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Economics Chapter 3: Business Organizations. Chapter 3: Business Organizations. Chapter 3: Business Organizations. Chapter 3: Business Organizations. Chapter 3: Business Organizations. Business Growth and Expansion – 2 ways
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Chapter 3: Business Organizations • Business Growth and Expansion – 2 ways • Growth through investment – businesses can grow by re-investing their cash flows (the total amount of new funds the business generates from operations) in plant, equipment, and new technology. • Growth through business mergers – most mergers take place because firms want to become bigger, more efficient, acquire a new product, catch up to or eliminate a competitor, or change its corporate identity.
Chapter 3: Business Organizations • Types of Mergers • Horizontal Mergers – takes place when 2 firms that produce similar products come together. • Vertical Mergers – is one that involves 2 or more firms at different stages of manufacturing or marketing.
Chapter 3: Business Organizations Types of Mergers (continued) • Conglomerates – is a large firm that has at least 4 different businesses, none of which is responsible for a majority of sales. • Multinationals – can be an ordinary corporation or a conglomerate, but it has manufacturing or service operations in several different countries. • Multinationals introduce new technology, generate jobs, and produce tax revenues for the host countries.
Chapter 3: Business Organizations • Other Organizations: • Non-Profit Organizations – function like a business, but on a non-profit basis to further a cause or for the welfare of their members. • Examples are schools, hospitals, churches, welfare groups, and adoption agencies. • Provide goods and services to their members while they pursue other rewards such as improving educational standards and helping those in need. • Their activities often produce revenue in excess of expenses, but they use the profits to further the work of their institution.
Chapter 3: Business Organizations • Other Organizations (continued) • Cooperative or Co-Op – is one of the major non-profit organizations. The Co-Op can be organized to provide goods and services, or to help producers. • Professional Associations – work to improve the working conditions, skill levels, and public perceptions of their profession. • Examples are the American Medical Association (AMA) and the American Bar Association (ABA).
Chapter 3: Business Organizations • Other Organizations (continued) • Labor Unions – an organization of workers formed to represent its members’ interests in various employment matters. • Business Associations → Chamber of Commerce – promotes the welfare of its members and of the community. • Better Business Bureau – association that helps to protect the consumer.
Chapter 3: Business Organizations • Government plays a direct role in the economy when it provides goods and services directly to consumers; it plays an indirect role when it provides social security, veteran’s benefits, unemployment compensation, and financial aid to college students or when it regulates businesses.
Chapter 3: Business Organizations • Examples of Direct Role of Government • Called direct because the government supplies a good or service that competes with private businesses. • FDIC (Federal Deposit Insurance Corporation) • TVA (Tennessee Valley Authority) supplies electric power for almost all of Tennessee. • USPS (United States Postal Service) • State and local governments provide police, fire protection, rescue services, schools, and court systems.
Chapter 3: Business Organizations • Examples of Indirect Role of Government • The government plays an indirect role when it acts as an umpire to make sure the market economy operates smoothly and efficiently. • Regulations of public utilities – water or electricity • Social security payments, veteran’s benefits, financial aid to college students, and unemployment compensation.
