IE 31

• Economic System

  Process that involves the production, distribution and consumption of goods and services by organizing labor, capital & natural resources between entities in a particular society.
• Economics has been defined as the study of the way in which mankind

  organizes itself to tackle the basic problems of scarcity.
• Planned Economy (aka Command Economy) - This economy is controlled by the government. This system

  places people first, and not profits first hence there is economic equality. The prices are revenue-based & not

  market-based.
• Market Economy – is free of all government control. This involves the private ownership of production, distribution, and trade. In this system demand is the sole driver of production and pricing.
• Mixed Economy – This is a hybrid between the command and market economic systems.
• Extractive or “primary raw material” industries

  • provide material or goods for other producers and consumers.
• Manufacturing industries

  • transform materials or parts into products of greater usefulness

  to others who will purchase these products.
• SEMI-MANUFACTURED -goods partly fabricated passing from producers

  to producers for further processing
• FINISHED GOODS -goods to be sold to the ultimate consumers
• Distribution industries

  • facilitate the passage of goods from the crude raw materials

  through many stages of processing and manufacture to the

  ultimate consumers.
• Service industries

  • exhibit this process like domestic, financial, professional,

  mechanical, general public and government services.
• ENTERPRISE - An organized business entity with activities aimed

  specifically at growth and/or profit.
• OWNERSHIP - The legal right to possess, control, and dispose

  something
• ENTERPRISE OWNERSHIP - “the title to and possession of the assets of

  the enterprise, the power to determine the

  policies of operation, and the right to

  receive and dispose of the proceeds.”
• There are three ways in which business ownership can be acquired:

  1. Initiating a business
  2. Purchasing an existing company
  3. Franchising
• (Types of Ownership) PRIVATE OWNERSHIP - Defined as the fact of being owned by a private individual or organization, rather than by the state or a public body.
• (Types of Ownership) PUBLIC OWNERSHIP - the right of disposal, by a public body representing society, by government, state power or some other political body (i.e. to municipal, provincial, national, or any agencies created by them) .
• (Types of Ownership) MIXED BUSINESS UNITS - Type of ownership wherein there is a combination of both the public and private ownership.
• PUBLIC CORPORATION - This is organized and chartered

  like private corporations.

  • They are the most widely used

  form of public enterprise.
• NON-INCORPORATED PUBLIC CORPORATION -• established by the government,

  • operated by a regular

  department or a special agency

  created for purpose.
• SOLE PROPRIETORSHIP - The oldest and most common form of

  private business, it is owned by one person

  known as the sole proprietor.

  • Owner assumes full responsibility of

  supplying the preparatory and operational

  resources which include capital, managerial

  skills and the like.
• PARTNERSHIP • Generally defined as the association of two or

  more persons as co-owners of the business for

  profit.

  • Assume equal rights and responsibilities that

  concern the company’s gains and losses, assets

  and liabilities and the like.
• GENERAL PARTNERSHIP - constitutes at least one general partner who manage the business and are equally liable for its debts.
• LIMITED PARTNERSHIP - constitutes at least one general partner and one or more limited partners who have liabilities limited only to their investments.
• Forms of Partnership Based

  on Involvement:

  SILENT PARTNER - type of partner who is passive in the

  management of the business however is known to the public
• Forms of Partnership Based

  on Involvement:

  SECRET PARTNER - type is unknown to the public, however participates actively in running the business
• Forms of Partnership Based

  on Involvement:

  DORMANT PARTNER - this type supposes both the characteristics of a silent and secret partner
• Forms of Partnership Based

  on Involvement:

  NOMINAL PARTNER - does not contribute in terms of monetary investments rather he/she offers expertise or skills
• CORPORATION - Structured on a legal basis that

  constitutes a number of

  stock/shareholders, a board of

  directors and officers chosen to

  manage the operation of the

  company.

  • Treated as a separate entity from the

  owners themselves
• CORPORATE COMBINATIONS - • Combination of two or more companies aimed to increase their

  profits through mutual dependence in the exploit of available

  resources.

  • They form a larger-scale enterprise that can give them an

  advantage over competition and a higher chance to become

  economically stable
• MERGER - Results from the combination of two related companies

  through acquisition of assets and/or shares.
• HOLDING COMPANY - Type of business organization that allows a firm (called parent) and its directors to control or influence other firms

  (called subsidiaries).
• COOPERATIVES - An organization collectively owned & operated by a group of people in order to compete w/ large-scale competitors.
• Management - The organization and coordination of the activities of business in order to achieve defined objectives. It is often included as a

  factor of production along with machines, materials and money.
• Land - AGRICULTURE-BASED ECONOMIES emphasized

  on this, since it is a major factor to the quality of

  the products that would be produced and harvested.
• Labor - This encompasses the MENTAL and PHYSICAL efforts of all

  workers regardless of skill or education, who perform many

  tasks required to produce and sell goods and services.
• Capital - It includes BUILDINGS, MACHINERY, and TOOLS used to

  produce products or services. This is also sometimes used

  to refer to MONEY used to buy those items.
• Information - It became a vital input since factors of production and

  operations are data-intensive and information is needed to

  maintain competitiveness in the market and produce new

  ideas.
• Basic Activities in a Business System:

  1. Designing
  2. Engineering
  3. Production
  4. Distribution
  5. Support
• A corporate system is the collection of processes and functions

  through which ideas are processed and eventually becomes a

  product to be sold in the market. Finished product in time will be

  replaced, scrapped and recycled.