Economics: Unit 2 Business Organizations, Labor and Institutions

Economics: Unit 2

Business Organizations, Labor and Institutions

Chapter 3: Business Organizations

?

Sole proprietorships are the most common form of

business organization.

Most sole proprietorships are small. All together, sole

proprietorships generate only about 6 percent of all United

States sales.

Chapter 8, Section 1Chapter 8, Section 1

A sole proprietorship is a business owned and managed by a single individual.

A. Proprietorships

Proprietorships biz. owned by single person PROS

Easy to Start Full Control All profits to Owner

CONS Large liability Limited Resources Lack of permanence

Under $25,000

$25,000 – $49,999

$50,000 – $99,999

$100,000 – $499,999

$500,000 – $999,999

$1,000,000 or more

By Size of Receipts

0.4%0.9%

70%

12%

8%

9%Mining

Construction

Manufacturing

Transportation

Wholesale trade

Retail trade

Finance, insurance, real estate

By Type

1%3%

13%

Agriculture, forestry, fishing services

Services

3%

5%

16%

8%

2%

49%

Proprietorships

B. Partnerships business owned by two or more people Started out as partnerships…

Partnerships

PROS Easy to Start Specialization Larger pool of $

CONS Unlimited liability Conflict

C. Corporations


A corporation is a legal entity, or being, owned by individual stockholders.

Stocks, or shares, represent a stockholder’s portion of ownership of a corporation.

Corporations biz. owned by stockholders PROS

Huge pool of $ Limited Liability No skills needed to be

stockholder CONS

Difficult and expensive to start Complex Double taxes on ind. & bus. Little Control

STOCKSTOCK

Corporate Organization

Corporate Combinations Horizontal mergers combine two or

more firms competing in the same market with the same good or service.

Vertical mergers combine two or more firms involved in different stages of producing the same good or service.

A conglomerate is a business combination merging more than three businesses that make unrelated products.


Oil Co. A Oil Co. B Oil Co. DOil Co. C

Parent Oil Co.

Steel plant

Utilities

Mines

Railroad

PROCTER and GAMBLE Ace is a brand of laundry detergent/liquid available in numerous forms and scents. Always is a brand of feminine care products. Ariel is a brand of laundry detergent/liquid available in numerous forms and scents. Bold is a brand of laundry detergent/liquid. Bounce is a brand of laundry products sold in the United States and Canada. Bounty is a brand of paper towel sold in the United States and Canada. Braun is a small-appliances manufacturer specializing in electric shavers, epilators, hair care appliances and blenders. Cascade is a brand of dishwashing products. CoverGirl is a brand of women's cosmetics. Crest/Oral B is a brand of toothpaste and teeth whitening products. Dash is a brand of laundry detergent/liquid. Dawn/Fairy is a brand of dishwashing detergent.[17]

Dolce & Gabanna is a brand of fine fragrances. Downy/Lenor is a brand of fabric softener. Duracell is a brand of batteries and flashlights. Eukanuba is a brand of pet food.

Febreze/Ambi Pur is a brand of air fresheners. Fixodent is a brand of air denture adhesives. Fusion is a brand of men's wet shave razors and is the quickest P&G brand to have reached $1 billion in annual sales. Gain is a brand of laundry detergent, fabric softeners and liquid dish soap. Gillette is a brand of safety razor and male grooming products. Head & Shoulders is a brand of anti-dandruff shampoo and conditioners. Herbal Essences is a brand of shampoo and conditioners. Hugo Boss is a brand of fine fragrances. Iams is a brand of pet food. Luvs is a brand of baby diapers. Mach3 is a brand of safety razor and male grooming products. Max Factor is a brand of women's cosmetics. Mister Clean is a brand of multi-purpose cleaner, and spray sold in the United States and Great Britain. Olay is a brand of women's skin care products. Old Spice is a brand of men's grooming products. Oral-B is a brand of toothbrush, and oral care products. Pampers is a brand of disposable diaper and other baby care products. Pantene is a brand of hair care products (conditioners/styling aids). Prestobarba/Blue is a brand of safety razor and male grooming products. Prilosec is an over the counter drug. Puffs is a brand of tissues. Rejoice/Pert is a brand of hair care products (conditioners/styling aids). Safeguard is a brand of soaps. Secret is a female anti-perspirant brand. SK-II is a brand of women's skin care products. Swiffer is a brand of house-cleaning products. Tampax is a brand of feminine care products. Tide is a brand of laundry detergent. Venus is a brand female hair removal products. Vicks is an over the counter medication. Wella is a brand name of hair care products (shampoo, conditioner, styling, and hair color).

PROCTER and GAMBLE Febreze/Ambi Pur is a brand of air fresheners. Fixodent is a brand of air denture adhesives. Fusion is a brand of men's wet shave razors and is the quickest P&G brand to have reached $1 billion in annual sales. Gain is a brand of laundry detergent, fabric softeners and liquid dish soap. Gillette is a brand of safety razor and male grooming products. Head & Shoulders is a brand of anti-dandruff shampoo and conditioners. Herbal Essences is a brand of shampoo and conditioners. Hugo Boss is a brand of fine fragrances. Iams is a brand of pet food. Luvs is a brand of baby diapers. Mach3 is a brand of safety razor and male grooming products. Max Factor is a brand of women's cosmetics. Mister Clean is a brand of multi-purpose cleaner, and spray sold in the United States and Great Britain. Olay is a brand of women's skin care products. Old Spice is a brand of men's grooming products. Oral-B is a brand of toothbrush, and oral care products. Pampers is a brand of disposable diaper and other baby care products. Pantene is a brand of hair care products (conditioners/styling aids). Prestobarba/Blue is a brand of safety razor and male grooming products. Prilosec is an over the counter drug. Puffs is a brand of tissues. Rejoice/Pert is a brand of hair care products (conditioners/styling aids). Safeguard is a brand of soaps. Secret is a female anti-perspirant brand. SK-II is a brand of women's skin care products. Swiffer is a brand of house-cleaning products. Tampax is a brand of feminine care products. Tide is a brand of laundry detergent. Venus is a brand female hair removal products. Vicks is an over the counter medication. Wella is a brand name of hair care products (shampoo, conditioner, styling, and hair color).

PROCTER and GAMBLE Oral-B is a brand of toothbrush, and oral care products. Pampers is a brand of disposable diaper and other baby care products. Pantene is a brand of hair care products (conditioners/styling aids). Prestobarba/Blue is a brand of safety razor and male grooming products. Prilosec is an over the counter drug. Puffs is a brand of tissues. Rejoice/Pert is a brand of hair care products (conditioners/styling aids). Safeguard is a brand of soaps. Secret is a female anti-perspirant brand. SK-II is a brand of women's skin care products. Swiffer is a brand of house-cleaning products. Tampax is a brand of feminine care products. Tide is a brand of laundry detergent. Venus is a brand female hair removal products. Vicks is an over the counter medication. Wella is a brand name of hair care products (shampoo, conditioner, styling, and hair color).

Corporations


Corporations

Others

PROFITS

90%

10%

Corporations

Others

TOTAL NUMBER OF

BUSINESS

20%

80%

D. Multinationals


Multinational corporations (MNCs) are large corporations headquartered in one country that have subsidiaries throughout the world.

Advantages: MNCs benefit consumers by offering products and jobs worldwide. They also spread new technologies, wealth and production methods across the globe.

STARTER: (Review) What are the benefits and drawbacks of each type of business?

MNCS: PROMOTING GLOBALIZATION OR AMERICANIZATION?

Disadvantages of MNCs Critics complain that

MNCS: Degrade cultures Offer low paying jobs Export wealth to

shareholders Provide harmful

working conditions Promote a “race to the

bottom”

Organized Labor (or Unions)

What Is a Labor Union?

A labor union is an organization of workers that tries to improve working conditions, wages, and benefits for its members.


Declines in Union Membership: Why?

“Right to Work” Laws The Taft-Hartley Act (1947) allowed states to pass right-to-work laws.

These laws ban mandatory union membership at the workplace.Economic Trends

Unions have traditionally been strongest in the manufacturing sector, representing blue-collar workers, or workers who have industrial jobs. Blue-collar jobs have been declining in number as the American economy becomes more service-oriented.

Fulfillment of Union Goals With the government setting standards for workplace safety, and with

more benefits being provided by both private and government sources, some claim that the union membership has decreased simply because their goals have been fulfilled.


Collective Bargaining


• Collective bargaining is the process in which union and company representatives meet to negotiate a new labor contract dealing with:

• Wages and Benefits

• Working Conditions

• Job SecurityUAW Collective Bargainers

Labor Conflict Options:

Mediation: is a settlement technique in which a neutral mediator meets with both sides to try and find an acceptable solution for both sides.

Arbitration: a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides.

Strikes: is an organized work stoppage intended to force an employer to address union demands. Strikes can be harmful to both the union members and the firm.

1959 Steelworkers Strike

2007-8 Writers Guild Strike

1987 NFL Players Strike

IKEA: Outsourcing to the USA1. What are the complaints of

Ikea’s US workers?

2. How is organized labor in the US and Sweden different?

3. What would be the advantages and disadvantages of a unionized workforce at the Danville plant?

You are a fast food cook and your boss has just informed you that you will be receiving a $5 an hour raise. This means your pay is now $13 an

hour (more than any other local fast food restaurant). How can this end up hurting you?

Supply and Demand in the Labor Market:or how can wage increases be a bad thing?

Labor Demand The higher the wage rate, the smaller the

quantity of labor demanded by firms and government.

Labor Supply As wages increase, the quantity of labor

supplied also increases.

Equilibrium Wage The wage rate that produces neither an

excess supply of workers nor an excess demand for workers in the labor market is called the equilibrium wage.


Effects of Wage Increases

A new restaurant opens in town, offering higher wages for cooks.

Other restaurants must raise wages for cooks in order to compete for scarce labor.

Restaurants increase the price of meals to cover their increased labor costs.

When the price of meals increases, consumer demand decreases.

As business decreases, restaurants’ demand for cooks decreases.

LABOR WAGES (price): Supply and Demand

Trends

A Changing Economy

The economy of the United

States has transformed from a

mainly agricultural economy

in the 1800s, to an industrial

giant in the 1900s.

The computer chip has

revolutionized the economy

since its introduction in the later

1900s.

Fewer Goods, More Services Overall, the United States is

shifting from a manufacturing economy to a service economy.

As service jobs increase, the nation is losing manufacturing jobs.

Demand for skilled labor is rising, and the supply of skilled workers is increasing to meet the demand.


Trends: Education and Earnings

Potential earnings increase with increased educational Potential earnings increase with increased educational attainment.attainment.



Trends in Wages and Benefits

Cost of Benefits Rises Benefits now make up about

28 percent of total compensation in the economy.

For employers, rising benefits costs raise the cost of doing business and decrease profits. Many firms are turning to contingent employment to curb benefits costs.

Recent Labor Conflicts1. What was the

issue?2. How long did

the strike last?3. How was it resolved? Who “won”?

4. Why is this woman so happy?

Be

Prepare

d to

Present!

Use economic reasoning and terms to explain the difference?

$290

Million

$7 a hour

$290

Million

Superstars!

$60 Million

$90 Million

$110 $75 Million

$300 Million

$48 Million

Economics for Leaders

$647 Million


Working Poor!

$5.15

$5.85

$6.55

$7.25


Why superstars?

Why Not Us?

Environment?Discrimination?


Or is it . . . .

Poor schools?

Ability?


Demand

Ultimately, what we are paid depends on the market for our services

Supply


It starts with demand:Willingness to pay

There are two elements: How much do workers produce? What value do consumers put on it?


It continues with supply:Willingness to accept

What affects workers’ willingness to accept?

1. Alternatives

2. Working conditions Safety

Surface vs. underground mining

“Non-pecuniary” Prestige, co-workers, location, etc.

Documents

Economics: Unit 2 Business Organizations, Labor and Institutions