Economics for the Global manager
Globalization is an important aspect of modern world system. It is one of the most influential forces determining the future global development. Globalization involves all areas of public life, including economy, politics, social sphere, culture, ecology, and safety. The basic sphere of globalization is the international economic system, i.e. global manufacture, national economies and the world market. By the end of XX century the international economic system has turned to the complex structure including about 186 countries. To some extent all of them participate in globalization process try to build and adjust the national markets.
Economics for the Global manager
1. Globalization is an important aspect of modern world system. It is one of the most influential forces determining the future global development. Globalization involves all areas of public life, including economy, politics, social sphere, culture, ecology, and safety. The basic sphere of globalization is the international economic system, i.e. global manufacture, national economies and the world market. By the end of XX century the international economic system has turned to the complex structure including about 186 countries. To some extent all of them participate in globalization process try to build and adjust the national markets. In his article, chairman Greenspan addresses a very important issues concerning recent economic situation in the USA, economic growth rates, inflation and employment issues. This analysis shows that economic growth and price stability has a direct impact on the unemployment rate and welfare. Greenspan explains that recent disasters hurricanes Katrina and Rita have had noticeably affected economic activity because of disruption of energy production (Greenspan, 2005). In its term, the rate of employment decreased Being influenced by negative outcomes of the hurricanes and higher gasoline prices.
Greenspan shows that there is a direct dependence between these two issues. Integration of the global employment market is another cause of unemployment. Greenspan pays a particular attention to globalization processes and reducing barriers between countries which resulted in afflux of high-qualified work force into America from Post-Soviet Union countries, China and India. Greenspan marks that: the gradual assimilation of these new entrants into the world's free-market trading system has restrained the rise of unit labor costs in much of the world and hence has helped to contain inflation (Greenspan, 2005). A prerequisite for economic growth and employment opportubnities is economic stability. It can be achiaved through maintainance of price stability. Beyond certain levels, public deficits and debt can have a negative impact on market interest rates because of the existence of an excessive additional demand for funds and the development of inflation expectations. There is clearly no greater stimulant for economic growth than price stability, and nothing is more damaging to economic growth than inflation. Greenspan underlines that a economic policy of the country should be oriented towards price stability that implies an efficient allocation of resources through a relative price mechanism. Greenspan explains that: The effective augmentation of world supply and the accompanying disinflationary pressures have made it easier & to achieve price stability in an environment of generally solid economic growth (Greenspan, 2005).
2. In order to improve current economy continious growth, it is important to regulate monetary policy of the country. But if the economy is really capable of growing and the Bank runs monetary policy on the assumption that it is only capable of growing at 2 per cent, then quite quickly demand will fall below capacity to supply, there will be a strong tendency for prices to fall. (Reserve Bank Monetery Policy, 2005).
And since economists take not going through the bottom of the target as seriously as we take not going through the top, we are forced to ease monetary policy to let demand In response, central banks in various countries have been making strenuous efforts to answer these questions with the view to enhancing transparency of the conduct of monetary policy. Measures that central banks have taken to enhance transparency vary from country to country, depending on the economic situation, historical setting, and institutional framework. iprice stability in the conduct of monetary policy has become widely recognized, central banks are urged more than ever to explicitly define what price stability means and to clarify how monetary policy achieves it. (Schiller, 2002).
3. Demand and supply are the most important factors of economic stability and growth. Consumers choose different products accordinhg their buying potential and preferences. Consusmers buy autos and food, mortgage and cloths according to their budgets, that reflect their own level of income. According to the marketing theory for this matching process to take place successfully, the organization must understand who is the customer and what value is required, and how best to deliver this value on a sustainable basis in line with the organization's overall corporate objectives. The needs of the customers represent their values and beliefs. Consumers needs are closely connected with Law of demand stage of consumer behavior. The law of demand states that if price declines, then the quantity demanded of the product will increase. The inverse relationship between price and quantity leads to the downward sloping demand curve (Model of Consumer Behavior, n.d.). Evidence is mounting that consumer needs and wants around the world are converging today as never before. Needs and wants are translated into demands for believes from people who can and will pay for them, in the belief that they will provide satisfaction and value. Consumers choose products and services they want to buy according to their budget. Buying at comparatively low prices allows consumers to safe money and spends them on other goods which, in general, increase their welfare. In any case, created products and services are satisfy wants, communicating to existing and potential customers the benefits of the products or services on offer to them. The consumer expends all of their income (budget) and selects specific amounts of the two products. Product prices and income are predetermined and, consequently only the quantities of the two products are varied to maximize utility (Model of Consumer Behavior, n.d. ).
4. Recent years, it has been often argued that large firms tend to become less efficient and innovative over time, becoming "complacent giants", because they don't have to be efficient or innovative to compete in the marketplace. So to say, some of them prefer to operate under a loss to sustain market position. In some cases, this very loss of efficiency can raise the potential value of a competitor enough to overcome market entry barriers, or provide incentive for research and investment into new alternatives. Under some conditions, firms are forced to behave as if there were competition, because of the risk of losing that monopoly to new entrants, or because of the availability in the longer-term of substitutes in other markets.
Some economists argue (Schiller, 2004) that in perfect competition there can be no long-run economic profits or losses because firms will enter or leave the market. In monopoly, there are no long-run competitors unless the industry ceases to be a monopoly - by definition. Thus long-run balance in a monopoly will be characterized by economic profits. If a firm has short-run losses it will adjust the scale and characteristic of its plant to eliminate such losses in the long-run. Assuming short-run profits, in the long-run the firm will adjust its production to achieve even larger profits. Output will be provided at the level at which long-run marginal cost equals long-run marginal revenue. This results can lead to a dead weight loss of a firm which reflects the fact that the consumer surplus is reduced but the gain to the monopolist is less than the loss to consumers.
5. Market structure has a great impact on market operations through its influence on firms participating in the market. A crucial factor of a market is product substitutability. For the USA market capitalism is the prevalent structure. Market capitalism is an economic system in which individuals and firms allocate resources and production resources are privately owned. Simply put, consumers decide what goods they desire and firms determine what and how much to produce; the role of the state in market capitalism is to promote competition among firms and ensure consumer protection. Today, market capitalism is widely practiced around the world, but the United States is distinguished by its competitive, "wild free-for-all" and decentralized initiative. It should be mentioned that market capitalism does not exist in "pure" form. In the USA, to a greater or lesser degree, command and market resource allocation are practiced simultaneously, as are private and state resource ownership. The role of government in modern market economy varies widely. An economic system in which command resource allocation is utilized extensively in an environŽment of private resource ownership can be called centrally-planned capitalism. The most effective for the USA would be centrally-planned capitalism where two-thirds of all expenditures are controlled by the government, resource allocation is more "command"-oriented than "market"-oriented. This form of capitalism is creating opportunities for large-scale investments by global companies.
6. The monopolists do not establich the highest price because the monopolized good is distributed in such a way that the quantity of the good given in exchange that is the equivalent of one unit of the monopolized good is equal for each of the purchasers of portions of the monopolized good. Price formation takes place between limits that are set by the equivalent of one unit of the monopolized good to the individual least eager and least able to compete who still participates in the exchange and the equivalent of one unit of the monopolized good to the individual most eager and best able to compete of the competitors who are economically excluded from the exchange. The monopolist does not know beforehand in what way the consumers will react to a rise in prices. He must resort to trial and error in his endeavors to find out whether the monopolized good can be sold to his advantage at any price exceeding the competitive price and, if this is so, which of various possible monopoly prices is the optimum monopoly price or one of the optimum monopoly prices It is assumed that all monopolists are economizing individuals aware of their advantage, then their policy is directed naturally neither to fixing the lowest possible price, nor to selling the largest possible quantity of a monopolized good. It is directed neither to making the monopolized good available to the largest possible number of economizing individuals, or groups of individuals, nor to providing each individual with the monopolized good to the fullest extent possible. The monopolist has no interest in all this. His economic policy is directed to making a maximum profit from the quantity of the monopolized good available to him.
If the price is too high the sales will fall noticeably, that resulted in profit loss. There is a further condition required, namely a certain shape of the demand curve. If it is possible for the seller to increase his net proceeds by restricting sales and increasing the price of the units sold, there are usually several monopoly prices that satisfy this condition. As a rule one of these monopoly prices yields the highest net proceeds. But it may also happen that various monopoly prices are equally advantageous to the monopolist. So, the highest price will not benefit neither monopolist nor consumers, because neither of them will receive a desirable result.
7. Taxi service is often regulated, with restrictions on market entry and pricing, although many communities are implementing. to encourage more competitive markets. Some experts recommend eliminating most regulations and allowing unlimited entry into the taxi market (Toward A 21st Century Taxicab Regulatory, 2005). If barriers controlling entry were removed, so that an operator can have as many taxicabs as desired it will result in competition and market growth. This relieved the county councils of their former task of estimating the demand for taxi services in each operating area. Fare controls should be removed, so that taxi companies become to be able to set their own fares. These changes will benefit taxi services, but can have a negative impact on consumers. In this case, taxi services should be required to inform customers about the fare prior to trips, and taxicabs must be equipped with receipt writing meters. The requirement for all taxicabs to belong to a booking centre should be abandoned. At the same time, in order to stimulate competition between centres, publicly owned centres should be established in the market as an alternative to the existing privately owned centres. On the other hand, competition can force taxi services to reduce prices in order to attract customers and increase their profits. While value is defined customer benefits divided by customer expenses, there are five value-creating formula alternatives for taxi services First, increase benefits and lower expenses. Second, increase benefits and hold expenses constant. Third, hold benefits constant and lower expenses. Fourth, increase benefits significantly and increase expenses. Fifth, lower benefits and significantly lower expenses. Though the value impact among the formula alternatives varies significantly, the core idea behind the prinŽciple remains unchanged. The lack of these benefits creates a feeling of insecurity and transience among many drivers. By both their words and actions, drivers make it clear that a higher and steadier wage and better employee fringe benefits would make taxi driving decisively more attractive. Since the level of drivers' commitment to their job is critical to the quality of service, the task of improving regulations should take center stage in efforts to upgrade taxi service. It is possible to conclude that to overcome recent problems the USA strategy should include the determination of the basic long-term goals concerns the on ceptualization of coherent and attainable strategic objectives. Produced by ProfEssays ( www.professays.com ) - professional custom essay writing service: custom essays, custom term papers, custom academic papers, custom research papers, compositions, book reports, case study. No plagiarism, high quality, prompt delivery.
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