As with most things in economics, taxation is a mixed blessing. It is a blessing for those who receive dollars from taxpayers, which is about 40% of the population; and it is a nuisance for those who have to pay the taxes. The objective of this unit is to help you understand taxes and understand how they affect your life and the economy. The income tax system began in earnest in 1913 with the Sixteenth Amendment to the Constitution that gave Congress legal authority to tax income. A rudimentary income tax system was tried during the Civil War but was eventually declared unconstitutional. There was no income tax during the high watermark of America's industrial capitalism, beginning in about 1870 and continuing to 1910. If you made money in that era, you kept it. Many of the most famous capitalist names emerge from this era: Rockefeller, Carnegie, McCormick, Swift, and Vanderbilt. Two major disasters in our economic history, the Great Depression and World War II, changed the role of taxation and government forever. Beginning in the mid-1930s, following the ideas of John Maynard Keynes, the U.S. government began to spend money much more aggressively. In the past, government believed mostly in a balanced budget, but that changed when the Great Depression lingered for an entire decade. Later, to finance a two-front, world war, taxes were raised to about 90%. Thus began the era of big taxes to pay for big government. Taxes, of course, have fallen from that lofty peak to a more modest 35% marginal tax rate at present, but the number of taxes has increased exponentially. All but six states have an income tax; likewise, many counties and cities have an income tax. Though there are many ways to slice the tax onion, perhaps the best is the following: Progressive taxes: This is a tax system in which tax rates increase as income increases. In other words, the more money you make, the more taxes you pay. This system places a greater burden on those best able to pay and almost no burden on the poor. For example, according to Internal Revenue Service (IRS) statistics, the top 50% of earners pay 97% of the taxes. The top 1% of earners pays 30% of all income taxes. On the other hand, over fifty million people, or one-third of the adult population in the United States, pay no taxes whatsoever. Regressive taxes: In theory, these are the opposite of progressive taxes; these tax strategies fall more heavily on the poor. Common sense would suggest that these would be rarely used in a well-organized economy, but in fact, they are among the most commonly used because of their relative invisibility. Sometimes called the nickel and dime tax, regressive taxes tend to be small for each individual event; therefore, they are not widely noted. A good example of a regressive tax is the sales tax. It takes a much larger percentage of a poor person’s income than the income of someone of wealth. The reason there is no protest is that it takes such a small amount of money on ...

1. As with most things in economics, taxation is a mixed blessing.
It is a blessing for those who receive dollars from taxpayers,
which is about 40% of the population; and it is a nuisance for
those who have to pay the taxes. The objective of this unit is to
help you understand taxes and understand how they affect your
life and the economy.
The income tax system began in earnest in 1913 with the
Sixteenth Amendment to the Constitution that gave Congress
legal authority to tax income. A rudimentary income tax system
was tried during the Civil War but was eventually declared
unconstitutional. There was no income tax during the high
watermark of America's industrial capitalism, beginning in
about 1870 and continuing to 1910. If you made money in that
era, you kept it. Many of the most famous capitalist names
emerge from this era: Rockefeller, Carnegie, McCormick, Swift,
and Vanderbilt.
Two major disasters in our economic history, the Great
Depression and World War II, changed the role of taxation and
government forever. Beginning in the mid-1930s, following the
ideas of John Maynard Keynes, the U.S. government began to
spend money much more aggressively. In the past, government
believed mostly in a balanced budget, but that changed when the
Great Depression lingered for an entire decade.
Later, to finance a two-front, world war, taxes were raised to
about 90%. Thus began the era of big taxes to pay for big
government. Taxes, of course, have fallen from that lofty peak
to a more modest 35% marginal tax rate at present, but the
number of taxes has increased exponentially. All but six states
have an income tax; likewise, many counties and cities have an
income tax.
Though there are many ways to slice the tax onion, perhaps the
best is the following:
Progressive taxes: This is a tax system in which tax rates
increase as income increases. In other words, the more money

2. you make, the more taxes you pay. This system places a greater
burden on those best able to pay and almost no burden on the
poor. For example, according to Internal Revenue Service (IRS)
statistics, the top 50% of earners pay 97% of the taxes. The top
1% of earners pays 30% of all income taxes. On the other hand,
over fifty million people, or one-third of the adult population in
the United States, pay no taxes whatsoever.
Regressive taxes: In theory, these are the opposite of
progressive taxes; these tax strategies fall more heavily on the
poor. Common sense would suggest that these would be rarely
used in a well-organized economy, but in fact, they are among
the most commonly used because of their relative invisibility.
Sometimes called the nickel and dime tax, regressive taxes tend
to be small for each individual event; therefore, they are not
widely noted. A good example of a regressive tax is the sales
tax. It takes a much larger percentage of a poor person’s income
than the income of someone of wealth. The reason there is no
protest is that it takes such a small amount of money on each
event, typically 7%.
Other examples of regressive taxes are the Social Security tax
and Medicare tax. Social Security takes 6.2% of your gross
income, plus 1.45% for Medicare. Of American workers, 70%
pay more to Social Security and Medicare than to income taxes.
Proportional tax: The third type of tax system is a proportional
tax; it is sometimes called a flat tax. A flat tax system would
place a single tax rate on all members of society—say 15%.
Proponents argue that everyone would pay the same rate of
taxes; therefore, it would be more fair. In exchange for the
simplicity of a flat tax, taxpayers would need to give up all
deductions. Therein lays a major problem because millions of
homeowners would lose the deductibility of real estate taxes
and interest payments.
The Federal Government
The Federal Government is the single largest influence on the
U.S. economy. There are two main areas in which the

3. government can impact the economy: fiscal policy and monetary
policy. Through its spending and taxing policies, the
government raises revenues and purchases vital goods and
services for the country. When the government spends and
taxes, this is known as fiscal policy. Monetary policy describes
the actions of the central bank, known as the Federal Reserve.
The central bank helps to regulate interest rates and the
activities of all the commercial banks in the country.
Fiscal Policy
In a democracy, elected officials of the government create
programs for the general welfare of the population. To pay for
these programs, the government taxes individuals and firms. In
this way, the government redistributes income from those it
taxes to those who receive goods and services.
Two significant Federal Government programs are Social
Security and Medicare. Social Security provides for the needs
of the elderly and disabled and is primarily funded through a tax
on wages. Medicare is a Federal Government insurance program
that covers the health care needs of the elderly. These two
programs, in combination, have greatly reduced the level of
poverty among elderly Americans.
The government also spends significant resources on areas like
military and agricultural subsidies. Groups of individuals and
firms can join together to create a special interest and lobby the
government for tax breaks or special spending. Every year when
the federal budget is passed, careful choices must be made in
allocating scarce resources to various government programs.
Monetary Policy
Unlike fiscal policy, monetary policy is set by unelected
officials. A group of economists is appointed by the executive
branch and confirmed by the Senate to serve on the Federal
Reserve Board, also known as the Fed. The central bank of the
United States is thus quasi-independent from political influence
and does not favor one political agenda over another.
The Federal Reserve has regular meetings to discuss the future
direction of the economy. Various economic factors like

4. inflation, unemployment, and consumer spending are considered
at each meeting. The Fed must then arrive at a set of optimal
policy decisions to guide the economy on a path of low inflation
and positive economic growth. This is not an easy task because
the economic factors are often contradictory and the future is
not always clear.
Coordination of Fiscal and Monetary Policy
The Fed is somewhat independent of government operations, so
the possibility exists that fiscal and monetary policies could be
working at cross-purposes. Twice a year the chairman of the
Fed gives testimony to both houses of Congress to sketch out
future Fed policies. The Federal Reserve is more adept at
making policy changes than Congress because it has several
economic tools it can operationalize immediately. For example,
the Fed was able to act quickly in September of 2001 to help
stabilize the economy.
Wealth Creation
The term wealth maximization is used in finance and
investments for both individuals and corporations. In the
corporate finance area, wealth refers to shareholder value or net
worth on a market value basis. That is, total assets less total
liabilities equals net worth or shareholder wealth. The
corporation conducts its business to maximize shareholder value
or shareholder wealth. It does this through its investing,
financing, and operating activities.
In the same regard, an individual creates an investment plan to
increase net worth over a period of time. The wealth is
measured on a market value basis as the difference between
assets minus liabilities.
Assets (market value) – Liabilities = Net worth or Total
Wealth
Individuals invest in assets that earn returns through income and
appreciation. Wealth is accumulated through a process of
systematically investing and reinvesting the earned income and
net gains. Individuals will invest in various asset classes that
earn different rates of returns and have different risk profiles.

5. In general, a higher level of desired wealth will require a higher
rate of return, which in turn, requires greater risk, so
individuals must consider both the risk and return on their
investment. Individuals can get in trouble when only expected
returns are considered. Investment planning should consider
both return and risk.
The term risk averse explains that, given the same return for
different investment alternatives, investors seek the investment
with the least risk. Or, rather, given investment alternatives
with the same risk, investors seek the one with the highest
return. Investors will demand higher returns for higher risk
investments. Thus, there is a risk-return trade-off.
Low levels of uncertainty or risk are desirable, but the returns
associated with low risk are also low. High levels of uncertainty
or risk are not desirable, but they are associated with high
returns. According to the American Association of Individual
Investors (AAII) (2009), the annual returns for the past 60 years
for the investments classes are as follows:
Asset Class
Risk Class
Annual Return
Treasury bills
Low
4.5%
Intermediate-term bonds
Medium
6%
Stocks
High
11%
Investors must accept some level of risk, but capital
preservation and stability must be a part of a wealth
accumulation program.
Inflation
Inflation relates to the purchasing power of the dollar over time.
The inflation rate is the rate of change in prices for goods and

6. services. Two popular measure of inflation are the consumer
price index (CPI) and the producer's price index (PPI). These
rates track the prices of a basket of goods and services over
time periods: monthly, quarterly, and annually.
Inflation is one of the risks of holding investments. Other risks
include such items as interest rate risk, exchange rate risk, and
default risk. Risk refers to the rate of variability in investment
value and/or possible loss of value of investment. Risk equals
loss of value.
The rate of inflation is a measure of the purchasing power risk.
It depends on price levels. If prices rise, inflation rises and
purchasing power decreases. Thus, in terms of purchasing
power, it takes more dollars to purchase the same level of
investment. Thus, increasing inflation reduce investment value
in terms of purchasing power.
Although recent inflation rates have been low, financial
planners have generally used inflation rates of 3–4% as a long-
term inflation rates in investment models.
Economists and financial planners will use the terms nominal
rates and real rates of return. The nominal rate is the current
stated rate of return, which includes inflation. The real rate of
return is the nominal rate less inflation. For example, if the
nominal rate of return is 10% and the inflation rate is 4%, the
real rate of return is 6%.
Reference
American Association of Individual Investors. (2009). Retrieved
from http://www.aaii.com
Microeconomics Basics
Microeconomics is the study of markets and choices of
individuals over a period of different time intervals. This
includes individual households, organizations (both for-profit
and not-for-profit), and government agencies (Dolan & Lindsey,
1991; Boulding, 1950).
According to David E. Laidler (1974), microeconomics is the
behavioral study of individuals that develops foundations of the

7. economic system: prices, outputs, and consumptions. On the
other hand, macroeconomics is a general overview of the
economy in a large-scale and broad viewpoint (Boulding, 1950).
Melvin L. Greenhut (1963) notes that microeconomics is mainly
considered to be comparing several different market types while
revealing the economic laws. Microeconomics is not concerned
about the fluctuations in total products (this would be
considered macroeconomics); rather, it strives to analyze the
market over different time periods.
Price Elasticity
Dolan and Lindsey (1991) define elasticity as the ratio of
percentage change or a measure of a specific response of one
variable or factor to a change within another variable or factor.
The two types of elasticity are the price elasticity of demand,
also known as demand elasticity, and the price elasticity of
supply, also known as supply elasticity. Demand elasticity is the
ratio of the percentage change in quantity of a good demanded
to a given percentage change in its price (when all other factors
are equal). The supply elasticity is the ratio of the percentage
change in the quantity of a good supplied to a given percentage
change in its price (when all other factors are equal) (Dolan &
Lindsey, 1997).
Long Run and Short Run Characteristics
According to Chrystal and Lipsey (1997), the term short run is
defined as the period of time over which a number of inputs
(also referred to as fixed inputs) cannot be varied. The term
fixed in a short run may consist of such things as resources
(e.g., land, labor, and capital) within a corporation.
A long run is "a period long enough for all the inputs to be
varied" (Chrystal & Lipsey, 1997). The goal of a long run is to
analyze the current available data prior to any changes that may
have occurred from basic technological changes. Keep in mind
that the short run and long run in economics are not based on
actual time but instead are primarily based on the production
changes via technology (i.e., new and improved products and
new methods of production) (Chrystal & Lipsey, 1997;

8. Greenhut & Scott, 1963).
Economic Strategies
One area of economic strategy is pricing. Firms can either price
products aggressively with a low-cost strategy or differentiate
on service/product quality and charge a price premium.
Firms that pursue the low-cost strategy typically have a cost
structure that is lower than that of competitors, and they have
found a way to manufacture their goods, offer their service, or
leverage their supply chains with less cost than the competition.
These firms typically operate on thin margins (meaning that
their gross or operating margins are not very high).
Companies that pursue a differentiated service or product-
offering strategy have typically developed a higher quality
service offering a better product, or they are perceived to offer
better quality than competitors. These firms may or may not
have stronger margins, depending on their cost structure relative
to competitors.
Supply And Demand
Market demand and supply explains the behavior and
composition of markets for goods and services. Goods that are
in strong demand or have few good substitutes typically offer
supply firms an opportunity to charge a higher price, thus
generating more revenue. Revenue is a major driver in cash
flow. Firms with products that have a strong demand can
generate significant cash flow and enhance firm value.
On the supply side, producers can enhance cash flow by seeking
to inhibit costs from growing more than the increase of profits
or by driving costs down. This can be accomplished by
employing more efficient production techniques through better
technology or a more productive labor force, by purchasing
lower cost goods, or by forming a better supply chain. All other
things being equal, firms with more efficient production
processes will have a lower unit cost than competitors, better
profit margins, stronger cash flow, and higher valuations.

9. References
Boudling, K. E. (1950). A reconstruction of economics. New
York: Wiley.
Chrystal, K. A., & Lipsey, R. G. (1997). Economics for business
and management. New York: Oxford University.
Dolan, E. G., & Lindsey, D. E. (1991). Microeconomics (6th
ed.). Chicago: Dryden.
Greenhut, M. L. (1963). Microeconomics and the space
economy: The effectiveness of an oligopolistic market economy.
Chicago: Scott Forseman.
Laidler, D. E. (1974). Introduction to microeconomics. New
York: Basic.
What enters your mind when you hear the word business? Do
you think about IBM? Or do you think about the mom-and-pop
grocery stores? Businesses range from small companies to large
enterprises. Today’s businesses produce most of the goods and
services we consume. These same businesses employ most of
the working class in the United States and all over the world.
The driving forces of business include the following:
· Labor
· Capital
· Entrepreneurs
· Physical resources
· Information resources
Understanding economic systems is key in planning and running
a business. There are several types of economic systems
including the following:
· planned economy, such as communism and socialism, in which
individuals contribute according to their abilities and thus
receive economic benefits
· market economy, which is a mechanism for exchange between
buyers and sellers of a particular product or service
· mixed market economy, which is a combination of the both
planned and market economies
· socialistic planned economy, in which the government owns
and operates major industries

10. The success of a company is predicated on how productively it
is managed. The basics of planning, organizing, directing, and
controlling are taken to a new level when business is
international. For example, Wal-Mart started out as a U.S.
growth company but then realized the opportunity for foreign
expansion. Wal-Mart aggressively opened new stores and
purchased existing retail chains, quadrupling its foreign sales to
$14 billion between the years of 1995 and 1999.
With international expansion, there are barriers to trade,
including
· social and cultural differences, such as language, culture, and
business formalities. In Japan, it is considered an insult if you
are given a business card that you glance at and then place in
your pocket.
· economic differences. In dealing with mixed economies, the
intervention of the government can play a critical role as how
business is transacted. For example, the French government is
heavily involved with all aspects of air travel and design. This
makes dealing with planned economies like China and Vietnam
difficult.
· legal differences. Many times, an accepted business practice in
one country is illegal in another country.
· political differences. Governments can place laws and
restrictions that can prohibit conducting business altogether.
· The Present Value of Future Income
· The effect of inflation on the dollar causes a drop in its value
such that the dollar you earn tomorrow will not be worth as
much. Even if there were no inflation, lenders would charge
borrowers what they call the real rate of interest. The reasoning
for this is a dollar that is loaned gains interest. The person
borrowing the dollar is willing to pay the additional amount so
he or she can spend the money today.
· To figure out the value of the income from a dollar that earns
interest for any period of time, use the following formula:
· 1___
· (1 + r)n r = interest rate and n = amount of time before the

11. dollar was repaid
· For instance, if the interest rate were 7%, how much would
$100 today be worth in a year? The answer is $107. When the
interest rate rises, the value of future dollars will decline and
when the rate falls, the value of the future dollars will rise.
· Interest Rates and Consumer Loans
· States have issued usury laws to place limits on how much
interest can be charged on consumer loans. According to
Merriam-Webster OnLine, usury is defined as charging "an
unconscionable or exorbitant rate or amount of interest" (usury,
2009). Because there are a lot more borrowers in the market
than lenders, these laws can create a shortage of loanable funds
and interfere with the laws of supply and demand. When prices
are low, buyers try to buy more; when they are high, sellers
offer more goods and services. A high interest rate signals
sellers to provide more loanable funds while discouraging
borrowers from borrowing. A high enough interest rate can
eliminate the shortage of funds. These laws can sometimes also
hurt borrowers with low credit ratings. When loaners are willing
to loan out money, it only goes to the people they consider to be
the most creditworthy (Slavin, 2006).
· Perfect Competition
· Perfect competition is a situation in the marketplace in which
there are many well-informed sellers and many well-informed
buyers of an identical product, and there are no barriers to
entering or leaving the market. A company that would be
perfectly competitive would be a company that is working at the
break-even point simply to survive and thus is operating at peak
efficiency. Perfect competition, however, does not exist in any
industry. There are several industries that are close to perfect
competition, but none are perfect because perfect competition is
an ideal economic state. Perfect competition would also mean
the end to monopolies, monopolistic competition, and
oligopolies.
· Now examine the different aspects of perfect competition. The
first aspect of perfect competition to examine is the sellers. In

12. perfect competition, there are so many companies that no one
company has enough influence to affect the price of the good or
service. There are so many companies in the market because
there are low barriers to entry. The second aspect of the perfect
competition is the numerous buyers in the marketplace. Again,
there are so many buyers because the good or service is in
demand or a necessity and because there are low barriers to
buying the good or service. The third aspect is that all
companies need to sell an identical or standardized product.
This means that consumers cannot tell the difference between
what one seller offers from what another seller offers, so the
buyers think the goods or services are identical; therefore,
consumers make their decisions based solely on the price of a
good or service because all the products are identical. The final
aspect to perfect competition is the low barriers to entry. In
perfect competition, the barriers to entry into a marketplace
must be so low or not exist at all for anyone to be able to enter
the market as a buyer or seller. Usually, there are barriers to
enter a market that prohibit new companies into a market;
however, in perfect competition none of those barriers exist,
which allows anyone to enter or leave the market as they wish.
Low entry barriers may occur naturally because some industries
simply do not require the financial and physical capital other
industries do.
· The agriculture industry is an example of near-perfect
competition. You have many sellers and many buyers of an
identical product. Wheat farmers have to sell their wheat at the
market price, entry and exit into wheat farming is relatively
easy, buyers and sellers are numerous all over the world, and
the product is perceived to be the same whether the wheat is
from Texas or from South Dakota.
· Land and Rent
· Land is capital that is used in production. Owners of land are
paid rent for allowing businesses to use their land. The amount
of rent is based on the supply of land available and the demand
for that available land. Land should not be confused with what

13. is built on the land.
· The supply for land is fixed. There is only so much land on the
planet. Likewise, there is only so much land available in any
given location. In economics, the supply for land is fixed
because more land cannot be gained. The demand for land is
derived from a company's marginal revenue product (MRP)
curve. Land will always go to the highest bidder, or whoever is
willing to pay the most for the land. From the diagram below,
one can see that the only way the price of rent changes is when
the demand for land changes. If D1 is the normal demand for
land, D2 is when the demand for land drops, thus dropping the
price of land.
· References
· Slavin, S. L. Economics (8th ed.) New York: McGraw-
Hill/Irwin.
· usury. (2009). In Merriam-Webster online dictionary.
Retrieved October 16, 2009, from http://www.merriam-
webster.com/dictionary/usury
·
In the past, many nations protected their domestic businesses.
Today, however, countries are realizing the financial benefits of
foreign trade and are aggressively encouraging it.
Coping with Inflation
There following two alternative approaches, used to modify the
accounting process to cope with inflation, have received much
attention:
· Constant dollar (also called general price level) accounting
approach: With this approach, historical costs in the financial
statements are adjusted to the number of current dollars
representing an equivalent amount of purchasing power. All
amounts are expressed in units (current dollars) of equal
purchasing power. Because a general price index is used in
restating the historical costs, constant dollar accounting shows
what happens when there is a change in the price of a product or
service.
· Current cost accounting: With this approach, assets and

14. expenses are shown in the financial statements at the current
cost to replace those specific resources. The current
replacement cost of a specific asset may rise or fall at a
different rate from the general price level. Current cost
accounting shows the effects of specific price changes rather
than changes of prices of different products.
To illustrate these approaches to inflation accounting, assume
that in Year 1, you purchased 500 pounds of sugar for $100
when the general price index was at 100. Early in Year 2, you
sold the sugar for $108 when the general price index was at 110,
and the replacement cost of 500 pounds of sugar was $104.
Unadjusted historical cost
Adjusted for general inflation (constant dollars)
Adjusted for changes in Specific Prices (current Costs)
Revenue
$108
$108
$108
Cost of goods sold
100
110
104
Profit (loss)
$8
$(2)
$4
Under each method, an amount is deducted from revenue to
provide for recovery of cost; however, the value assigned to the
cost of goods sold differs under each of the three approaches.
The unadjusted historical cost method is used in current
accounting practice. The use of unadjusted historical cost is
based upon the assumption that the dollar is a stable unit of
measure. Profit is determined by comparing sales revenue with
the historical cost of the asset sold. In using this approach to
income determination, accountants assume that a business is as

15. well off when it has recovered its original dollar investment,
and that it is better off whenever it recovers more than the
original number of dollars invested in any given asset. In our
example of buying and selling sugar, the profit figure of $8
shows how many dollars you came out ahead; however, this
approach ignores the fact that Year 1 dollars and Year 2 dollars
are not equivalent in terms of purchasing power. It also ignores
the fact that the $100 deduction intended to provide for the
recovery of cost is not sufficient to allow one to replace the 500
pounds of sugar.
When financial statements are modified for changes in the
prices of products, historical amounts are restated as the number
of current dollars equivalent in purchasing power to the
historical cost. Profit is determined by comparing revenue with
the amount of purchasing power (as stated in current dollars)
originally invested.
The general price index tells us that $100 in Year 2 is
equivalent in purchasing power to the $100 invested in sugar in
Year 1. But you do not have $110 in Year 2 because you
received only $108 dollars from the sale of the sugar. Thus, you
have sustained a $2 loss in purchasing power.
In the current cost accounting, profit is measured by comparing
revenue with the current replacement cost of the assets
consumed in the earnings process. The logic of this approach
lies in the concept of the going concern. What will you do with
the $108 received from the sale of the sugar? If you are going to
continue in the sugar business, you will have to buy more sugar.
At current market prices, it will cost $104 to replace 500
pounds of sugar; the remaining $4, therefore, is designated as
profit.
Current cost accounting recognizes in the income statement the
costs. The resulting profit figure closely parallels the maximum
amount that a business could distribute to its owners while still
being able to maintain the present size and scale of its
operations.

16. Case# 11
Case Analysis of World Wrestling Entertainment
Introduction:
World Wrestling Entertainment also known as WWE is an
incorporated media and an entertainment company which is
based on a wide range of businesses consisting of passionate
and loyal base of the customer. WWE is been recognized as a
leader in providing entertainment related to sports for many
years. Strategy used by the company is to capitalize on major
leverage operations if the business model of the company is
distributed of its intellectual property across existing platforms
related to media and also new emerging platforms based on
distribution. Main focus of the company is the expansion of its
potential of the brand of WWE not only in domestic markets but
also in international markets, developing extensive business
apart from the brand of WWE and development of new
programming as well as brands related to sports entertainment
which help in leveraging the core competencies of WWE. Part
of their business strategy is to look for the initiatives for
strengthening the brand, to expand the business at an
international level, making use of significant wrestling content
of their library effectively and to look for more opportunities in
providing entertainment related to films.
Now, World Wrestling Entertainment is recognized as one of
the major integrated entertainment company that is mainly
involved in developing, producing, and marketing of programs
related to television, programming related to pay-per-view, live
events and also licensing and sale of consumer products that are
branded which also features successful brand of WWE. with the
continual growth in the brand of WWE, a strategic decision for
expanding the brand of WWE globally was made with great
emphasis.

17. Business model of WWE is given below:
(Shuart, n.d)
Issues faced by WWE:
Apart from its large global expansion and its increasing brand
growth and opportunities, there are also some issues faced by
WWE which include an issue faced due to growing form of
mixed martial arts which is a form of combat sports combining
kickboxing and grappling. As it is very much similar to
wrestling, therefore there is a threat that fans of WWE might be
attracted to martial arts.
Another issue faced by WWE is that it is not a family friendly
entertainment due to involvement of abusing words, sex and
much violence. Due to which strong customer base of the
company might be hurt as people prefer to get entertainment
with their family and which WWE is not.
Solution
to the Issues:
First issue is solved by starting MMA in Brazil and Japan which
is an ultimate fighting championship and is also an International
Fight League which contributed in promoting WWE as a new
spectator sport in United States.
Second issue is solved by toning down its sex and violence for
expanding their audience base and also to make their shows
more family friendly. Fake prop blood is now no longer used by
them and the use of abusive language has also been toned down
for getting the rating of TV-PG for their television

18. programming. Therefore, by implementing and adopting such
changes, many new ways of exploiting wrestling as a form of
mass entertainment can be found.
SWOT analysis of WWE:
STRENGTHS:
1- Biggest strength of WWE is that it is merely not just a
wrestling company but it is also involved in providing its
customers with a wide range of entertainment. This strength
separates it from its competitors.
2- Another strength its licensing program that operates all
around the world. In video games of WWE, licensing plays a
very important role which is a main source of earning revenues
for the company.
3- One of their biggest strength is their huge library that is
based on home video.
4- Pay per view is also strength of WWE. Wrestling was
introduced to the mainstream through WrestleMania by using
pay per view and now almost 20 pay per views are presented by
WWE which feature its two significant brands i-e RAW and
Smackdown.
WEAKNESSES:
1- Major weakness of WWE is that the industry of wrestling is
very cyclical in its nature having uncertain ups and downs.
2- Another weakness of this company is that there is not enough
competition in this industry and therefore without enough

19. competition, there is less motivation for being creative and
innovative in its offerings.
OPPORTUNITIES:
1- Major opportunity for WWE is related to their home video
library through which it has covered many decades of the
business of wrestling including many other wrestling companies
like World Championship Wrestling, Extreme Championship
Wrestling, American Wrestling Association and many others.
2- Another opportunity for the company is its international
expansion in its market. International television syndication has
been possessed by WWE for dealing all around the world which
also makes its fans more rabid about wrestling just like the
Americans are for it.
THREATS:
1- Threat of competition from its closest competitor i-e NWA
which is a total non-stop action which was started in year 2002
and was available only on pay per view and on weekly basis.
2- Another biggest threat at this point to the company is related
to its television ratings because it was not just good as it was
before as its storyline was becoming more repetitive and boring.

20. Core Competencies of WWE:
One of their major competencies is their availability of both
tangible and intangible resources. Most valuable tangible
resources for the company are its workers. Characters i.e.
wrestlers that are marketed in this industry are very strong and
even stronger than the product itself of the company.
Another tangible resource which the company has is the money
which can be analyzed from the net income figures of the
company. An intangible resource of the company is its strong
brand name in the industry. More than 300 live events are held
by the company every year with the production of two
magazines every month and also a huge base of viewers viewing
its website in their daily routine.
Another intangible resource of WWE is their possession of
multiple copyrights and trademarks and that is just not only for
the company or its products but they are also possessed for its
wrestlers like “Stone Cold” Steve Austin if he wants to work in
another wrestling federation then he could not use the word
“Stone Cold” as this name has been owned by WWE. This is
therefore considered as a big advantage for WWE.
Another core competency of the company is related to its
capabilities which are mainly located in the corporate

21. management of WWE. Structure that is used in the overall
organization also contributes very well in enhancing their
capabilities.
Global Strategy of WWE:
WWE is been considered and recognized as the biggest
wrestling company of the United States. Company has reached
this position by spreading its wrestling entertainment around the
entire world through international expansion. The expansion of
the products of WWE in international markets becomes a
necessity due to the current situation of this industry in United
States. Reason behind this expansion was due to an increase in
the demand for the products of WWE. In addition to this,
attendance of live events or house shows in this industry was
becoming very disappointing and therefore, for providing more
overseas shows to its fans that do not get a chance to see its
programs live. By doing so, not only the increasing demand will
be satisfied but it will also help in getting the market of
wrestling that was declining. Moreover, due to increase in
international live events of the company, more of the
international staff was also hired for continuing its international
expansion.
Television presence of WWE at an international level also helps
in expanding its entertainment at an international level.
Moreover, due to its licensing agreements with many licensees
all around the world, it has been more successful in expanding

22. internationally. Logo of WWE is used by the licenses and
wrestling characters are also trademarked on its every type of
product.
Recommendations:
It has been analyzed from the case of WWE that it is recognized
as the biggest provider of wrestling entertainment and has
earned a reputable position in the industry through its strong
brand, huge customer base and also due to its international
expansion. Moreover, in its career of success, there were some
issues that were also faced by the company but the company
sought them out with appropriate solutions and has reached the
heights of great success. Apart from its successful career path,
there are some recommendations for future brand strategy of
WWE and they are:
· WWE must appoint national of regional directors for the brand
strategy of WWE in different and specific markets.
· Films of WWE should be self identified and certain activities
should also be changed.
· Creative storyline should also be developed further.
· WWE must also expand its entertainment in developing
countries.
· Company must start the active usage of possibilities like Web
2.0 which includes social networking, Blogs and etc.
Conclusion:
Therefore, at the end it is concluded from the complete analysis

23. of this case that WWE has established its reputation and strong
brand name all around the world through its continuous and
consistent struggle by offering live event shows to its fans in
order to increase its customer base. Although, some problems
were also faced which were solved easily and the name of the
company was not spoiled. Moreover, some recommendations
like development of more creative storyline, expansion in
developing countries, active usage of Web 2.0 and etc. are to be
adopted by the company for expanding its future brand strategy.
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