The market allocates resources

The market allocates resources Introduction The market allocates resources efficiently by the price system. The invisible hand of Adam Smith is a system of prices, which will promote the producers and consumers making their own decision. Consumers make purchase decisions on the basis of utility maximization while producers make marketing decisions according to the principle of profit maximization. Based on the changes in prices, the markets guide resources toward the most efficient aspects of allocation between supply and demand. Chandler (1977) presented that the enterprises internal administration and coordination as the visible hand was replacing the visible hand of market mechanisms. With the rise of modern business enterprise and its managers, the large modern enterprise was gradually replaced the small traditional family firm and was taking over the coordination function of economy activities and resource allocations, as well as its management team were becoming the most influential group of economic decision makers. Actually, the visible hand is not a denial of the visible hand. The effect of both invisible hand and visible hand is conditional. Therefore, the visible hand was not completely replacing the visible hand; it was a kind of supplement and development of the invisible hand from the perspective of administrative coordination. How effective the market allocates resources For market, the price system is the coordinating device that takes care of allocation. Price, which makes balance between the consumers demands and the producers supply, is achieved through interaction in the market. The process of market interaction is what we call the invisible hand. Demand and supply affect the market interaction. On one hand, consumers demand for a commodity depends on its price to a large extent. The total demand will go up if the price goes down. This is the rule of demand. On the other hand, the total supply of goods is also determined by its price. The total supply will go up if the price goes up. This is the law of supply. Figure 1 illustrates that when a commodity oversupply and the price will drop, on the contrary, it will stimulate consumption, so that increase the demand. Besides, it will inhibit the production, hence reduce the supply. Market equilibrium occurs when the supply curve and demand curve meet. The meeting point of supply and demand needs to be achieved through price adjustments. At this time, resources will be allocated in a variety of purposes through price. The market will out of equilibrium no matter supply excess demand or demand overrun supply. The price will then be adjusted until equilibrium comes back. However, the invisible hand is not a panacea. In real life, the market has its limitation in allocating resources. The invisible hand of market can be effectively only in the perfectly competitive market. Public goods, externality, monopoly, market control lag, as well as the unbalanced information may lead to the disorder and chaos of the market economy. For example, according to statistics from Sina Finance, there were 80 big department stores in 2005 in Beijing. A Beijing persons average purchasing power was one- third of a persons buying power in Tokyo, while the number of large shopping malls was 8 times greater than it in Tokyo. This Phenomenon made a general decline in department stores economic benefits, thus malls closed down one after another. It shows that market has a certain degree of blindness and the market mechanism does not always achieve their ideal state. The management was affecting the economy as a Visible Hand Chandler posed the Visible hand of management, which was playing an ever-increasing key role in the allocation of resources. Today, the companies are not the small workshops anymore in the time of Adam Smith. Modern business enterprises were replacing small traditional enterprises. Some of them can be as rich as a country, which have great powers to directly affect national economy and even politics; moreover, they may make sense to the relationships between countries as well. The companys management was playing a significant impact on the allocation of resources. Chandler indicates that before the rise of the modern enterprise, the small personally owned and managed firm was a single-unite firm, which charges a single economic function and operating a single product line in one location. Thus the activities of these small traditional enterprises were coordinated and controlled by market and price system. In contrast, most of the modern business enterprise is multi-unit enterprise, which has its own administrative office, handles various types of products and services and operates diverse types of economic activities in different areas. Therefore the activity of these unites and transactions between them were internalized. They were coordinated and controlled by salaried managers rather than market mechanisms. As some propositions which Chandler mentioned in The Visible Hand (1977), can provide that the visible hand of management coordination was replacing the invisible hand of market mechanisms. Fist of all, small traditional business will replaced by modern multiunit business when administrative coordination allowed lower costs, greater productivity, and higher profits than coordination by market mechanisms. Modern enterprises interiorized the transactions, which transacted between some business units before. This internalization may reduce transaction costs and information costs, improve productivity, provide a more stable cash flow and thus reduce costs to improved profits. Secondly, only by forming a formal managerial hierarchy can the advantages of the internal activities of many business units be created. In modern business enterprises, middle managers control and coordinate the production and distribution in the company. Meanwhile, top managers are not only evaluate and coordinate with the intermediate managers, but also replaced the market for future production and distribution of resource allocation. Thirdly, the management system promotes the companys specialization and sustainable development. The majority of the traditional enterprises are partnerships and family firms, which were always short-lived. In contrast, management hierarchy allows the functions of company be maintained even the staff turnover and makes the salaried managers becoming more professional through various formal trainings. The managerial authority and ownership of enterprise can be divided when the business scale and the scope of operational diversity of business developed to a certain level, meanwhile the manager become more and more professional From the viewpoint of Chandler, to manage and coordinate this visible hands, compared to the invisible hands, could not only bring huge productivity and profits, but also enhance the competitiveness of capital. Thus, it could largely promote the productivity and consumption which caused by the revolution of organization management. That is what called the revolution of business enterprise management It cannot be denied that the visible hand has become a more and more crucial role in the contemporary economy, but there are still some defects in the view of Chandlers visible hand. First of all, Chandlers over-praise of the executive of corporation is just partly making sense to some extent. Managers may hide various levels of opportunism and potential trickery, such as the Enron scandal, as well as high-paying CEO scandal. Secondly, Chandlers understanding of large enterprise is not entirely accurate. Enterprises are expanding for large enterprises, because there is some kind of asset specificity. Enterprises expanding the scale do not mean that it is capable enough to build up its strength. Take the American slaughter Gustavus in 19th century as an example, he run a train transport business and freezer factory because it was the best way that he could control the quality and efficiency of meat-packing. He worried about that he would be plot in secret by his competitor if buying t ransport services and freezers from others. It is obviously that internal management of large enterprise would not substitute the regulatory action of market, the visible hand would play a role only in the case of management mechanism can produce greater productivity than the market mechanism and internal coordination costs are cheaper than the market transaction costs. To sum up, the market allocates resources efficiently by making equilibrium between demand and supply through the price system, while the visible hand coordinates and allocates resources by management. Every sword has its two sides. Both the invisible hand and the visible hand have their strength and weakness. The visible hand can not totally replace the visible hand, while the visible hand is the supplement and development of the invisible hand from the aspect of management coordination. They supplement each other to ensure the allocation of resource processed efficiently. References: Alfred D., Jr. Chandler (1977) The Visible Hand The Managerial Revolution in American Business Massachusetts and London: Belknap Press of Harvard University Press. P.1-4, P6-9 Eitan Goldman Gary Gorton (2000 ) The Visible Hand, The Invisible Hand And Efficiency. National Bureau of Economic Research. JEL NO.D21, G30 Economypedia [online]. [Accessed 1th December 2009]. Available from World Wide Web : Economypedia [online]. [Accessed 1th December 2009]. Available from World Wide Web : Jintang Wang Wenfan Zhong (1995) Modern American large enterprise and American society. Wuhan: Wuhan University Press. P3-5 Wikipedia [online]. [Accessed 1th December 2009]. Available from World Wide Web : Wikipedia [online]. [Accessed 1th December 2009]. Available from World Wide Web : Sean, Douma Hein, Schreuder (2008) Economic Approaches to Organizations Essex: Pearson Education. P.3-5, P9-10, P12-19, P28-38, P42-44, P46-51, P56-60 Sina [online]. [Accessed 1th December 2009]. Available from World Wide Web :

Netflix and Consumer Behavior Trends Essay

Netflix, Inc. is a subscription-based movie and television show rental service that offers media to it’s subscribers through on-demand internet streaming and DVD-by-mail service. Since its start in 1997, Netflix has taken the movie rental world by storm, becoming the world’s largest online movie rental service. As of January 2013 Netflix had a total of 29. 4 million streaming customers worldwide (Cohan). Netflix can attribute much of its success to its decisions to follow trends in consumer behavior, while its major competitors, namely blockbuster, sealed their fate by ignoring them. In the following paper I will tell you how Netflix was able to stay afloat while other movie rental companies failed, and gained success by following trends in consumer behavior. Background Netflix was founded in 1997 by Marc Randolph and Reed Hastings. Hastings had the idea for the DVD-by-mail service when he was forced to pay $40 in late fees after returning an overdue video. The company began its operation in April of 1998, with its core business being DVD-by-mail rental service. Besides being one of the first companies to rent DVDs by mail, Netflix also planned to capitalize on the fact that major brick and mortar video stores, such as Blockbuster, did not carry a wide selection of DVD rentals at the time. Netflix experienced much success with DVD-by-mail rentals, hitting the one million subscribers mark in February of 2003, and shipping over 1,000,000 DVDs by mail per day by 2005. In 2007 Netflix introduced it’s Video on Demand Service. This service was extremely successful, eventually making Netflix the number one online video streaming service in the world. Netflix, Inc. History) Consumer Behavior Trends Towards Entertainment There are several key trends in consumer behavior towards entertainment that Netflix was able to capitalize on. The first consumer behavior trend is convenience. The fast paced world that we live in has the average consumer seeking out anything that will save them the smallest amount of time or effort. Therefore, consumers expect entertainment fast, and at their fingertips. The next trend in consumer behavior is to limit spending. Due to the financial hardships our country has been experiencing in recent years consumers are looking to cut cost in whatever way possible. Before making a purchase decision, consumers are looking for a much higher cost/value ratio than they were in the past. The third consumer behavior trend Netflix was able to pick up on is the Smartphone/ tablet trend. According to Business Insider, â€Å"there are at least 165 million active Android and Apple iOS devices in the U. S. and that they are used by 78% of the adult population (Blodget). Today’s consumers are hardwired to participate from anywhere at any time; they use their smartphones for everything they can and expect to be able to do almost anything on it. Having the ability to stream media straight to their smartphones was almost expected by consumers. How Netflix Followed Consumer Behavior Trends Netflix was able to satisfy the consumers need for convenience at first by shipping unlimited DVDs through the mail for a month ly membership fee, instead of making consumers visit a brick and mortar location (Kang). Since then, Netflix has furthered adhered to the consumers need for convenience by introducing Video on Demand streaming in 2007. Through Video on Demand Netflix subscribers have their choice of thousand of new and old TV shows and movies to watch at just the click of the mouse. Customers can stream videos from netflix using a multitude of devices such as Xbox, PlayStation 3, Wii, Roku, their smartphone or tablet, or their computer, making Netflix easily accessible to almost all consumers. Netflix’s decision to incorporate Video on Demand into its service offerings was brought on by two factors- the decline in DVD sales starting in 2006, and the increase in the amount of consumers who were viewing video content digitally through websites like YouTube. These two factors demonstrated a fundamental shift in the way people consume entertainment that Netflix was quick to catch on to (Kang). Netflixs main competitor at the time, Blockbuster, chose to ignore these trends in consumer behavior, leading to its ultimate demise; â€Å"Netflix almost single- handedly wiped out the retail video rental business. Blockbuster went bankrupt last fall (Kang)†. The article â€Å"Why Blockbuster Went Bust While Netflix Flourished† found on Dailyfinance online states â€Å"Netflix’s corporate mindset has been key to its ability to adapt as people started gravitating toward online video streaming. It’s method is to put new technology at the service of customers while keeping a close eye on changing delivery costs and the competition (Cohan, 2010)† Netflix’s strategy of appealing to the consumers need for fast, convenient at home entertainment has proved to be successful. In the fourth quarter of 2012, Netflix reported customer growth of 2. 05 million customers in the United States, bringing its total US customer base to 27. 15 million. According to Brian Stelter in an article written for The New York Times â€Å"Netflix’s fourth-quarter success was a convenient reminder to the entertainment and technology industries that consumers increasingly want on-demand access to television shows and movies. Streaming services by Amazon, Hulu and Redbox are all competing on the same playing field, but for now Netflix remains the biggest such service, and thus a pioneer for all the others. Stelter)† The state of the US economy has caused consumers to seek out ways to cut corners with spending as much as possible. In terms of entertainment, this has lead to more people staying in and watching movies instead of going out as a way to save money (Crutchfield). From the beginning Netflix offered consumers an affordable means to entertainment by charging users a reasonable flat fee to have DVDs mailed to them as often as they want, without any late fees (Cohan). Today, Netflix’s more prominent service, instant streaming video, offers consumers the same affordability as its DVD by mail service. The company provides consumers with a very affordable subscription plan- unlimited streaming movie rentals for $7. 99 a month. CEO of Netflix, Reed Hastings believes that at this price â€Å"people who use it once or twice a month will still find value and come back and those who use it once or twice a week will rave about it to friends (Kim). Due to the rise in smartphones and tablets, and the amount of things consumers use theses devices for Netflix made the decisions to expand their service offerings to smartphones and tablets. In May of 2011 Netflix released a free application consumers can download on their smartphone or tablet that allows them to instantly stream movies and television shows to their smartphone anywhere there is WiFi, as long as they have a subscription (Brown). Consumers were very impressed with the quality of the video streaming Netflix was able to provide via smartphone or tablet, â€Å"Over WiFi viewing is superb– as though you were looking at a DVD not a video streamed off the internet (Brown). † Netflix’s integration with the smartphone and tablet market has proved to be wildly successful, â€Å"The company said revenue of $945 million, up from $875 million in the quarter in 2011, was driven in part by holiday sales of new tablets (Stelter). † The Netflix app Conclusion In conclusion, much of Netflix’s success can be accredited to the actions taken by the company to stay on top of and follow trends in consumer behavior. If the fate of Blockbuster is any indication, the level of attention companies pay to changing consumer behavior trends and the actions they take to be the first to satisfy the needs of those customers has the ability to make or break the company. Despite Blockbuster’s household brand name, Netflix, a relatively unknown company at the time, was able to win its customers by offering them the things they felt of value that Blockbuster did not.

The Basics of Help Write Papers

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Comparison Essay Like Water for Chocolate vs. Things Fall...

Like Water for Chocolate by Laura Esquivel and Things Fall Apart by Chinua Achebe are two novels that revolve around the struggle of adapting to traditions. Both novels take place in areas where tradition is fundamental. Therefore, the characters act different than those around them and are unable to adjust to their traditional lifestyles. . The two main characters in both books, Tita and Okonkwo, find it hard to live up to their own traditions, and fail to adapt to them as they go against their people. In the novel Things Fall Apart, Okonkwo the main character, refuses to accept the new traditions because he thinks they are not manly enough. He believes that the political and religious reforms are intolerable. Okonkwo supposes that he†¦show more content†¦In the beginning of the novel, Tita never faces the fact that she cannot marry and still insists for Pedro to come and ask for her hand in marriage. However, when he does, her mother advises him to marry Rosaura so he does. Tita is then mad and depressed but little does she know that Pedro did that in order to become close to her. This when Tita starts becoming isolated and loathes her sister and mother for doing such a thing. In addition, I believe that this tradition will be left behind or forgotten about by Tita because of her experiences. She will never put her daughters through what she has went through because she felt the misery and sorrow of that tradition. In Okonkwo’s case however, he is isolated from his own family because of his lack of emotion, which is also considered to be part of their traditions. Okonkwo never demonstrated his feeling towards anything because he considers this unmanly which is believed to be not part of their traditions. In contrast to Tita, Okonkwo started opening up to his family in the middle/end part of the novel. For example, when his daughter Ezinma is sick, Okonkwo worriedly makes medicine and does everything in his power to save his favorite child. Also, Okonkwo follows the priestess Chielo and Ekwefi when the priestess unexpectedly kidnaps Ezinma. For the second time, Okonkwo publicly displays emotions and compassion towards Ezinma. In conclusion, both books are based on customs, traditions andShow MoreRelatedStephen P. Robbins Timothy A. Judge (2011) Organizational Behaviour 15th Edition New Jersey: Prentice Hall393164 Words   |  1573 PagesLoyalty Is an Outdated Concept 87 Questions for Review 88 Experiential Exercise What Factors Are Most Important to Your Job Satisfaction? 89 Ethical Dilemma Bounty Hunters 89 Case Incident 1 Long Hours, Hundreds of E-Mails, and No Sleep: Does This Sound Like a Satisfying Job? 90 Case Incident 2 Crafting a Better Job 91 4 Emotions and Moods 97 What Are Emotions and Moods? 98 The Basic Emotions 100 †¢ The Basic Moods: Positive and Negative Affect 100 †¢ The Function of Emotions 102 †¢ Sources of