WOW 3

Economic Systems and Business Operations

Planned (or Directed) Economy

• Definition - Resources are owned and controlled by the government.

• In a Planned Economy – all phases of the economy and plans will be done using military and the police force if necessary. The average citizen has little or limited freedom.

Market Economy

• Definition - Consumers and businesses make economic decisions based on their own interests.

• Generally Market Economies are found in countries that have democratic forms of government.

Private Enterprise

• Definition - A system in which most economic resources are privately owned and decisions about production and distribution are largely made by voluntary exchange in the marketplace.

• Capitalism – private enterprise, private property, profit, competition and freedom of choice

Manufacturer

• Definition - Take products or raw materials and changes them into a form that consumers can use.

• Examples – Cotton mill in N.Carolina takes cotton from Alabama farm – spins the yarn into cloth – sells cloth to a Levi’s in SF…

Marketer

• Definition - A business that is involved with moving goods from producers to consumers.

• Example – identify, develop and test new products. Package and store goods, etc…

Service Business

• Definition - A firm that does things for you instead of making or marketing products.

• Projected that 3 out of every 4 workers will hold jobs in the service industry.

• Some serve individuals and some serve businesses

Joint Venture

Definition - Two or more companies form an alliance to perform various business activities. Often using each

others strengths.

Example – Jeep and Eddie Bauer – Doritos and Taco Belll

Franchise

• Definition - A written contract granting permission to sell someone else’s product or service in a prescribed manner, over a certain period of time and in a certain territory.

• Examples – Subway, etc.

Mass Production

• Definition - A large number of identical products are assembled using a continuous efficient process.

• Examples - Assembly line – beverage bottling plants.