The Influence of Economic, Political, and Social Factors on Firms Essay

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The Influence of Economic, Political, and Social Factors on Firms

The long controversy exist over the influence of economic , political
and social factors on the success of the firms. With many economist
believing that economic factors such as management structure
contribute to the success of the firm. Karl Marx (1976)[1] and other
economist argued that economic factors are not the sole determiner of
firm’s success. Marx believes that political, social and economics
plays a part in making the firm to be effective. So the following
paper will address the question of whether political, economic or
social factors contribute to success of the firms. The discussion of
economic, political and social factors will be based on the argument
between Marglin and Landers.

Competition creates a spur for companies to innovate, improve
efficiency and drive down prices. Competition is a model of industrial
structure in which many firms compete in the supply of a single
product in a competitive environment where only the fittest or most
affective firm succeeds. Before going further I will like to emphasise
the competition I’m referring to is perfect competition where new
firms can enter the market if it appears profitable[2]. Because of
insignificant barrier to entry firms are faced with challenge to
innovate and to improve efficiency. As stated by the neo-classical
theory of the firm it is in the interest of the firm to keep the
marginal cost as low as possible. The need to lower the average total
cost persuaded firms to look for efficient form of production.

Competition from rivals forced firms to adopt management systems that
will allow them to outperform their rivals .I clearly agree with
Landers that the new management system emerged because its
effectiveness[3]. Firms adopted the putting out system because it
allows them to have edge over other firms The creation of the
factories overcome the control that workers had over their work in the
early phase of capitalist through the cottage system. Under the
cottage system workers were working from home and the domestic
craftsmen was master of his time. The lack supervision under the
cottage industry meant that workers had no control over how much
worker produced per day. Firms were not benefiting because it was easy
for workers to steal raw materials. As stated by Karl Marx and the

... middle of paper ...

... as mentioned by Marglin both social and economic factors
play a part , but they depend on competition .For example in the
factory system firms exploited workers because of competition if I
wasn’t because of competitions firms wouldn’t have exploited

[1] Landers ,”what do bosses really do ?p.591

[2] Landers ,”what do bosses really do ?p.591

[3] Marglin “What do bosses do ?p.18

[4]Marglin “what do bosses do ?p.16-17

[5] Marglin what do bosses do?

[6] Chandler (1992)managerial enterprise and competitive capabilities,
business history .p16

[7] Elger ,T & Fairbrother , P (1992)fordism and flexibility .p.40


Chandler , A .(1992),”managerial enterprise and competitive
capabilities; Business history review , vol.58,no .4.

Elger, T & Fairbrother ,P.(1992),’inflexible flexibility ‘ in N.
Gilbert et al (eds) Fordism and flexibility :Division and
Change(London , Macmillan)

Lazonick,w.(1991), Business organization and the myth the economy.

Landers, D.(1986), “What do bosses really do” The journal of economic

Marglin.S.(1976)’What do bosses do ‘ .In A .Gorz (ed),The division of
Labour (Brighton , Harvester)

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