Understanding Business

Structure
Distinguishing between types of enterprises
Star Trek - Enterprise
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.
Types of Enterprises

• Competitive Enterprises
• Complementary Enterprises
• Supplementary Enterprises
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.
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.
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.
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?
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.
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.
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?
The End