Types of economic systems and determinants of business performance
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Published: Mon, 5 Dec 2016
Evident from existing literatures have shown that economic system comprised of the processes that involves organizing and motivating labor inputs, producing and distributing various outputs of human labor, among which includes products and services like consumer goods, manufacturing machines, tools, and several other technologies that are used as inputs for further productions, and many other infrastructures that are within the production, distributions, and the circulations of goods and services. A major issue is that some of these lists of processes have been argued to be over determined by some forces in the society such as the politics, culture, and the environmental conditions within which the processes operate. Meanwhile there are some scholarly works that have empirically established that a given comparative economic systems are normally defined within an established political boundaries. A good example is a Chinese economic system, practically China as a country is in fact very complex in terms of conglomeration and the interaction of its economic systems. Nevertheless, trying to bind an economic system like China in this way will provide a way to discuss how China’s systems are made possible to survive through the effects of the changes in its political institutions, cultures, and the environmental differences. Similarly is the process that the capitalist economic system in Germany in 1999 was defined as been different to that of the capitalist economic system in Britain as at the very year.
Theoretically, going by the aforementioned practical examples an economic system could be defined as different types of methods and the standards through which any society will decide and organize its allocations of its limited resources in satisfying the unlimited human wants in its society. Looking at it from one angle, production could be said to be occurred in a private-enterprise systems such that all the resources were privately own. As described by Adam Smith that economic system are means of frequently promoting the social interests, meanwhile only few private owned interests were intended. At the other side, Karl Marx and author like Vladimir Lenin emphasized on what is called pure communist systems, a situation such where all the resources will be publicly owned with the intent of minimizing the inequalities of wealth that exist among the prevailing social objectives.
Similarly, an economic system could be referred to as any arrangement by firms and the general processes through which any society can make their production and consumptions decisions. As argued to create and modify their economic system, each community needs to choose among available alternative objective and any promising alternative decision methods. Some of these objectives have been argued as been desirable for measuring the production and consumption of a society, such as production efficiency, Economic growth, liberty, and the equality.
The definition given above is because any economic system could significantly be considered as part of a larger social system that hierarchically equals to the societal legal system, the political system, and the cultural system. This is because most often there exist strong correlations between some of the ideologies, its political systems and some certain economic systems e.g. let us consider the meanings of a term communism. Not only about communism, there is enough evidence to show that several economic systems are overlapping each others in various perspectives (e.g. mixed economy has been authoritatively argued as including elements from other systems like capitalism and socialism). Under this same discussion, there were many mutually exclusive categorizations within the list of the hierarchical systems.
Below are the basic types of societal Economic systems:
The Market economy (called the basis upon which many hands off systems are implemented, i.e. capitalism). It mainly happens where market forces determine the prices.
Mixed economy (This is compromise economic systems that incorporate few aspects of a market economy as well as few aspects of the planned economy).
Planned economy (It a type of economic system where much “hands on” type of systems are put in place, i.e. socialism, or the military or command type of economy).
Traditional economy (This is a generic term that is used for the most oldest and traditional type of economic systems).
Participatory economics (This is a recent type of proposal for the new economic systems)
Inclusive Democracy (This is a project that emphasized on a new type of political and economic systems).
Gift economy (This occurred when there is an exchange that is made without any valid explicit agreements that is to be made for rewards whether in the immediate or future date.
Barter economy (This is a type of economic system where goods and services are exchanged for each other).
In explaining the aforementioned economic systems, there exist some basic and unfinished economic questions that should be answered so as to be able to resolve the problems that are related to economics in a more satisfactorily manner. Notable on this is the scarcity problem, and this problem of scarcity in resource generally requires some answers to the important and basic questions like what are we to produce, how should we produce it, and for whom or who should we produce it?. Importantly, it is worth mentioning here that economic systems are means of answering the above basic questions, and note that each economic systems have a way of answering this questions differently.
Division of economic systems
Typically, when we talk of “hands-on” type of economic systems we mean an economic system that involve the society playing a greater role and/or where the state government pick the goods and services with their sole aim of establishing and making sure there is social justice in a more equitable distribution of the community wealth (a good example of these type of economic system are the welfare state) or a state where there is amelioration due to the market failures (such as economic interventions). Meanwhile, the “hands-off” type of economic systems is said to give more economic power to the private businesses (like the corporations) in making economic viable decisions rather to putting it up to the society as a whole to deal with, and this somehow limits the government’s ability to intervene in the societal market economy.
Often as noted that the primary concerns of the “hands-on” type of economic system that do contained the government’s involvement in the market oriented type of economies are mostly egalitarianism, meanwhile it is equally observed that the primary concern for the traditional “hands-on” type of socialist economic system were normally planned to be transformed into rationalize production, a better means of coordinating the economic activities (thereby providing superior type of economic structure and also serves as replacement to capitalism) and advances those productive forces in the economies from other perspective which makes the markets forces of exchanges were left open to the systemic problems and the following inefficiencies; while these primary concerns of “hands-off” in the economic systems are usually in the private property. Arguably the Libertarians normally targets the individual economic freedoms as one primary goals of their individual “hands-off” economic policies, although in general, the common type of these economic systems have been claiming that their individual systems of economic organizations is either very efficient or socially good in its effectiveness. The above list has divides the main type economic systems into the “hands-on” and the “hands-off,” where they both attempts in structuring their systems in a planned structure such as by the alphabetical orders and/or in a more vertical hierarchy order where it is possible.
Pure markets economies seldom exist whereas in theory, the market economy do answers those three questions that do form the economic problems through the existing market systems. These market systems are consistently based on the actual relationships between the demand and the supply of the goods and the services. Practically the demands and the subsequent market supplies are the determinants of prices and also serve as signals to both the producers of the goods (the suppliers) and to the presents and the future consumers. This is because the market systems tend to normally rely on the different numbers of other factors in order to ensure that they both work efficiently. Below are some of the terms in the market system:
Profits motives – these are the attached incentives for the rewards that are meant for enterprises
Total level of the goods of the available information which could be efficiently utilized by both the producers and consumer
Prices are accurately reflecting the actual cost and the inherent benefits of the consumptions and productions.
How easy at which the resources could move to the different and alternative uses.
Notably the profit motive is at the heart of the market system. Mainly among those that are stimulated to take the market risks by organizing the needed resources into the production of goods and services for the prospect customers and make profit.
To quote Chomsky again, “people can survive, [only] by renting themselves to it [capitalist authority], and basically in no other way. . . .” You do not sell your skills, as these skills are part of you. Instead, what you have to sell is your time, your labour power, and so yourself. Thus under wage labour, rights of “self-ownership” are always placed below property rights, the only “right” being left to you is that of finding another job (although even this right is denied in some countries if the employee owes the company money).
So, contrary to Rothbard’s claim, capitalism actually alienates the right to self-ownership because of the authoritarian structure of the workplace, which derives from private property. If we desire real self-ownership, we cannot renounce it for most of our adult lives by becoming wage slaves. Only workers’ self-management of production, not capitalism, can make self-ownership a reality.
Economic freedom implies freedom of trade, in the classical liberal tradition of political economy.
To understand the nature of free trade, one must note first of all that it is logically dependent on the principle of the right to private property. One cannot trade if one does not own anything. Oddly, Karl Marx clearly identified the function of property rights: “the right of man to property is the right to enjoy his possessions and dispose of the same arbitrarily, without regard for other men, independently from society, the right of selfishness.”2
Marx focused on the worst-case scenario, but one should not do that when considering the characteristics of a system of principles. Of course, the right to private property makes free trade possible and thus leaves one free to dispose of one’s possessions irrationally. But it also leaves one free to act and trade in accordance with the best judgments one can form-something Marx did not mention. Marx gave us just a fraction of the story. Private property enables one to dispose of one’s belongings either responsibly or irresponsibly, so that trade can yield both worthy and unworthy results. Yet, precisely because it is private property, acting in a fashion that brings unworthy results will be less likely, since the harm will first of all befall the owner, not others. Property discourages irrationality and encourages rationality.
It bears noting that most prominent and articulate contemporary defenders of capitalism are economists. This creates a misimpression. Economists study the way the free market satisfies human desires, but they ignore the nature of those desires. They do not concern themselves with whether the market may be morally justified, whether it is an institution basically in line with human moral values.
I have noted that the principle of property rights underlies the market. What are property rights? They are necessary preconditions of genuine free trade and thus of a free market.
Certainly there are numerous societies in which conditions resembling a structure of property rights are evident-we might call them a structure of property privileges. In these societies persons are permitted, within certain limits, to hold and trade goods and services, although the government-the local Coastal Commission, the Federal Communications Commission, the king, or some other powerful group or person-can legally revoke the privilege. In such societies there is no genuine free market.
Business Performance Excellence can be attained when an organization is generating the maximum level of profitability possible given the financial, human, capital, and other resources that it possesses. (Luftig, 1998)
All companies wanted to be the best in their market. But most never succeed. Many of the ones one’s that do, is temporarily and later lose their position through misunderstanding how they got there and what needed to be done to maintain the best. Very few, as Jim Collins has stated, are capable of going from “Good to Great.”
The following are the major determinants of Business Performance
Practical and technological training for workforce
In order to improved the business skills training must be organized for the employees of a company so that the productivity and efficiency of that company’s worker can be improved through the training within a short period of time. This training must involved the services of an expert who have an excellent experience in business Intelligent and business managements’ (BM) and this also must involved the amount of services rather in the training in cash which will have to be done by an expert employers in order to enhance the professionalism of (BI) and its improvements so that the long-term objectives of the company’s capacity and lucrative can be achieved within a given period of time.
Increasing the number of participate in the workforce
A quality and intellectual business workforce must be the major objective of a business employer. Such as, the incentives, confidence, push-push and bonuses all those things can improves the employees’ efficiency within a short period, because it is the mystery of lucrative businesses in the business world where they gives room for bonuses and encouragements for the workforce.
Large number of capital investment
These are some of the benefits which are discussed.
The innovative and imported mechanical equipments can improved the hours of the workforce so the employee may be able to earn the highest amount of profitable.
More capital investment will enhance the overall efficiency of the company.
Huge amount of money input will bring fort the highest amount of efficiency and output to company and the company will have less resources and capital.
The use of best quality raw materials
the usage of best raw materials will not only enhance capacity of the machines, but it will enhance the outside work of the business by producing more quality amount of production. In order words, it would enhance the overall business efficacy.
Never the less, business intelligence (BI) in this regards the ability to enhance all the business efficacy is the main objective of the producer. They put larger number of investment in businesses by introducing latest technologies to get maximum profit. The introduction of business training to the workers comes into consideration through the incentives of the business employers so that all efficacy of the workforce can be lift up within a short period of time.
The process of marketing resource allocation consists of two stages. In stage one, a model of demand is estimated. This model empirically assesses the impact of marketing actions on consumer demand of a companyâ€Ÿs product. Ideally, the model also includes competitive activities. While in some cases data on competitorsâ€Ÿ actions are available
(e.g., scanner data studies for consumer packaged goods), in many other scenarios these data are not known (e.g., in database marketing).
In stage two, estimates from the demand model are used as input in an optimization model that attempts to assess the economic impact of marketing actions.
This stage takes into account costs as well as firmâ€Ÿs objectives and constraints (e.g., minimum market share requirement). While most optimization models do not account for competitive reactions to changes in target firmâ€Ÿs marketing budget, more sophisticated models can take these reactions into consideration either through simulation or game theoretic equilibrium models.
Over the last several decades, marketing researchers and practitioners have adopted various methods and approaches that explicitly or implicitly follow these two stages. In Table-1, we have categorized these approaches into a 3×3 matrix, which suggests three different approaches for stage-one demand estimation, and three different methods for stage-two economic impact analysis. We begin by describing the pros and cons of each option at a high level in the remainder of this section. We go into greater depth in the next section by discussing specific examples of how researchers have used the techniques to address issues commonly encountered in practice.
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