-> Profit - occurs when businesses sell products or services for more than they cost to produce
-> Loss - occurs when businesses sell products or services for less then they cost to produce
-> Businesses typically organize in one of the following types:
* Sole proprietorship
* Partnership
* Corporation SOLE PROPRIETORSHIP
-> Sole proprietorship - a business form in which a single person is the sole owner and is personally responsible for all the profits and losses of the business
-> Many small businesses are sole proprietorships
PARTNERSHIP
-> Partnership - similar to sole proprietorships, except that this legal structure allows for more than one owner
-> Each partner is personally responsible for all the profits and losses of the business
-> When starting a partnership, it is wise to have a lawyer draft a partnership agreement
Partnership agreement - a legal agreement between two or more business
partners that outlines core business issues
CORPORATION
Two general types of corporations :
-> For profit corporation - focuses on making money and all profits and losses are shared by the business owners
-> Not for profit (or nonprofit) corporation - usually exist to accomplish some charitable, humanitarian, or educational purpose, and the profits and losses are not shared by the business owners
The differences between a sole proprietorship, partnership, and corporation are:
* Licensing
* Income
* Liability
FINANCIAL STATEMENTS
-> Financial statement - the written records of the financial status of the business that allow interested parties to evaluate the profitability and solvency of the business
-> Four primary financial statements include:
* Balance sheet
* Income statement
* Statement of owner’s equity
* Statement of cash flow
MARKET SHARE
-> Measuring the proportion of the market that a firm captures is one way to measure a firm’s performance relative to its competitors
-> Market share - calculated by dividing the firm’s sales by the total market sales for the entire industry
- For example, if a firm’s total sales (revenues) were $2 million and the
sales for the entire industry were $10 million, the firm would have captured
20 percent of the total market, or have a 20 percent market share
-> Reasons to Increase Market Share
* Economies of scale
* Sales growth in a stagnant industry
* Reputation
* Increased bargaining power
Marketing
-> Ways to Increase Market Share
* Product
* Price
* Place
* Promotion
-> There are also reasons not to increase market share
-> Marketing - the process associated with promoting the sale of goods or services
-> Marketing communication - seeks to build product or service awareness and to educate potential consumers on the product or service
-> Marketing mix - includes the variables that marketing managers can control in order to best satisfy customers in the target market
MARKETING MIX
Picture of martketing mix:
