Were microsoft cisco and others simply forming a

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Unformatted text preview: ed partnerships with potential competitors such as Intel, Compaq, and Dell, and did better than Apple, which did not form partnerships. Were Microsoft, Cisco, and others simply forming a “draft line”? Moving up the corporate ladder also has characteristics of a “draft line.” Often an executive climbs the corporate ladder with selected staff. Often one corporate “draft line” replaces another. Cooperation and competition are two important processes in economics. People cooperate when they trade with each other, and they compete when they pursue the same customer’s dollars. Perhaps this does explain the rise in popularity of NASCAR. People realize that watching and studying stock car races might teach them lessons that lead to success in the business world. And near the end of the race it is inevitable that cooperation will give way to competition. The second car in a draft line will try to pass the car in front. This is a very technical maneuver, but it is made harder by the first car trying to prevent his former partner from passing. Lesson learned from stock car racing: Stock car racing is not just a matter of powerful engines, agile handling, expert driving, and fast pit stops. It is a second-by-second knowledge of knowing when to cooperate and when to compete. Are there any “draft lines” in your life? Has it ever been necessary for you to form new partnerships to achieve your goals? Which do you think is most important in achieving success— cooperation or competition? THINK ABOUT IT * This feature draws on two papers: “Fortune 500, Meet Daytona 500,” by Charles Duhigg in Slate, February 17, 2003, and “Social Science at 190 MPH on NASCAR’s Biggest SuperSpeedways,” a 2000 Rand Corporation paper by David Ronfeldt. Section 1 About Business Firms 161 07 (154-185) EMC Chap 07 11/17/05 5:14 PM Page 162 Disadvantages of Sole Proprietorships Sole proprietorships have disadvantages, too: partnership A business owned by two or more coowners, called partners, who share profits and are legally responsible for debts. Chris Feaver and Larry Little were the founding partners of Excite, an Internet company. Although they have since sold their company, what advantages would Chris and Larry have enjoyed operating their company as a partnership? What would have been the disadvantages? 1. The sole proprietor faces unlimited liability. Liability is a legal term that has to do with the responsibility to pay debts. Saying that sole proprietors have unlimited liability means that their personal assets may be used to pay off the debts of the firm. For example, suppose Arzlani opens her own cookie shop in the shopping mall. A year passes, and she is taking a loss on the business. She is also in debt to her suppliers—the person from whom she buys flour, the person from whom she rents the shop, and so on. Because Arzlani has unlimited liability, her personal assets—such as her car and her house—may have to be sold to pay off her business debts. 2. Sole proprietors have limited ability to raise fun...
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This document was uploaded on 01/16/2014.

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