Case Study on "Economic Business Policy"

Case Study 8 pages (2511 words) Sources: 8

[EXCERPT] . . . .

Organization Behavior

Economic Business Policy

Economic Policy

Economic Business Policy

OPTIONS

Government can have various options to make welfare for the general public of its country. The most important step is to improve the industrial infrastructure and bring efficiency in all what it undertakes for the good cause (Connolly & Munro 1999). In this case study, the first option for the Government is to bring efficiency in the economic setup of the country. Economic setup or environment is the backbone of any country; it improves the level of domestic production, reduces unemployment, makes social welfare, boosts up businesses, and strengthens the country's position among other countries (Lipczynski, Wilson, & Goddard 2005). The major bodies or departments that are involved in this option are Commerce, Trade, Finance, Industry, Infrastructure, Information, Foreign Affairs, and the Labor (Newbery 2000).

Secondly, the Government has to improve the living patterns and conditions of its general population. The Government can make efforts to reduce the poverty level, improve the standard of education and health facilities, and eliminate child labor from the country. Moreover, the Government can improve the law and order situation in the country in order to ensure a safe and peaceful environment for the general public, domestic business entities, and foreign investors (Wilson, Reck, & Kattellus 2010).

The level of competition can be increased by the Government by implementing privatization policy at National level. It can either sell out the sick units to the private organizations or can make heavy investments in collaboration with potential business partners from various industries. In the first option, it can sell out the publicly owned business units that are no more profitable for the Government. The Government must expect a good return from this sell-out. On the other side, it can make collaborative arrangements with potential business entities to invest in large projects. After completion of these projects, the Government can either continue this partnership or purchase the whole project from its partners (Lipczynski, Wilson, & Goddard 2005).

As far as unilateral and hybrid restraints are concerned, the Government should prefer unilateral over the later. Reason being, these restraints support the antitrust laws and show favor towards the general pubic instead of business entities. On the other hand, hybrid restraints encourage the business entities to perform with their full competencies without considering any harmful impacts to the general public (Wilson, Reck, & Kattellus 2010). The Government has an option to choose between the two different alternatives; one of which favors the social welfare while the other show little or no concern for the negative impacts which are brought by the illegal business practices.

PART -- II: RESTRUCTURING

When public or private sector departments, institutions, or organizations are restructured, the biggest benefit that is realized from this restructuring is the cost control by the respective authorities. Restructuring not only enables these authorities to work in a well-organized way, but also brings technical efficiency in their day-to-day affairs and operations. It also increases the competition between top notch market participants and enables the leading organizations to come up with more competitive tactics and strategies (Wilson, Reck, & Kattellus 2010). On one side, Restructuring to privatization puts a burden on the general consumers, but at the same time improves the X-efficiency.

In addition, privation increases the level of competition which is a positive sign for the growth of an economy. The intensity of competition in a particular market also affects the way consumers use their budget plans. For public utility (e.g. electricity), the Government should use the retail sector privatization policy. That is, the electricity and related power projects must be privatized for their retail operations so that general consumers get the most of their benefits (Lipczynski, Wilson, & Goddard 2005).

The Major Factors to affect the Restructuring Process:

The three major factors that affect the restructuring process are Demand, Technology, and Social Welfare. The Government should first analyze the impact of these factors on the general public, the respective industry, and the whole economy (Connolly & Munro 1999). However, the Government's first and the foremost priority should be the social welfare in every restructuring or privatization project. The Government always has two options as its strategic decisions; it can either choose to privatize a public utility or keep it in its own control. It only chooses to privatize a public utility when it feels that the switching cost is lesser than the social benefit which will be realized from privatization (Wilson, Reck, & Kattellus 2010).

The Intensity of Competition:

It is clear that restructuring of publicly owned institutions and departments will increase the level of competition among all the small scale and large scale industry participants. However, this level of competition varies with the way the restructuring process is initiated and carried out by the Federal Government. As prices rise after the restructuring and privatization process, the industry participants do not compete on the basis of price and allow them to increase with slow pace.

The level of competition affects the social welfare and asset valuation in the country; thus brings certain big challenges for the Government. The vertical externality does not affect the intensity of competition significantly, but it paves the path for horizontal externality which is an important variable in the restructuring process. Now the question arises that how Government will be able to control the level of competition and bring all the industry participants under its supreme control (Hull 2012).

Efficiently-regulated Monopoly:

The answer to the above question lies in the fact that competition cannot be controlled by a single authority or departments; it is the mutual effort of all the industry participants as well as the Government itself. The Government can make efforts to control the level of competition if it promotes efficient monopoly in the country (Wilson, Reck, & Kattellus 2010). It can better manage the privatization process of publicly owned institutions if the competition is equally coordinated at the upper stream and the down stream industry segments. Alternatively, it can impose an excise tax on both the industry segments in order to ensure a perfect competition among the industry participants (Lipczynski, Wilson, & Goddard 2005).

Competition in the Market, for the Market, and Comparative Competition:

Government can also manipulate the way industry competitors compete with each other. It can increase the level of competition within the market by keeping the publicly owned institutions under the federal control while allowing the private sector to compete with full competencies with the public sector. Secondly, it can increase the competition for the market by tightening the policies for the private sector only (Hull 2012). In contrast, it can ensure a competitive competition by tightening the policies for public sector. It will make the public sector more efficient in competition with the private sector. This will also help in increasing the level of competition among different publicly owned institutions within the country (Wilson, Reck, & Kattellus 2010).

PART -- III: SETTING PRICES

How Prices are set in a competitive environment?

In a competitive environment, prices are largely affected by the level of competition among industry participants; that is, the publicly owned institutions and the private sector organizations in the country. Generally, prices are determined by the supply and demand forces that are present in the industry. When the supply of a product or service increases; the level of demand decreases among the general consumers. In contrast, if the supply of that product or service decreases, the consumers will demand that product even at a higher price. It will increase the level of demand and the price for that product or service (Connolly & Munro 1999).

In a competitive environment, competitors are always in a state of price war with each other. Especially, the top notch market leaders are always in a quest to snatch each other's customers by offering the same high demanded products at the lowest price. Similarly, new entrants in the Market make it difficult for the market leaders to increase the prices of their products. Reason being, these new competitors offer their products at cheaper rates in a view to penetrate in the market and capture a greater market segment as their target market (Wilson, Reck, & Kattellus 2010).

How prices are set in a regulatory environment?

In contrast to the competitive environment, prices are decided by the Government departments in a regulatory environment. In such an environment, there is a great interference of the Government in setting the price level for all types of consumable and household goods. The Government first analyzes the supply and demand patterns of all the products and services and then decides to manipulate the prices according to their availability in the market and acceptability by the consumers. Converse to the competitive environment, there is no price war among competitors in a regulatory environment; the only thing that takes an organization to the heights of success is the quality of its products or services (Connolly & Munro 1999).

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