Understanding Business Structure

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Understanding Business Structure

• Distinguishing between types of enterprises

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Star Trek - Enterprise
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Enterprise

• Enterprise is simply defined as Business
  Organization
• Examples
• If you raise sheep, you have a sheep enterprise
• If you grow crops, you have a crop enterprise.
  But if you grow corn wheat, you also have a
  corn enterprise and a wheat enterprise.

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Types of Enterprises

• Competitive Enterprises
• Complementary Enterprises
• Supplementary Enterprises

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Competitive Enterprises

• Most enterprises are competitive ones. That is
  they compete for resources.
• Make up most farm enterprises, compete for
  economic resources
• Land
• Labor
• Capital
• Management
• Increasing the level of one enterprise reduces
  the resources available to have another competing
  enterprise.

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Show What You Know

• List at least two of the four resources that
  competitive enterprises compete for.
• If I increase the level of one enterprise, it
  _____the resources available to have another
  competing enterprise.

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Complementary Enterprises

• Adds to another enterprise when resources are
  limited.
• One that increases its output while at the same
  time increases the output of another enterprise
  within the same farming system.
• Extremely rare and only exist for a very few
  combinations.

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Show What You Know
A complementary enterprise adds to another
enterprise when resources are _______. Which is
more rare, a competitive enterprise or a
complementary one?
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Supplementary Enterprises

• Neither competes with nor adds to the production
  of another enterprise.
• May have use for some existing resources that
  would otherwise go unutilized or at least
  underutilized.
• Would supplement the farm income and not compete
  for any resources that might be utilized by other
  enterprises. The relationship ends as that
  enterprise becomes larger and starts competing
  for resources. 
• Typically utilize resources with low opportunity
  costs.

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Opportunity Costs

• The cost of using a resource based on what it
  could have earned if used for the next best
  alternative.
• For example, the opportunity cost of farming your
  own land is the amount you could have received by
  renting it to someone else.

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Show What You Know
A supplementary enterprise neither ______ nor
_______ to the production of another
enterprise. Are the opportunity costs high or
low with supplementary enterprises?
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The End