The Impact of Industrial and Economic Factors on Company Performances
Industry performance in any country is largely influenced by a variety of micro and macro factors (Cairncross 54). A company operates under industrial factors that incorporate macro-economic forces. The stock performance of the company is also as an influence of micro economic factors. These factors are as discussed in this paper.
Deregulation is an important economic variable that entails elimination and reduction of laws and regulations that act as barriers to free competition in the supply of consumer and capital goods; it has been utilized in the modern economics to allow market forces to drive the economy. Many players in the market are therefore able to engage in business, as prices are determined by the interpersonal forces of demand and supply. This encourages competition where efficiency is enhanced through efficient methods of production, which every producer in the market struggles to achieve (Korres 48).
Foreign competition is the kind of competition that domestic industries faces from the foreign established industries trading and targeting the same market. This is highly destructive to the economy if one of the industries participating in this kind of competition is not able to undertake production efficiently. Most of the industries established in the developing countries are not well advanced technologically and hence inability to produce efficiently and at cost effective methods unlike those ones in the developed countries who are able to produce at low costs due to high utilization of technology. This brings a remarkable difference in the quality and pricing of goods and services manufactured by the two industries hence the reason for the foreign competition. Foreign competition is highly advantageous in bringing efficiency in the production process where various industries continue to improve their technology so as to remain relevant and prevent exit.
New technologies have been witnessed in the market to improve the level of production, reducing the cost of production and increasing sales of the company produce in the market when the level of pricing remains low and the quality of the goods produced remaining high. Many companies are investing in research and innovations to add value to goods and services to consumers. Industries which fail to adapt new technology in the production process faces high competition hence unable to compete efficiently (Kaldor 45). Low pricing and high quality as depicted by the forces of demand will bring many to the market hence guaranteeing long term survival of the company.
Mergers and takeovers are methods where firms combine efforts to enjoy economies of scale. They could partner on projects or mutually agree to join hands to merge It also include out rightly acquiring another company by taking over its operations such as debts and holdings o replacement of the management with the acquirer’s representatives. Mergers form synergies that help companies counter competition in the market. Through synergetic combinations companies will be able to share vital information on technology, combining production efforts and ideas that make them remain relevant in the market. The use of advanced technology increases efficiency lowering the cost of production for industries. Low cost of production coupled with high quality leads to low pricing which is highly favorable to the market.
Every business aims at making profits changing methods of competition, most companies in the market are highly competing for sales and enlarging their market share. Competition ranges from performance competition, this is where a company does its best to win the heart of its customers. Another form of competition is the head-to-head competition. In this case, a company not only seeks to do better than its opponents but also aims at reducing the competition once it achieves a large market share. Large companies to wade off small firms and establish its single influence in the market use predatory competition. This is a very harmful kind of competition in the market, as the predator will keep its prices high when it puts away other firms. In my opinion, competition should be highly encouraged so that high quality goods are produced and at low prices (Cairncross 72). This enables customer’s satisfaction and reduces exploitation by the producer since the customer remains the king.
Labor problems and financial crisis has been witnessed in the modern economics whereby companies are required to employ highly qualified workers to operate machines used for production. This has increased Labor costs that bring an overall increment in the total cost of production from which net revenues and net profits are obtained. High Labor costs have led to the financial crisis that many firms experience hence reducing the level of productivity when the firm is under losses (Coale 106). Therefore, a firm should aim at minimizing total Labor costs by effectively utilizing technology in their operation.
Market structures analysis provides relevant and key data about the organizations competitive advantage, it provides crucial information on customer development, market development and product development and the route a producer should take to maximize sales and reduce production costs. Every market structure has a production possibility frontier from which a producer can position his production unit and survive the market forces to achieve organization growth objective (Korres 65). Through proper analysis of market structures, a company is able to capture a comprehensive summary of organizations value drivers and thus providing a stronger foundation for the establishment of the company especially when approaching a new market.
Elasticity of demand and supply has a great effect on sales of some products especially on habit forming goods and necessity goods in that when there is slight decrease in prices of goods a lot will be demanded hence increase of sales level coupled with increased revenues. The increased level of unionization among producers in the market has made many producers combine efforts to counter increased competition in the market where they are able to agitate more producer rights from the government hence increasing efficiency in production.
The cost structure of the company that involves both the variable costs as well as fixed costs is a contributing factor in the market that needs to be taken into account. When the cost of production increases efficiency is decreased and the company is unable to compete effectively in the market. Therefore, a firm should aim at producing at optimal cost levels. The role of advertising in the company highly influences the sales volume; advertising has a major effect of increasing demand for the company’s products in the market (Kaldor 38). This is because it influences customer’s personal decisions on selecting the basket of goods. The degree of internal competition within the production unit of the company may be harmful to the economic performance of the company when players do not join hands to work in the same goal congruence of achieving market efficiency.
Cairncross, Alec. Factors in Economic Development. London: Allen &Unwin, 1962. Print.
Coale, Ansley J. Economic Factors in Population Growth: Proceedings of a Conference Held by the International Economic Association at Valescure, France. New York: Wiley, 1975. Print.
Kaldor, Nicholas. Strategic Factors in Economic Development. Ithaca: New York State School of Industrial and Labor Relations, Cornell University, 1967. Print.
Korres, George M. Technical Change and Economic Growth: Inside the Knowledge Based Economy. Farnham: Ashgate, 2008. Print