Why is competition important for efficient use of resources

Reference no: EM133714897

Homework: Critical Thinking

Using the Situation, Task, Actions, Results (STAR) approach that is explained in the video, critically discuss the following questions.

The changes in the natures and forms of competitions, macroeconomic conditions, fiscal policy and monetary policy tools (instruments) affect the performance of companies. With a Global Fortune 500 Company you selected under Homework for your research in your mind, utilize (demonstrate) your critical thinking skills in your discussion and analysis of the following questions.

I. Competition is generally considered to be a source of growth for companies as well as for the general economy. Studies confirm that competition leads to more efficient resource use. Yet, competitive forces also result in firms being driven out of the market. Moreover, firms compete through innovations and introducing new products to the market. Some of these products will be successful and others will end up failures.

Why is competition important for efficient use of resources? What can the company you researched do to compete effectively? How may the company avoid business failure competitions induce?

What determines whether the new products are successful or failures? How important is innovation and product differentiation as the source of growth for the company of your research?

II. Business cycles lead to fluctuations of macroeconomic indicators, and hence they have impacts on the performance of firms. Suppose the economy is under recessionary pressure. The uncertainty about the future causes households to increase their saving and reduce their consumption. In another situation, suppose the household saves little and spends most of its income on current consumption.

How does a company prepare to weather the ups and downs of the business cycles? How will the situations that influence household spending behavior affect the company you selected for research? How can the company plan to deal with the economic decline and decrease in household spending to be profitable on a sustainable basis?

III. Fiscal policy deals with the government's spending and taxation practices. The changes in fiscal policy affect households and firms (companies) in the economy. Monetary Policy refers to the actions of the Federal Reserve to control (regulate) money supply to influence the rate of interests in the economy. The change in the rate of interests affects companies and households. Suppose the Federal Reserve increased the money supply to reduce the rate of interest.

How does this affect the company you selected for your research? How can the company prepare itself to deal with the changes in fiscal policy and monetary policy? What actions do you suggest for the firm to undertake to ensure success on a sustainable basis during the changes in macroeconomic environments pertaining to fiscal policy and monetary policy?

Reference no: EM133714897

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