Business Q-A Paper

Business, Government and Regulation

Terms

Privatization is the process of transferring ownership of a publicly-owned company from government to private ownership through the buying and sale of shares and assets.

Regulation is a rule or principle for governing conduct. It involves the use of a detailed set of procedures by an authority such as a government.

Keiretsu is a group of companies with interlocking or interrelated business relationships and shareholdings. It exists as informal form of network within a conglomeration of businesses.

Question 1

Business and governments are more inclined to work together because they have new ways that allow for cooperation and interdependence while still maintaining the identity of each entity as an independent party. Furthermore, the government and the private sector have identified mutual advantages through mergers and bailouts the post-crisis era (Geist, 2000).

Question 2

Keiretsu is a network of business network composed of manufacturers, supply chain partners and financial institutions which are inter-dependent but still retain their legislative identities. These partners may have avoided bailouts by working in cooperation with each other to create strong and long-term relationships that are mutually beneficial. Moreover, these partners often recognize each other within their system as manufacturers, distributors and financial capacities. In this respect, they normally give first priority to the partners within this unit in matters relating to mutually beneficial business practices.

Question 3

Some companies have been labeled as too large to fail. This is because they operate in large, multinational capacities and contribute a huge portion of revenue to the country both directly and indirectly. They are also the top in their respective industries and operate in a monopolized manner. The immediate effect is that these companies’ performance has a direct effect on industries and the national economy. Government normally support these companies and strive to keep them operational and profitable due to their contribution and support to the economy. Their collapse creates a negative ripple effect that disturbs stability of revenue, consumption and employment (Geist, 2000). Thus, governments and international organizations provide bailouts and support systems to keep these companies afloat and maintain their position in the industrial chain.

Question 4

Reserve industrial policy has become an established system in India, where it was heavily implemented in the years following the end of the Second World War. It holds a mixed economy theme and is very sector-specific. This policy focuses on specific sectors which go ahead to receive massive support and resources. It was widely beneficial to India due to its concentration on future projections, government support for infant industries and knowledge spillover. India adopted this policy at a time when it was under-developed and lacked funding. Government support and specialization enabled the growth of independent industries that carved their edge and developed a competitive advantage in financial, technological and production sectors.

Question 5

There is a looming crisis arising from the mass employee deficit in worker retirement benefits estimated at half a trillion dollars. As automakers continue to point out to the fiscal challenges they face, they have redirected pension money to other profit-making ventures that are directly beneficial to them. In addition, bailouts aimed at protecting workers and stability of industries have been used to fund other projects that are less beneficial to employees but more suitable to the interest of those running the businesses.

Question 6

The automakers crisis was at its peak between 2008 and 2010. The automotive sector was weakened by an increase in fuel prices which discouraged production of vehicles with low fuel economies. American consumers then turned to fuel-efficient vehicles from Japan and Europe. General Motors, Ford and Chrysler took a huge hit during this crisis (Geist, 2000). Asian and European auto makers gained popularity across the US and the rest of the world while the American automakers continued to struggle with high production costs. This balance has however shifted in recent years following their design of creative technologies, distribution patterns and marketing communication strategies. Even though impact of the crisis is still evident, the automakers are slowly shifting this balance and restoring it back to their favor. For example, they have started focusing on development of efficient and high-quality products.

Question 7

Airline deregulation was implemented to remove extreme government control over the airline industry and address specific aspect such as fare and entry routes. The aim was to reduce the limit imposed on carriers operating in the US. Deregulation has created more freedom for the carriers in the industry. However, the industry still remains heavily regulated by the Federal Aviation Administration which focuses on air safety. Mergers between airlines and stakeholders are not as beneficial to airline regulation as they should be. Regardless of the fact that they normally lead to the merging of revenues and an increase in their earning capacities, fares and prices are less likely to change due to the lack of competition in the industry.

References

Geist, C. (2000). Monopolies in America: Empire Builders and their Enemies, from Jay Gould to Bill Gates. Oxford: Oxford University Press.

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