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

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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

o...

... 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

workers.

[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

REFERENECE LISTS

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

history

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

Labour (Brighton , Harvester)

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