CONTENT/TEACHING OUTLINE COMPETENCY: OBJECTIVE: 3.00 3.

03 Explain economic foundations relevant to the sports and entertainment marketing industry. Discuss the free enterprise system.

A. Identify the basic principles of a free enterprise system. 1. The free enterprise system is also referred to as private enterprise. a. Encourages individuals to start and operate their own business with limited government involvement. b. Allows the market to determine prices through supply and demand. 2. Basic economic freedoms a. Freedom of ownership i. The ability to choose a house, car, job or business. ii. There are restrictions on how and where some businesses can operate. For example, the city of Wilmington might not allow a new movie production facility to be built in a residential area. b. Competition i. A rivalry between two or more businesses to gain as much of the total market share as possible. ii. Competition helps to maintain reasonable prices, provides consumers with new and improved products and results in a wider selection of products from which to choose. iii. Competition forces businesses to operate in the most efficient manner possible. c. Risk is the potential for loss or failure. d. Profit is the money earned from conducting business after all costs and expenses have been paid. B. Identify the advantages and disadvantages of entrepreneurship. 1. Advantages a. Personal independence to make key business decisions b. Personal fulfillment and feeling of self-worth c. Potential for increased income 2. Disadvantages a. Risk associated with potential loss of income b. Hours can be long and often irregular C. Discuss the forms of business ownership. 1. A sole proprietorship is a business owned and operated by one person. Seventy percent of all businesses in the United States are sole proprietorships. a. Advantages: i. Ease of startup ii. Limited government regulations including taxes. Sole proprietorships are taxed less than other forms of business ownership. iii. Profits go to the owner. iv. Freedom in making business decisions. b. Disadvantages
Sports and Entertainment Marketing I Summer 2003 47

CONTENT/TEACHING OUTLINE COMPETENCY: OBJECTIVE: 3.00 3.03 Explain economic foundations relevant to the sports and entertainment marketing industry. Discuss the free enterprise system.

i. Unlimited liability. The business owner is liable for all business losses including the initial investment and the ability of the owner to pay. ii. Sole responsibility for all aspects of the business including skills and finances. iii. Life of the business is limited to the life or interest of the owner. 2. A partnership is a business owned and operated by two or more people. Less than 10% of all businesses in the United States are partnerships. a. Types of partnerships: i. General partnership. (a) An agreement in which both partners agree to share equally in the profit and/or loss of the business. (b) Each partner is liable for all debts incurred by the business. ii. Limited partnership (a) Each limited partner is liable for any debts of the business up to the amount of his/her investment. (b) Limited partnerships must have at least one partner who has unlimited liability. b. Advantages i. Relatively inexpensive to start. ii. Combined financial resources and knowledge. iii. Shared management responsibilities. iv. Increased potential for profits. v. Shared responsibility for risk. vi. Taxed less than a corporation. vii. A change in ownership does not alter the continuity of the business. c. Disadvantages i. Partners can disagree on business decisions. ii. The decision or action of one partner is legally binding on the other partner, including financial decisions. iii. If one partner dies, the business is dissolved. 3. A corporation is a business owned by stockholders. a. A corporation is a legal entity that is chartered by the state in which the business is located. b. Boards, directors and officers manage the daily operations of a corporation. c. The three main types of corporations include: i. Private (closed) corporations do not offer shares of stock for sale to the general public. ii. Public (open) corporations offer shares of stock for sale to the general public. iii. Subchapter S corporations are taxed like a sole proprietorship and limited to 35 or less shareholders. (a) Advantages
Sports and Entertainment Marketing I Summer 2003 48

CONTENT/TEACHING OUTLINE COMPETENCY: OBJECTIVE: 3.00 3.03 Explain economic foundations relevant to the sports and entertainment marketing industry. Discuss the free enterprise system.

(i) Delegation of specific management skills (ii) Limited liability for stockholders (iii) Life of the corporation is unlimited (iv) Easier to secure capital (v) Stockholders can easily enter or leave the business by purchasing or selling stock (b) Disadvantages (i) Numerous legal restrictions (ii) Complex to start up and dissolve (iii) Taxed heavily (iv) Complex record keeping 4. A franchise is a business or organization with the right to use an established name and sell trademarked products. Franchises are granted to a retailer or a wholesaler for a fee. a. Advantages i. Name recognition and common products or services result in reduced liability. ii. Management training is typically provided by the franchisor (parent company). iii. Business plan is established by franchisor, modified for the location and franchisee (person purchasing the franchise). b. Disadvantages i. Freedom to make business decisions is usually limited ii. Franchise fees may be expensive iii. Supplies and products must be purchased directly from the franchisor.

Sports and Entertainment Marketing I Summer 2003 49

CONTENT/TEACHING OUTLINE COMPETENCY: OBJECTIVE: 3.00 3.03 Explain economic foundations relevant to the sports and entertainment marketing industry. Discuss the free enterprise system.

Resources Printed References: Marketing Essentials, 3rd ed., pp. 38-57. Sports and Entertainment Marketing, pp. 107-109, 128-132, 168, 261-264. Marketing, pp. 562-578. Suggested Activities: Marketing Essentials, 3rd Ed., Zazz Lab, pp. 206-207. Foreign country economic research presentation In teams of two assign students a country (or have them draw a country out of a basket). Be sure to include a variety of countries. Using the World Factbook link on the www.cia.gov site, students are to research various economic information on their assigned country. In addition, they are to research popular forms of entertainment and sports for their assigned country. (www.ipl.org has a link for newspaper websites all over the world) After each team presents their country, have students stand with posters and organize teams/countries by various economic indicators to illustrate the difference in the economic systems. Continue re-ordering countries around by other economic information. For example, Norway, with a socialist model, has a very high GDP per capita while North Korea and Cuba have a very low GDP per capita. This provides for a class discussion on worker motivation, competition, etc. Entrepreneur research Have students select (or assign) an entrepreneur in the SEM field to research and create a PowerPoint presentation to share with the class. Examples may include Oprah Winfrey, Bill Gates, Bob Johnson, Dave Thomas, etc.
Sports and Entertainment Marketing I Summer 2003 50

Teacher Notes

CONTENT/TEACHING OUTLINE COMPETENCY: OBJECTIVE: 3.00 3.03 Explain economic foundations relevant to the sports and entertainment marketing industry. Discuss the free enterprise system.

Resources, cont.. Suggested Activities: Franchise information hunt Have students use the Entrepreneur Magazine web site(www.entrepreneur.com) to research a specific franchise opportunity on the Franchise Zone link and/or Entrepreneurs Franchise 500 link. Students are to select a franchise of their choice, analyze the franchise information on the site and provide the following information: Name of franchise, description of franchise, number of U.S. franchises, number of foreign franchises, number of company owned stores, franchise fee, royalty fee (may be presented as on-going), required cash liquidity, and location of corporate headquarters, and based on the information the student has learned, do they think this franchise would be an attractive, money making venture for them? They should explain their answer. Business structure research Have student access the NC Secretary of States Business License Information Office web site to research the legal aspects of the different forms of business ownership. (www.secretary.state.nc.us/blio/, Starting a Business in NC link. There is a 3.00 project at the end of this competency. Websites: www.ipl.org www.cia.gov www.secretary.state.nc.us/blio/ www.entrepreneur.com Other Resources: 3.03 PowerPoint Presentation
Sports and Entertainment Marketing I Summer 2003 51

Teacher Notes