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

MARKET STRUCTURES

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