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Firm’s Competitive Environment
Firm’s Competitive Environment
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Institution
Introduction
A comprehensive understanding of the government regulations and the dynamics pertaining to the competitive environment of businesses comes is imperative not only for businesses but also for potential employees. Needless to say, the markets are made up of different structures, each of which is affected in a different way by the varied regulations. On the same note, a number of bodies and commissions are established in an effort to regulate the markets and ensure fairness not only among the business entities but also with regard to the customers.
Antitrust laws
Also called competition laws, antitrust laws underline statutes aimed at protecting consumers from predatory or unfair business practices through safeguarding the existence of fair competition in open-market economy. The United States has four fundamental antitrust laws including the following.
Sherman Act – enacted in 1890, the Sherman Act prohibits any conspiracy, contract or combination between two or more business entities that imposes unreasonable restrictions on commerce and trade (Vogel, 1998). It prohibits monopolies, conspiracy or agreements that monopolize the market of a particular service or product.
Clayton Act- this Act, passed in 1914, aimed at addressing specific practices whose effect is the creation of a monopoly or substantially lessen competition. It covers mergers and acquisition, exclusive dealing agreements, tying arrangements, as well as interrelated boards of directors.
Robinson-Patman Act – coming into force in 1936, the Act addressed discrimination in prices that are charged to competing purchasers for goods that have similar quality and grade (Vogel, 1998). It aimed at protecting small businesses through restricting the capacity of larger companies to dictate discriminatory discounts via their purchasing power.
Federal trade Commission Act – the Act gave the Federal Trade Commission the authority to enforce the three other antitrust laws. It prohibited deceptive practices and unfair competition methods (Balleisen, 2011). It was designed to nip anticompetitive practices in the bud.
Intended Purpose of economic regulation in monopolies and oligopolies
Oligopolies
These refer to market structures that are characterized by few firms dominating the market, selling differentiated or identical products with considerable barriers to entry in the industry. Economic regulations in this industry are aimed at ensuring economic efficiency. Oligopolies may try to fix prices, leading to high prices and reduced production unlike the case of perfect competition. In addition, economic regulations of oligopolies are aimed at enhancing the growth of the industry, especially considering that oligopolies can apply unethical practices so as to limit entry into the industry.
Monopolies
Economic regulation of monopolies aims at preventing excess price. Deficiency of government regulation may cause monopolies to put the prices up, resulting in allocative inefficiency and a reduction in consumer welfare. In addition, economic regulations safeguard the quality of services in monopolies (Baldwin et al, 2010). Monopolies often have no incentive to provide quality services as there is no competition. Economic regulations ensure that monopolies meet specific standards of service. Moreover, economic regulations promote competition and limit monopsony power (Baldwin et al, 2010). Firms that have monopolistic powers may choose to exploit monopsonic buying power.
Key functions of federal commissions governing economic regulations
Federal Energy Regulatory Commission (FERC)
FERC controls oil pipeline rates, hydroelectric licensing, wholesale electric rates, natural gas pricing and interstate electricity sales.
Securities and Exchange Commission – SEC’
SEC was created with the aim of controlling securities markets, as well as protecting investors. It has statutes that encourage full public disclosure and protect investors from manipulative and fraudulent practices in security markets (Balleisen, 2011).
Federal Communications Commission
The FCC aims at making available worldwide, nationwide and radio communication services with sufficient facilities at reasonable cost to all United States people without discrimination (Balleisen, 2011). It also aims are promoting safety of property and life via radio and wire communications.
Intended purpose of social regulation in all market structures.Social regulation underlines a wide range of rules that govern the manner in which individuals or businesses undertake their activities with the aim of correcting varied market failures (Baldwin et al, 2010). It aims at serving two purposes. First, it prohibits business entities from producing goods with certain characteristics of in ways that would harm public interests like environment, health and safety (Baldwin et al, 2010).
Secondly, it aims are ensuring that business entities produce goods with certain characteristics and in ways that would benefit public interests.
Key functions of the five primary federal regulatory commissions that govern social regulation.
Environmental Protection Agency (EPA)
EPA was established with the sole aim of protecting the environment and human health through the creation and enforcement of laws made by Congress. It is responsible for the maintenance and enforcement of national standards under varied environmental laws in consultation with local and state governments (Baldwin et al, 2010).
Food and Drug Administration
FDA promotes and protects public health via supervision and regulation of dietary supplements, tobacco products, food safety, prescription, vaccines, blood transfusions, veterinary products, pharmaceutical drugs, biopharmaceuticals and ERED (Balleisen, 2011).
U.S. Consumer Product Safety Commission
CPSC controls the manufacture and sale of varied consumer products through banning dangerous consumer products, researching on their potential hazards, and issuing recalls if such products are already in the market (Balleisen, 2011).
Occupational Safety and Health Administration
OSHA has the mission of safeguarding healthful and safe working conditions for workers through establishing and enforcing standards, as well as offering assistance, education, outreach and training (Baldwin et al, 2010).
National Highway Traffic Safety Administration
The NHTSA aims at saving lives, preventing injuries, as well as lowering vehicle-related crashes through the development of anthropomorphic dummies that are used in safety testing and the test protocols themselves (Balleisen, 2011).
References
Baldwin, R., Cave, M., & Lodge, M. (2010). The Oxford handbook of regulation. Oxford: Oxford University Press.
Vogel, S. K. (1998). Freer markets, more rules: Regulatory reform in advanced industrial countries. Ithaca, NY [u.a.: Cornell Univ. Press.
Balleisen, E. J. (2011). Government and markets: Toward a new theory of regulation. Cambridge: Cambridge University Press.
Federal Health Care Policy
Federal Health Care Policy
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Course
Course Instructor
Date
Affordable healthcare policy may not be the solution to America’s healthcare challenges but an indication of overstretched power by the federal government. For the last two decades, the health reforms that had somehow been forgotten by the federal government have been taken very serious. The Federal government has attempted to improve on the healthcare policies especially under Medicaid and Medicare but some critics argue that whatever they are getting from the government is not worth their money (Williams, McClellan & Rivlin, 2010). Some of the Federal health programs are constantly absorbed into the states and the local authority although the whole issue is highly politicized.
Most people in America agree that there is no better healthcare program in the country. However, even the few reforms that are made in the federal government receive much criticism from many. It is evident that a good number of people do not have health insurance policies but the few who have are ever complaining of higher premiums and plans that may hinder them from getting maximum service (Williams, McClellan & Rivlin, 2010).
Healthcare has had skyrocketing nature that is believed to outpace even people’s income and inflation yet the quality has continued to be poor. The Affordable Care Act was therefore prompted by the need to extend the insurance coverage t the larger uninsured population and improve the quality of healthcare as well as ensuring affordability in accessing healthcare facilities. The policy intended to address all the challenges facing the health system in the country such as lowering and controlling the ever rising cost of health care (Harrington, 2010).
Pros
The policy requires that no American should be denied medical insurance cover regardless of the preexisting conditions. Medical history of an individual can no longer deny the person from obtaining medical insurance and therefore would be able to acquire the coverage with no regard to health underwriting. The policy also intends to increase the coverage for uninsured individuals who are almost 3 million Americans. Some of these people will include the 3.1 million aged between 19 and 25 but still in their parents’ plans since they cannot afford the cost of insurance. Whoever cannot afford to pay health insurance are catered for by the federal government through the states which will be required to add this category into their Medicaid program (Harrington, 2010).
It is also apparent that this program will reduce the cost of healthcare because a larger percentage of citizens will have the insurance cover. There will be possibility of easier access to preventive healthcare because patients will no longer wait for the disease to be more serious for them to visit the hospital. There will also be combination of high taxes and lower deductions. Citizens who do not either pay for insurance or do not qualify for Medicaid will be assessed $95 tax while the high income earners will pay more tax to assist in covering the program (Harrington, 2010).
Cons
The policy requires pharmaceutical firms to pay extra fees in the next ten years and this may eventually lead to increase in drug cost to the consumers. Relationship between the healthcare provider and the patients has reduced as a result of high dependence on the federal government. This policy has centralized health care system and even turned the states into a channel of implementing the federal policy. Requirement by the federal law that all citizens should buy federally designed insurance covers illustrates federal outreach which is against the originality of the constitution (Gardner, 2012).
There is another possibility of health professional shortage due to the increased demand for the service. Healthcare facilities will be overstretched because of the high number of patients. Apart from stretching the facilities and healthcare staffs, there are no financial incentives set aside for the hardworking healthcare professionals. This may really demoralize the workforce and even reduce the quality of their work.
This policy may not be as effective as it is deemed by the government. All the companies in the healthcare sector are clearly in the business of making profit without even thinking of the welfare of their clients thus making diseases and sickness big business. In fact, the US healthcare is the most costly due to the players in this fundamental sector thus making it unproductive to throw money in this system. Demand for healthcare has since been limited by demand because it is provided in the market and any attempt to provide it freely can only be limited by rationing which happens in most countries practicing this system (Gardner, 2012).
This policy is absolutely inconsistent with the constitution. Federal government should not control the health insurance industries and even compel citizens by issuing threats that they should buy the insurance covers. It seems that the federal government is trying to misuse their powers by interfering with the states’ powers. Federal government have few and defined powers which they should not go against unlike the states whose powers are numerous and indefinite. Indeed Affordable healthcare policy may not be the solution to America’s healthcare challenges but an indication of overstretched power by the federal government.
References
Gardner, D. B. (2012). The future of the affordable care act: Will we abandon health care reform? Nursing Economics, 30(1), 40-1, 49. Retrieved from http://search.proquest.com/docview/923245010?accountid=45049
Harrington, S. E. (2010). U.S. Health-Care Reform: The Patient Protection and Affordable Care Act. Journal of Risk and Insurance, 77(3), 703-708. Retrieved from http://search.proquest.com/docview/747991216?accountid=45049
Williams, D. R., McClellan, M. B., & Rivlin, A. M. (2010). Beyond The Affordable Care Act: Achieving Real Improvements in Americans’ Health. Health Affairs, 29(8), 1481-8. Retrieved from http://search.proquest.com/docview/744045666?accountid=45049
Firm I and firm II have formed a strategic alliance where firm II buys the products of firm I
a).Firm I and firm II have formed a strategic alliance where firm II buys the products of firm I. The alliance is mutually beneficial to both firms though there are risks involved. Firm I agrees to build a new plant next to firm II primary facility. The agreement between the two firms is that, firm I builds a new plant close to firm II primary facility so that it can be easy for them to purchase the products of firm I. Firm I is at a greater risk as compared to Firm II. According to the alliance, Firm II seems to be benefiting more than Firm I. Firm I will incur the cost of building a new plant so that they can specifically sell their products to Firm II. The benefits of having Firm I build their plant close to Firm II primary facility is for them to minimize costs of transport and also to supervise the production to ensure it meets their standards. This is likely to cause problems when it comes to selling of the products to Firm II which is the major customer. Problems with setting the price will arise and firm II is likely to control the prices of the products from Firm I (Gerybadze, 1995). The alliance is likely to encounter strains in case firm II establishes a buyer for the same products as those of firm I that are being sold at a cheaper price. In this case, Firm I will incur huge losses with the loss of their major buyers.
b).Firm A and Firm B have formed an alliance for them to capture new markets. Both firms wish to sell their products to each other’s home countries. In the case of Firm B, selling its products in the home country of firm A does not require many regulations which mainly involve the government. On the other hand, Firm A requires contracts from the government of Firm B for it to capture the market. As explored by Ajami & Goddard (2006) there are risks involved in capturing new markets especially those related with the culture of a certain country. The government could also have strict regulations for those who wish to sell their products in that particular country. Though Firm B might face the risk of cultural difference making it hard to penetrate the market, Firm A is at a greater risk because the sell of its products is not as immediate as that of Firm B in the home country of Firm A. The regulations that might be imposed by the government may make it impossible for Firm A to sell its products in the home country of Firm A.
c). The strategic alliance formed by firm 1 and firm 2 is aimed at sharing of technologies between the two firms. This is a good venture since the new technology that is meant to be incorporated in the products of firm 2 might yield them a huge profit as compared to their profits before the alliance. In return, the profits realized by firm 2 are to be shared with firm 1 which owns the new technology. However, there are risks involved which are mainly derived from trust (Ireland, Hoskisson & Hitt, 2008). The new technology given to firm 2 by firm 1 is untested and could be bound to fail putting the firm out of business. The other issue is that firm 2 might not share their profits with firm 1 if the new technology is a success. However, firm 2 is at a greater risk because use of the new technology could lead to production of goods that are either substandard or those that do not fit the preferences of the consumers. For them it is a greater risk because competitors might use this move to their advantage in case the use of the new technology is not a success. Firm 2 runs the risk of compromising their products or being put out of business while firm 1 runs the risk of loosing one of their new technologies.
References
Ireland, R., Hoskisson, R. & Hitt, M. (2008). Understanding Business Strategy: Concepts and Cases. New York: Cengage Learning. Print.
Gerybadze, A. (1995). Strategic alliances and process redesign: effective
Management and restructuring of cooperative projects and networks. New York: Walter de Gruyter. Print.
Ajami, R. & Goddard, J. (2006). International business: theory and practice. New York: M.E. Sharpe SharpeLtd. Print.