Unit I: Basic Principles of Economics

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Unit I Basic Principles of Economics
Have out HW and notebook work from yesterday!!
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Growth

• There are two ways for a business to grow and
  expandand remain privately owned!!
• Growth through Reinvestment
• Growth through mergers

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Growth

• By the end of next week we will get into the
  third way a company can expand, and that is
  through becoming a publicly traded
  companyselling of shares (stocks) of the company.

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1. GROWTH Through REINVESTMENT

• After paying out all costs of the business at the
  end of a cycle (monthly or quarterly), an
  entrepreneur can take that money and put it back
  into the business.

Reinvest PROFIT and buy MORE RESOURCES land,
labor cap.goods. This will move the PPF!!!
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2. Growth Through Mergers

• MERGER a COMBINATION of 2 or more companies to
  form a single company
• Why Merge?
• More EFFICIENT
• ELIMINIATE rival
• Grow FASTER
• Change IMAGE
• ACQUIRE better product/resources

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Two Different Types of Mergers

• Horizontal Mergers
• JOINING of companies that MAKE the SAME product
  take out competition

Key Bank
HSBC


HSKBC
Rockefeller Oil
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Growth Through Mergers
Wheat Farm

• Vertical Mergers
• A JOINING of firms involved in DIFFERENT STEPS of
  the manufacturing PROCESS
• Make production better!

Cattle Ranch

Slaughter Plant

CARNEGIE Steel
McDonalds
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Making Mergers

• Each group is given a listing of companies. You
  have to make some mergers, both horizontal and
  vertical. All companies must be used, and you
  must have at least three different vertical and
  three different horizontal mergers.

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Making Mergers

• Horizontal Mergers
• 2 McDonalds Burger King
• 3 Reebok, Adidas, Nike
• 4 Aeropostale, Banana Republic, Express,
  American Eagle

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Making Mergers

• Vertical Mergers
• 2 Byrnes Dairy Perrys Ice Cream
• 3 Mighty Taco, Franks Hot Sauce, Iceburg
  Lettuce
• 4 GM, Quaker State, Goodyear, Sony

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Other Business Terms

• Incorporated Anyone can incorporate a
  business to take the liability away from
  their personal belongings.
• Franchise Opening a business that already
  exists, paying the original corporation
  the right to use their goods
  http//www.timhortons.com/us/en/index.html

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Other Business Terms

• Multinational Any firm that either
  produces or sells goods services in
  more than one country
• Conglomerate A firm that owns four or more
  other companies that make unrelated
  products
• www.yum.com

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Unit I Basic Principles of Economics

• BE READY FOR TOP TEN FUN!!
• Have out merger note sheet from Friday

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Countries with the Most Gold Reserves
Although less important today, in the days of the
Gold Standard, this provided a way of measuring a
countrys wealth, guaranteeing the convertibility
of its currency, and determined exchange rates.

• 10. Taiwan
• 9. Russia
• 8. China
• 7. Netherlands
• 6. Japan
• 5. Switzerland
• 4. Italy
• 3. France
• 2. Germany
• 1. USA

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Many, Many Mergers Later

• Conglomerate
• A firm that has at least 4 unrelated businesses,
  none of which make a majority of the money
• Ex) YUM! Corporation owns KFC, Taco Bell, Long
  John Silvers, AW, Pizza Hut,

www.yum.com
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Many, Many Mergers Later

• Multinational
• A corporation that has manufacturing or stores in
  a number of different countries
• Ex) GM, HSBC, McDonalds, Disney, Sony, Nike.

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• Merger Matching Game!!
• Homework to follow!! The quicker you finish the
  match the faster you can start the homework!!