The Coffee Bean & Tea Leaf(CBTL), Business strategy case study
Day2
1. Quiz 1
½ page
1. When an economist is talking
about a “firm”, what is that?
2. Why doesn’t Mr. Klein drive a
Tesla? Using economic language
3. What is your opportunity cost of
being here right now?
4. Why might someone disagree
with the statement “the best
things in life are free”?
5. Why do you think entrepreneurs are
vitally important to our society?
(2 reasons)
2. Full page Assignment
1. Give an example of a time when you were
forced to do something.
2. Who was the authority figure?
3. Why did they force you to make that choice?
4. How could they have made you do #1
without force?
3. 4 Economic questions for your
house
1. What to produce?
2. How to produce?
3. How much to produce?
4. How much does each person consume?
4. 4 Economic questions for every
society
1. What to produce?
2. How to produce?
3. How much to produce?
4. How much does each person consume?
Barack Obama
President of USA
Naoto Kan prime minister of JapanMexican President Enrique Pena Neito
5. What happened in 1776?
• Enlightenment
• Philosophy
• Adam Smith
• Scottish economist
• Wealth of Nations
• Pages 46-50
• Read for 8 minutes
• Answer 4 economic
questions
• Summarize the 5
parts of “our system”
in your notes
6. Adam Smith’s invisible hand
• Laissez faire
• Market based
economy
• How did your
pencil get made?
• I pencil
7. Circular Flow Model
Households
Firms
Product Market
Factor Market
Money $$$
Goods/Services
labor
Wages $$
Investments $$
Interconnectivity
Where is the gov’t?
Regulation &
taxation
8. In Review
In our system:
• Firms need
households
• Households
need firms
• They are
interconnected
• Gov’t small role
• Mixed economy
9. The government role in the economy?
• Like a guide to our economy
• Mixed economy
• Group Assignment: 1 paper
1. Explain your family’s role in the market
economy. (2 ways from circular flow)
2. Using the model, why would a business want
other businesses to succeed?
3. How could the government increase
consumption by households? 2 ways
4. How could the government increase goods
and services created or sold by firms? 2 ways
5. How could the government increase the
number of households who work for firms?
2 ways
6. For 3-5, what is the opportunity cost of that
action?
10. Next assignment Full sheet
1. Imagine that Flowing Wells High School won a
$15,000 grant to do what ever they want from
Bookman's. How do you think they should
allocate the $15,000?
12. Allocation methods
How do families allocate?
Brute force
First come, first serve
Equal Rationing
Rationing by committee
Based on need (poorest)
Contest based
Random lottery
Auction – willing to pay
13. FW Administration has 2 tickets to this
year’s Final Four basketball games
They are going to allocate the tickets to one student.
They are going to either use: 1. lottery, 2. auction,
3.poorest, 4.first come, first serve, 5.highest GPA,
6.committee of teachers, 7.fastest 1 mile run, 8. most
free throws, 9.winner of singing contest, 10. best
youtube fan video
2. Two reasons your method is best
3. For each of the others, 1 problem
14. Currently organ donation in the US is
done by donation only, and first come
first serve.
4. Write a paragraph
comparing and
contrasting this
allocation method
with an auction for
kidneys where
people on the waiting
list could buy kidneys
from donors. Which
method do you think
is best?
15. Value, in economic terms
½ sheet of paper
2 ways economists measure
value of a good/service:
1. Price – (How much are you
willing to pay?)
2. Utility (how happy does this
make me?)
16. Why trade is important?
On this ½ sheet of paper:
1. What is your original good/service?
2. Write what you think the value (in $) your good or service is.
Round 1, only at your table
Round 2, same gender
Round 3, everyone
1. Write down the good’s utility for you (1-10)
Walk around the room for 10 minutes and see if you can trade your good for something
of higher utility
4. How many trades did you make?
5. What is your final good/service?
6. What is its value?
7. What is your new utility?
8. Imagine you had to pay Mr. Klein $10 for each trade, how
would that have impacted this simulation? (this tax is called a tariff)
17. Full sheet: Choose an entrepreneurial idea
Landscaping firm
Restaurant
Software firm
Trucking Company
1.Think of at least two places could you raise the
$15,000-$30,000 to start the business?
2. Besides going bankrupt, what bad things or risks
could occur to your business?
3. Would your business do better during good
economic times or could it succeed anytime?
Explain your reasoning.
18. Sole Proprietorship
• Single person
• Good for: low risk businesses, low entry costs
• Benefits: single person has all control and keeps
all profits
• Drawbacks: single person assumes all risk,
• hard to raise capital
• Examples: small construction firms,
artistic firms, bloggers, import/export
19. Partnerships
• Two people in business together
• Good for: low risk businesses
• Benefits: low entry costs, shared costs
• Drawbacks: partners assume all risk
• hard to raise capital,
• agreements “like a marriage”
• Examples: law firms, small specialized
firms
21. Liability
• If your Sole Proprietorship or Partnership
is sued…
• They can take:
– Your house
– Your car
– Your money in the bank
– Your future money!!!
22.
23. Corporations
• A legal “person”
• Good for: higher risk businesses
• Benefits: owners protected
• easier to raise capital
• Drawbacks: double taxation
• increased regulation
• Examples: restaurants, LLC’s,
Sports Franchises
24. Double taxation
• Corporation pays its own taxes: 25-35%
• Corporation pays employees wages/salary
• Employees ALSO pay taxes: 20-38%
• Trade off is liability for risk
25. General Electric ($26/share)
• Founded by Thomas
Edison (1878)
• Largest producer of
finished goods in world
• Lighting, appliances,
engines, aviation, power,
railroads, healthcare, NBC,
measurement systems
• Revenue: US $146 Billion
(2013)
26. Non-Profit Organization
• Goal is service, not profit (not part of gov’t)
• Good for: caring or political, service related
goals
• Benefits: legally protected, no taxation
• Drawbacks: difficult to keep alive, survives on
donations and grants
• Examples: Churches Salvation Army,
USAID, Amnesty International,
NAACP,
PETA, Judicial Watch, Gates
Foundation, Scholarships
27. 4. Which business organization would you use
for your business and why?
30. 2 types of Corporations
• Privately held – owned by founders or
owners
• Publicly held – owned by shareholders
31. Publically Held Corporations
• Larger corporations, publically traded
• Good for: higher risk businesses
• Benefits: owners protected,
• MUCH easier to raise capital
• Drawbacks: double taxation
• increased regulation
• owned by shareholders
• Examples: Wal-Mart, Disney,
Starbucks, Apple, Microsoft
32. Corporate Structure
Shareholders
Election
Board of Directors
Hires/fires
Chief Executive Officer
(CEO)
Hires/fires
Every other employee
1976 – founded as partnership
Steve Jobs, Steve Wozniak
1977 – formed privately held corp
1980 – “went public” to shareholders
Steve Jobs new CEO
1985 – Jobs fired by B of Directors
1996 – Jobs returns as CEO, ipods, imacs
33. Chapter 3, Corporations
1. Page 56, Rank US business organizations in order of how common
they are
2. Rank business organizations in order of revenue
3. Who actually owns big corporations like Walmart, Disney and Apple?
4. What would your business need to do to file articles of incorporation
with the state of Arizona?
5. What would you have to do if you wanted to open a Subway
franchise?
6. Compare and contrast the advantages of owning a franchise like a
Subway.
7. What is the opportunity cost of investing in the stock market?
8. What is a merger? Give 3 real world examples, ok to look up on
phone
9. Contrast cooperative business structure with the 3 most common
10. Which market structure would you use if you wanted to start a taco
stand? Support your answer
11. Which market structure would you use if you wanted to start a
company that writes cellphone apps? Support your answer
34. Profit Motive
• People want profits
• Different than command economy
• Adam Smith “invisible hand”
• Movie clip: “What's the point?”
35. Free Market Economy
• “Invisible hand”
• Government does as
little as possible
• Property rights
• Stays out for winners
and losers
37. Mixed Economies
• Modern countries have the government
help some, but mostly it’s the market
• For example….
• Schools
• Roads
• Healthcare
• Child care
• Space Travel
38. What if….
In our system:
• Firms need
households
• Households need
firms
• They are
interconnected
• Govt raised
sales tax to
25%?
• Govt lowered the
income tax by
5%
• Unemployment
rate rose by 10%
39. Investing
• One way to save for your future is to
invest
• You can publically invest in hundreds of
companies
Brainstorm a list of 10 companies (or
industries) you think would be a good
investment and a brief “why”.
Investments $$
40. Investing in the USA
• Stocks
• Bonds
• Stock Market
• NYSE, NASDAQ
• Dow Jones
• Bull vs. Bear
• Mutual Funds
• Industries
42. Investing
• Brokerage Account
• Old School – Stock Broker
• Higher fees, but advice
• New School – DIY online
• Lower fees, little to no help
43. A stock broker at work
• Finance
degree
• Income:
$50,000 and
up
• Commission
per trade
44. Famous Investor
Warren Buffett (1930-
Richest man in the
world ($52 Billion)
Successful investor
Earns only pays
himself
$100,000/year
“hold investments”
45. Bonds
• Government backed
• Very Safe
• Low risk
• Low return
• Loan for a time
• Corporations also
offer them
47. Stocks
• Stock Calculation:
• $25.90/share
• You have $1000 to
invest in Disney
• $1000 investment
• $25.90 per share
• You can buy 38.6
shares with $1000
• Dividend: $0.35 /year
Investment divided by share price =
shares you can buy
48. Let’s try one
• $1,000 investment
• Someone name a large company
49. Stocks
• Stock Calculation:
• $25.90 share price
• You own 38 shares
• Price $28/share
$28 X 38 = $1064 now!
Total investment = share price X shares owned
50. Stock Market
• Place where
Stocks are traded
• Most famous:
NYSE
• Others, NASDAQ,
Nikkei, London,
Hong Kong,
Chicago
66. Old School Stock Market
Simulation• Sellers/Buyers
• 2 minute trading day
• 3 companies, Ford (F) , Campbell's (CPB),
Adobe (ADBE)
67. Simulation questions
2. On a half sheet write down how much
money Klein gave you
3 Write down your goal for this simulation
68. News of the Day
• American businessmen fear US government
debt
• Consumer demand for soup increases by 10%
• Chevy announces new hybrid model
69. News of the Day
• Mexican tomato growers watch 80% crop killed
• President Obama announces increase in
income taxes
• Adobe announces record breaking year
70. News of the Day
• US signs trade deal with Australia, tariffs on
cars eliminated
• Consumer debt at an all time high
• US consumers frustrated with Indian tech
support
71. News of the Day
• Gas price up to $5/gallon in US
• US computer companies sell 20% more
computers last month
• US consumers get rebate check of $200
72. News of the Day
• US Unemployment Rate increases to 10%
• US tourism increases for the second straight
month
• Microsoft announces new product to compete
with Acrobat Reader
74. Closure
4 How much did you finish with?
5 What effect did the news have on
your investing?
6 Explain why you think this was a
Bear or Bull market?
7 Fill in 3 things you learned today
on the L column of #1
75. Mental Bellringer
Think of a day when you got a lot done. What
were you doing? Why were you able to do it?
80. Productivity
• Quantity of output for each unit of input
• For example:
• Mechanic can do 4 oil changes per hour
• Each oil change requires $8 worth of filter & oil
• “At the margin” increases in
Productivity
Another example?
Hours studying? Working?
81. Draw and label 2 good PPF
label impossible, efficient and inefficient
82.
83. Increases in productivity
• Causes ---------
• #1 technology
• Others:
• Human capital
• Cheaper inputs
• Health
• Globalization
84. In your groups
• How have the factors of production changed
(and become more productive) in the last 20
years
95. In your groups
• You are members of the
financial ministry of the
country of Travistan
• Create a budget for FY 2014
• Smog level 100 million
particles per square inch
Reducing pollution would
increase tourism and create
thousands of new jobs
Travistan
