It
is imperative to stress that for a firm to succeed, it has to abide by the
tenet of a market system. Human want are insatiable hence, the need for firms
to meet demand with supply is necessary for the growth and sustainability of
the firm. Also, for the firm to enjoy returns earnings on investment, Market
system are better than Central Planning. With
the world tending towards full globalization, most Centrally planned economic/
firm are playing catch up to firm
operating a market economy.
For instant, there is low motivation regarding setting innovated ideas in motion due
to bureaucracy associated with Centrally planned firm. Moreover, there are
bound to be shortages or surplus of supply due to lack of free market prices that set quantity to be produced, who the target demographics are
and how much of the products will be demanded to avoid over saturation of
supply. A firm operating under Centrally
Planned economy faces the threat of Economic Darwinism. In this case, the firm is forced out of the market by more efficient
competitor.
References
Brickley,
J., S., & Zimmerman, J., (2016). Management Economics and organizational
architecture. 6th edition.
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