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Essential Question:

SECTION 4. Other Forms of Organizations. Essential Question:.

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Essential Question:

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  1. SECTION 4 Other Forms of Organizations Essential Question: • Describe each type of merger and the reasons why corporations pursue them, define the term Franchise and identify the benefits for this form of B.O; describe what a cooperative is and how it differs from regular businesses, explain the purpose of a non-profit business.

  2. SECTION 4 Other Forms of Organizations Mergers (combinations): • Mergers- When two companies join to form a larger company. Usually the larger company buys the other (Buys a controlling number of shares in the company) • More resources • Can reduce competition depending on type of merger

  3. SECTION 4 Other Forms of Organizations Vertical Combinations: • Vertical combinations—two or more companies involved in different production phases of the same good or service • Example- Apple buying the company that produces the processors for the iPhone or Ipad. • Why? To lower costs or ensure supply • Copy the model on the board into your notes

  4. SECTION 4 Other Forms of Organizations Horizontal Combination: • Horizontal combinations—two or more companies produce the same good or service and one purchases the other. • Why? Increases the larger company’s market size, gets rid of a potential competitor • Horizontal Combinations are most closely regulated by government since they reduce competition • Copy the model on the board into your notes

  5. SECTION 4 Other Forms of Organizations Conglomerate Combinations: • Conglomerate combinations—two or more companies that produce unrelated products. • Example- Proctor and Gamble, Time Warner • Why: As corporations grow, they are always on the lookout for businesses that they can acquire to increase their profit-making ability or that let them expand into new markets.

  6. SECTION 4 Other Forms of Organizations Franchise: • A franchise is a business that uses the original companies name to sell goods and services. • The parent company (Burger King Inc.) is the franchisor and agrees to let a business person, the franchisee, use their name and products in exchange for a fee or percentage of profits • Strict set of rules that franchisee must follow- products/pricing/etc.

  7. SECTION 4 Other Forms of Organizations Benefits of Franchise: • A business owner can reduce the overall costs associated with starting a business because: • employee training is often provided by parent company (lower costs) • advertising is sometimes paid for by parent company (lower costs) • it can use the parent company’s name (generates business from the start)

  8. SECTION 4 Other Forms of Organizations Cooperative : • Cooperative are owned by a group of members who cooperatewithout profit being the sole motive for doing business. • Cooperatives put the specific needs of the members ahead of things like profit • Specific products (green, vegetarian, bulk) • Provide services (healthcare, travel, savings)

  9. SECTION 4 Other Forms of Organizations Differences between a nonprofit organization and other types of business organizations: • not focused on financial gain • income not taxed by the government

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