial users
Other Wholesalers
Retailers
Wholesalers are also considered
distributors.
Retailers
•
Buy goods from wholesalers or directly
from the manufacturers and resell
them to the consumer.
•
Retailers generally cater to the
consumer market.
FUNCTIONS OF BUSINESS
Production & 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.

Retailers & wholesalers
Marketing

All activities from the time a product is
created until it leaves the producer or
manufacturer until it reaches the final
consumer.
Examples:
 Research
 Promotion
 Personal Selling
Management

The process of achieving company
goals by effective use of resources
through:



Planning – mission, vision
Organizing – scheduling, records
Controlling – budgets, financial reports
Finance & Accounting

Finance:


The function of the business that involves
money management
Accounting:

The discipline that keeps track of a
company’s financial situation.


Balance Sheet = Assets, Liabilities, Owner’s Equity
Profit & Loss (Income) Statements = revenues &
expenses