Econ chap 6-7

• Competition


  The contest between several firms selling similar goods or services
• Advantages of competition


  • Competition makes your customer services better
  • Competition fosters innovation
  • Competition helps identify your strengths and weaknesses
  • Competition is good for consumers
  • Competition reminds you to focus on your key customers
  • Competition provides the opportunity to serve
  • Competition makes way for creative thinking
  • Competition helps identify threats to your business
  • Competition helps identify your strengths and weaknesses
  • Competition stops complacency
• Customers


  Individuals or businesses that purchase another company's goods or services. Customers are important because they drive revenues.
• Suppliers


  Usually known as either the manufacturer who manufactures the product itself or a distributor who purchases the goods from manufacturers
• Substitutes


  Products or services that can be easily replaced with another by consumers. In economics, products are often substitutes if the demand for one product increases when the price of the other goes up.
• SWOT analysis


  SWOT is the acronym for Strengths, Weaknesses, Opportunities, and Threats. It is a tool for business analysis which every organization needs to get through greater heights of success.
• Strengths


  • Positive internal characteristics that the organization can exploit to achieve its strategic performance goals. These are the qualities that help the firm achieve its objectives.
• Weaknesses


  • Internal characteristics that might inhibit the organization's performance. Weaknesses are the very qualities that the firm restrict to reach their objective and potential to the fullest.
• Opportunities


  • Characteristics of the external environment that have the potential to helps the organization achieve or exceed its strategic goals. They are the avenues for improvement and success which are present in the business environment.
• Threats


  • Characteristics of the external environment that may present organization from achieving its strategic goals. They arise when the efforts of the firm to attain a high level of profitability are jeopardized.
• Steps in creating a SWOT analysis

  1. Determine the objective

  2. Create a grid

  3. Label each box

  4. Add strengths, weaknesses, opportunities, and threats

  5. Draw conclusion
• Porter's Five Forces of Competitive Analysis

  Another tool that uses five industry forces to determine the intensity of competition in an industry and its profitability level. Michael E. Porter from Harvard University studied a number of business organizations and proposed that business- level strategies are a result of five competitive forces in the company's environment.
• The five competitive forces


  • Potential new entrants
  • Bargaining power of buyers
  • Bargaining power of suppliers
  • Threats of substitute products
  • Rivalry among competitors
• Steps used in Porter's Five Framework


  1. Gather the information on each of the five forces

  2. Analyze the result and display them on a diagram

  3. Formulate strategies based on the conclusions
• Industry


  Group of productive enterprises or organizations that produce or supply goods, services, or sources of income. In economics, industries are generally classified as primary, secondary, tertiary, and quaternary; secondary industries are further classified as heavy and light.
• Agribusiness industry


  Encompasses the economic sectors for farming and farming-related commerce. It involves all the steps for getting agricultural goods to the market, including production, processing, and distribution.
• Manufacturing industry


  The manufacturing industries are industries transforming goods, that is, mainly manufacturing industries in their own right, but they also concern the repair and installation of industrial equipment and subcontracting operations for third parties.
• Types of manufacturing production

  • Make to Stock (MTS)
  • Make to Order (MTO)
  • Make to Assemble (MTA)
• Retail industry


  The selling of goods and services to consumer end users. Retailing is seen as a contrast to wholesaling, which typically involves selling in mass quantities at lower prices.
• Services industry

  Provides people with intangible products or services and completes tasks that are useful to customers, clients, businesses or the general public. Service industries, unlike, for example, manufacturing and production industries, do not rely on the sale of material goods and products to earn a profit. Instead, the individuals who work in the service sector focus on completing tasks and providing services.
• Business organizations


  Establishments intended to carry commercial business by producing goods or services and meet the customers' needs. Most of the organizations have a standard such as social structure, purpose goals, utilization of resources, rules and regulations, etc.
• Types of business organizations


  • Sole proprietorship
  • Partnerships
  • Corporations
  • Multinationals
  • Conglomerates
• Sole proprietorship


  Has one owner who has unlimited liability for the business.
• Advantages of sole proprietorship


  • Ease of formation
  • Sole ownership of profits
  • Decisions making and control vested in one owner
  • Flexibility
  • Relative freedom from government control
  • Freedom from corporate business taxes
• Disadvantages of sole proprietorships


  • Unlimited liability
  • Lack of continuity
  • Less available capital
  • Relative difficulty in obtaining long-term financing
  • Relatively limited viewpoint and experience
• Partnerships


  A business partnership is a legal agreement between two or more entities that determines shared ownership and operation of a business. A partnership may be between two people, two businesses, or shared among any number of people and organizations.
• Advantages of partnerships


  • Ease of information
  • Direct rewards
  • Growth and performance are facilitated
  • Flexibility
  • Relative freedom from governmental control and regulation
  • Possible tax advantage
• Disadvantages of partnerships


  • Unlimited liability of at least one partner
  • Lack of continuity
  • Relative difficulty in obtaining Large sums of capital
  • Bound by the acts of just one partner
  • Difficult of disposing partnership interest
• Corporations


  Businesses that are treated like individual people by the law. A corporation can own assets, hire employees, sign contracts, and exercise individual rights.
• Advantages of corporations


  • Limited liability
  • Transfer of ownership
  • Unlimited life
  • Relative ease of securing capital in large amounts
  • Increased ability and expertise
• Disadvantages of corporations


  • Activity restrictions
  • Lack of representation
  • Regulation
  • Organizing expenses
  • Double taxation
• Multinationals


  Multinational corporations have business offices and operations in two or more countries. These companies are often managed from a central office headquartered in the home country. Simply exporting goods for sale abroad does not make a business a multinational company.
• Advantages of multinationals


  • Help spread new technologies
  • Help generate new jobs in a country
  • Produce tax revenues
• Disadvantages of multinational corporations


  • Political influence in host nation
  • Can exploit the economy of host nation
  • Take away jobs
• Conglomerates


  A conglomerate is the combination of two or more business entities engaged in either entirely different or similar businesses that fall under one corporate group, usually involving a parent company and many subsidiaries. Often, a conglomerate is a multi-industry company and is often large and multinational.
• Advantages of conglomerates


  • Helps the company in diversification
  • Enough opportunities for growth
  • Increases the number of customers
• Disadvantages of conglomerates


  • Chances of mismanagement for lack of experience
  • Shifting of focus from its core business
  • Difficulty in merging cultural value