The Importance of Economic Planning - Book Report/Review Example

Markets and Environment The Nature of the Firm In normal economic system, buying and selling works itself. The process comes out to be automatic, elastic and responsive. This marketing system of the economy is co-ordinated by the price mechanism and the society around the business. The system dictates the direction of resources required, which has a direct dependence on price. However, this fact is not in line with economic planning. A firm has to put in place structures for production, promotion, distribution, selling and pricing. All these factors considered will define the nature of a firm. Economic theory spells out that allocation of the factors of production and production cost among different use is to determine the price mechanism. Outside the firm operations, price movements relate directly to production, which is co-ordinated by a series of counter transactions within the market partners. Inside a firm, these market partners’ transactions no longer exist and in place of the large markets’ structure with counter transactions performed by the entrepreneur-coordinator. He directs production, examines methods of coordinating production with a critical eye, and shapes the market accordingly. Earlier in time there was something of importance than the relations inside each factory captained by a caretaker; there existed relations of the caretaker with the entire of the economic world aside from his immediate area of operation. The caretakers’ activities were to sub-divide labor within each firm, plans and organize consciously. Directions of an entrepreneur give guide as long as they are within certain allowable limits. The chief goal of the contract is to state the required limits to the powers of the entrepreneur. Within these provided limits, the entrepreneur can direct the other factors of production. The operation of a market costs something and by allowing entrepreneur to direct the resources, saves certain marketing costs. Many factors contribute to putting profit objective of a firm first. Mode of payment is one among the key issues of the firm-fixed incomes that are guarantee for those involved in the production. Market shape up may require that a firm size down or up to accommodate changes in the market environment. The relationship that exists between efficiency and size of a firm is a serious problem of economic theory in contrast with relation to a plant, largely because of personality rather it is of intelligible principles (Coase). Continuous and unlimited expansion of a given firm leads to decreased efficiency. First, as a firm becomes bigger, sometime there may be a reduction of returns to the entrepreneur duties. Additional costs of organizing transactions inside a firm arise. Again, a point where the loss from the waste of resources becomes equal to marketing expenses becomes the goal. Considering costs of the counter transaction within the open market in cases were another entrepreneur put the transaction in place. Finally, the sale price of the factors of production is critical to determining the price. The broader reason for the existence of firms is division of labor. Keeping risk and uncertainty to the minimum is any firms; objective. Maximizing profits are a firms’ focus. Contracting large proportions of jobs allowing a set sum of reward to the entrepreneur. However, this is independent of any direction. However, it means that the relative prices system changes and a new arrangement of the factors of production are henceforth available. The Pressure of the Past The founding conditions of an organization affect its market outcome. As a factor to consider, little attention time and again has been given to ways in which social and the technical conditions during founding time affect all other social forms, including network structures, and the impending social mechanisms that have maintained historical imprint patterns. It is paramount to keep an understanding of how the past continues right now to take a toll on the present (Wassermann). Market and environment including groups, institutions, laws, population characteristics, and sets of social relations that were involved form the environment. Current market shape and environment setup are historically contingent. They have kept an imprint on the organization with the characteristics of founding time situation. Understand factors that keep a firm pinned to its past environment in order to shape the current market. The two key mechanisms, which may lead all the organizations within the local network setup systems to keep on replicating the imprinted pattern list, are as below. (1) Availability of locally thriving social institutions that are a venue for social and local connection and (2) firms’ sometimes emulates locally consumable templates used for action (Marquis). Locally inter-corporate networks formed within a community earlier in time. These organizations came to the existence before the time of auto-motives, and air travel has a greater interconnection of local network than recently established cities. Bank for a very long time have been in existence and serving humanity. They offer security to money related transaction. Currently, every start up need bank services in relation to the firm money issue; save keeping, payments, loans and insurance. The greater the presence of commercial banks in any community, the higher the likelihood that firms in the community will exhibit local network connections. A new firm will utilize available terms and conditions of the firm to undertake its transaction with the bank. The presence of arts and cultural organizations in a given community will greatly influence the organizations in that community to have local network connections. Human being imagination is limited to their exposure level. They shape thoughts and decisions human being make. Institutions that foster arts and culture have gates open for the locals. They altogether transact their daily activities in harmony. Start up business goes through initial procedures of setting up the ground rules. It is likely that firms will seek advice during this process; they will look to other local setup firms when structuring and putting their board together. New institutional theory has predicted that industry peers and close allies would be the guide needed and source of required behavior. The chances of replicating the already formulated structures are very high because that is what the peers know and are. Choosing Strategies for Change The current market players are ever facing stiffer competition and changes in technology. This makes the companies embrace change of course in order to stay competitively. Many a times when a company tries to makes changes but eventually end up in the wrong place. Some managers take a shortcut approach, half-baked strategy and out of point approach. Managers need an all round approach towards the best strategy for change to achieve the best results; success in the market. Take into consideration various steps when taking out on a project change. They should start by analyzing the firm situational factors. To do this, questions must be asked of the resistances anticipated (Kotter), the manager’s position in relation to those resisting change. Information is very important in the changing mission. Look up for those with the most accurate knowledge on the changes desired. The end of the questioning period consider the urgency of the changes desired. The next step involves determination of comfortable speed required for change. Time from start to end of the changing mission is a factor that delivers success or not. Situational factors are considered here to decide proceed speed; either quick or slow approach. Choose quick approach when the company risks low market performance or looming death. Apply slow approach considering intensity and extensity of resistance, the time that will take to get the information required for the change procedure and the position held by one initiating change is of less power compared to source of resistance. Finally, the change initiator should look into the methods that manage resistance. Some methods used include Education, participation, facilitation, negotiation and coercion (John P. Kotter). When the desired changes have been formulated, communicate them accompanied by reasons to the employees. One can also decide to involve resistors in designing and the actual implementation of desired change. Provide training, emotional support and incentives for the agents of change. At the extreme end, some managers may use job loss threats or promotional opportunities. A case in hand is manufacturing firm that had a tradition of employing counselors. Exhibiting high moral standards was their mandate and helping mentor other personnel relationship in the firm. Firm installs new performance appraisal every six months. The counselors took a key role in monitoring emotional maturity of employees through the new systems. They wrote evaluation reports about employees. It was apparent with time that the counselors resisted the change entirely affecting and putting pressure on company personnel including the president until the new system was altered significantly (John P. Kotter). Factors discussed above are no doubt to the point in an endeavor of change. A wholesome package cannot work half baked. The results are catastrophic because the firm may collapse or more positively soar high in the market and its environments. However, strategy choice approaches were not complete. Need for change pointers to warn the management of the need for change. Businesses should consider embracing a self appraisal on performance index in the market. As shown from the case above, not all new systems bring positive results. People have a different perception of change. Understand the entire personnel emotional set up and everything will run smoothly as managers of change planned (Harold l. Sirkin). Works Cited Coase, By R. H. "The Nature of the Firm." The Nature of the Firm (1937): 1-20. Harold l. Sirkin, Perry Keenan, Alan Jackson. "The Hard Side of Change Management." The Hard Side of Change Management (October 2005): 1-10. John P. kotter, leonard A. Schlesinger. "Choosing Strategies for Change." Choosing Strategies for Change (2008): 1-12. Kotter, John P. "Leading Change ." Why Transformation efforts Fail (2007): 1-14. Marquis, Christopher. "The Pressure of the past." The Pressure of the past (2003): 1-36. wasserman, S., K. Faust. Social Network Analysis. Cambridge: Cambridge University Press, 1994. Read More