Page 15 - Bus101FlipBook

CH 1] Business 101 1-3

not only on the balance sheet, but also in matters of social responsibility." From this,
Sears earned a reputation of integrity, and competitive strength that enabled it to
succeed as one of this nation's largest retailers during its time. 1

The Free Market and Private Enterprise System
Historically the United States business climate incubated in a free market, with
limited or no government intrusion. A free market is one where there is little
government interference where a business and owner(s) may enter or leave at will.
Even though the small businessman may report more intrusive government in his free market
a political/economic state
business decisions. In today’s thinking, we still refer to our ability to freely enter or where one where there is
leave a market as a private enterprise system; and it is often taken that the “private little government intrusion
enterprise system” and “free market” are synonymous phrases. A point of and a businessman many
embarkation for business in the United States is that our government form has been enter or leave at will.

specifically established to protect the fundamental right to private property. When
that is infringed on, then the needs of society will not be met.
In the private enterprise system, its success or failure, for the owner and his firm private enterprise system
is determined by how well they match and counter the offerings of competitors. An Economic system in
Competition exists among businesses for customer acceptance of the goods and which success or failure is
determined by how well
services that they offer as each business endeavors to differentiate its business from firms meet the needs of the
all others. Total Sales and Net Profits are the yardsticks by which success and market place and match and
acceptance is measured. For any business to continue, it must make a profit, else it counter the offerings of
will go out of business—Nobody works for free, not even your teachers. Competition competitors.

occurs with price, product quality in relation to its price, product availability, and the competition
perceived needs of the consumer. Contest among businesses
There exists a plethora of examples of once successful firms that failed to for costumer acceptance.
continue to meet consumer demands. There is always someone waiting to provide
your customers with a product or service that you do not. It is competition which
assures that, over the long run, firms that satisfy consumer demands will be successful
and those that do not will be replaced.
In a free market, you have business owners who comprise the private enterprise
system, and their firms compete for market share, continually adjusting strategies,
product offerings, service standards, and operating procedures to gain wider
acceptance and increase sales and profits. For each company, it is an up and down
rollercoaster ride. Consider the following grocery store chains: As the idea of the
grocery store was developing, it was the Great Atlantic and Pacific Tea Company
(A&P) that was for many years the dominant and largest supermarket chain in the
United States. The Safeway company overtook the A&P in size and sales volume
only to be overtaken by The Kroger Stores; now Whole Foods and Hi-Vee Stores
surpass the A&P pushing it farther down in store rankings. These rankings are not
static but continually change as management structures their stores to meet the needs
and demands of their customers.
Ford once led all automakers in production. Today it ranks second to General
Motors among domestic producers. At one time, Montgomery Ward (1871-2001)
competed head to head with Sears and Roebuck, was the original mail-order
company, developing departments stores which it closed. Having started in mail-order
sales, Montgomery Ward Inc. has been rebranding itself as an online retailer known
as Wards. Sears has struggled with re-organizations, mergers with the SS Kresge
Company (K-Mart Corporation) into the Sears Holdings Corporation. Now Wal-Mart,
headquartered in Bentonville, Arkansas, is the leading retailer in dry-goods, sundries
and grocery items. These events suggest the dynamic environment of the private
enterprise system.
Competition is a critical mechanism for guaranteeing that the private enterprise
system continues to offer the goods and services that provide high living standards
and sophisticated life-styles competing among themselves for consumer acceptance.
Few businesses escape the influence of competition. Nonprofit organizations, such as
the American Cancer Society, compete for contributions with such groups as the local
symphony, your own college, and other worthy charities.

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