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Commercial Activities Counter-Productive to Progress & Forward Benefit?


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Paquadez's Avatar
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06-Feb-2011, 01:51 PM #1
Cool Commercial Activities Counter-Productive to Progress & Forward Benefit?
What Commercial Activities can become counter-productive to the progression, stability and forward benefit of a socio-economy

1. Why do some commercial enterprises become untenable to the stability of an economy?

2. Should they be controlled?

3. How could they be controlled?

There are then three subordinate and distinct questions posed, and open for debate.

Flowing from this is the first and most obvious comment, viz: "Any business activity which becomes monopolistic or quasi-monopolistic."


Ground Rules:

No politics please! (By this I mean that nothing on party-political stance or rhetoric: i.e. Dems V The GOP.)

No politically based theories please; such as redistribution of wealth by taxation. It has never ever worked: and never ever will work!

Taxation can be used, carefully, in order to control or limit certain aspects of any commercial activity, however, it must be applied judiciously, or this suffers invariably, from what is called "The Law of Unintended Consequence".

Also, please remember that for any action; there is an opposite and reverse reaction. Now whilst this is actually an original Newtonian Law (Of Motion), it works just as well in arguing and developing hypothesis of almost anything, relating to and applying to society.

(n.b. Write on one side of the paper only. Calculators may be used. Anyone handing in their course work late will get a smack! )

Joking aside, if we can, for once, enjoin in and enjoy a good lively debate, then hopefully, we might all leave somewhat the wiser; this quite obviously includes me.

Gloves off and go to it!


Last edited by Paquadez; 07-Feb-2011 at 03:28 AM..
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Brigham   (John) Brigham is offline
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06-Feb-2011, 02:24 PM #2
Surely, If a company becomes too big for the economy in which it operates, it just becomes global. Like the Oil and car companies.
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06-Feb-2011, 02:52 PM #3
Quote:
Originally Posted by Brigham View Post
Surely, If a company becomes too big for the economy in which it operates, it just becomes global. Like the Oil and car companies.
As always, when trying to consider the present, philosophically, firstly, consider the past...............

Research the early history of Standard Oil and one John D Rockefeller.
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06-Feb-2011, 04:40 PM #4
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Originally Posted by Brigham View Post
Surely, If a company becomes too big for the economy in which it operates, it just becomes global. Like the Oil and car companies.

Frankly, that statement makes no sense.
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06-Feb-2011, 05:09 PM #5
This is CivDeb, GB.........................................

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06-Feb-2011, 05:24 PM #6
So it dont have to make sense?
As far as oil companies...there are several..we can also divide that into many nations as well,so I dont see how oil companies would apply here.
There is also competition among the auto manufacturers...so not really an issue
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06-Feb-2011, 06:09 PM #7
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Originally Posted by aka Brett View Post
So it dont have to make sense?
As far as oil companies...there are several..we can also divide that into many nations as well,so I dont see how oil companies would apply here.
Try thinking in terms of Cartel: and effective Monopoly, Brett.

Then consider Exxon's recently posted Supra-Profit. See here:

Next consider how any business can suddenly increase profit by 50% odd, when and if two realities pertain:

1. Their operational cost base (Overhead) remains stable: &,

2. Their standard industry mark-up (Difference between Cost of goods for Sale: and Cost of goods Bought for Sale) remains roughly the same. All business activities tend to follow a standard Gross Profit and Net Profit margin which can be expressed as percentages: i.e. Gross Profit expressed as a percentage of Gross Revenue: Net Profit expressed as percentages of Gross Profit and Revenue.

Next consider how any activity can become essential in terms of allowing a continuum of any society, at any one time and era.

What has "Many Nations" got to do with the question?

We are considering ALL nations. And all socio-economic systems.
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pyritechips   (Jim) pyritechips is offline
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06-Feb-2011, 07:22 PM #8
Quote:
1. Why do some commercial enterprises become untenable to the stability of an economy?
Can it be that overlarge corporations weild undue influence?

And as for being monopolistic, has it come to be that control of a certain market disallows small, independant entrepreneurs from competing? For example, if I wanted to start up a retail company, how could I compete with the low prices of the big box stores? Especially if the market is already saturated. If already in existence, how can my small business survive if a big box store opens up across the street? Is it a simple matter of "Too bad. If you can't compete, fold 'em."?
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06-Feb-2011, 08:57 PM #9
Follow Paq's advice and think cartel. Monopoly even (not the same thing).

As per Thorstein Veblen (who who also had a lot to say about the productiveness of industry vs. the parasitism of business, but first things first.) "The material framework of modern civilization is the industrial system, and the directing force which animates this framework is business enterprise.....which is nothing more than creating an acceptable combination of product or service availability matched to consumer needs."
Quote:
the directing force which animates this framework is business enterprise
Now one can go into sophistry on what constitutes enterprise but I still hold competitiveness, productivity and innovation to be the prime markers. All of which are forestalled in the case of both monopoly and cartel (forming).

A company going global, be it for being too big or too small (yep, that reason can apply as well), hardly qualifies as a killer of the afore-mentioned objectives for solely that behavior. Large corporations (not sure how "overlarge" would be definable) are, first of all, simply that, large.

A nice example of something being detrimental to progress is (was) the (government induced) sugar cartel. With cartels we look primarily (and mostly with distaste) at their capacity for price fixing (OPEC, Big Energy etc.) but the crux can be demonstrated with something as banal as what we put in our coffee and the crux is the stifling of enterprise.

Quote:
The most visible effect of the cartel was how it limited supply. Acreage quotas prevented the entry of new farmers, but they also locked in the 1934 geographic pattern of sugar production. Though shifting land or labor prices might have made some areas more attractive to sugar producers, the cartel “distorted” production decisions by discouraging relocation: Refining factories wouldn’t move to new areas where farmers didn’t have quotas.
Quote:
By locking the industry into less productive regions, therefore, these cartel provisions reduced productivity.
http://www.minneapolisfed.org/public...ay.cfm?id=4456
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06-Feb-2011, 09:07 PM #10
Quote:
Originally Posted by pyritechips View Post
And as for being monopolistic, has it come to be that control of a certain market disallows small, independant entrepreneurs from competing? For example, if I wanted to start up a retail company, how could I compete with the low prices of the big box stores? Especially if the market is already saturated. If already in existence, how can my small business survive if a big box store opens up across the street? Is it a simple matter of "Too bad. If you can't compete, fold 'em."?
There a few things you can do. First, I think you have to move beyond the traditional brick-n-mortar model. E-bay, as an example, levels the playing field for online sales and broadens your distribution. Also, offer a unique service with the product. Or, for that matter, offer any service at all. I can think of more than a few shops locally that compete and if they don't match price they sure beat the service and I will shop there instead. Finally, choose your market wisely. Best Buy computer service is horribly expensive and they hire more for sales than for technical ability. There is a niche there and there may be other possibilities in your area. Specialization also works well in a large market but not so much in a small one.

It's interesting that you mention Walmart given it's the only grocer in the area that sales and encourages the use of reusable shopping bags and the only one that has sections specifically for locally grown product. Cater to the interests of your local market. Price is not the only deciding factor.

One example of a company whose monopoly has harmed consumers globally is Microsoft. I would so much prefer typing this in Linux but must run windows for other reasons. Google has made a dent. At least my phone runs Linux. So when are we going to get an Android TSG app?

In addition to Microsoft and the obvious in Oil and Banking, I might throw in a few others like McDonald's and BCBS in the US. As for being Counter-Productive to Progress I would have to throw in News Corp and the Catholic Church.
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07-Feb-2011, 03:48 AM #11
Quote:
Originally Posted by pyritechips View Post
Can it be that overlarge corporations weild undue influence?
Right on the button, Jim.

Additionally, today, major organisations can bend any market to their desire and end-game objectives, purely because of their financial clout.

As a ready example, the leading (By size, outlets and revenues) UK supermarket chain, Tesco, can and do engage in unfair price wars to drive out small fry competition from their markets. They will decide a policy of selling food far cheaper than their cost, which smaller retailers simply cannot compete in.

The little guy has gone broke and Tesco then raise their prices. And thereafter adjust the market to their desired whim.

In fact this cynical strategy has become so bad, major UK supermarket chains (Tesco and Asda which is a Walmart biz) are driving farmers into bankruptcy by driving down farm gate prices to the point of non-viability: and then taking over their farms!

This was a trick used by Ford from the 1930s on: they would seduce an independent component manufacturer to become a chosen Ford supplier: and so load them with work, which increased subtly over time, the manufacturer finished up working 90% for Ford: and then Ford would pull the contract. leaving the owners with one poor option: sell the business to Ford.

The latest scandal, is major agro-conglomerates and perhaps worse, equity funded companies (Raising huge cash funds via private equity markets et al) buying up vast tracts of land in Third World countries and such as Eastern Europe, for massive arable factory farms to grow cash crops for Western markets: when the indigents of that nation cannot even eat properly.

Whilst the land is peanuts in cost to Western farmland cost, to say, a collection of Eastern European farmers struggling to survive, a quick capital deal makes them comparatively wealthy amongst their peers. For a short while............

Quote:
And as for being monopolistic, has it come to be that control of a certain market disallows small, independant entrepreneurs from competing? For example, if I wanted to start up a retail company, how could I compete with the low prices of the big box stores? Especially if the market is already saturated. If already in existence, how can my small business survive if a big box store opens up across the street? Is it a simple matter of "Too bad. If you can't compete, fold 'em."?
Well, from a pragmatic focus of business strategy the last thing anyone should aim to do is try and compete with a major in a conventional market slot: unless the small biz offers something really unique which commands a higher price and thus margin.

This is basic marketing theory: USP (Unique Selling Proposition/Proposal).

Start Ups should always seek out a genuine market "Niche"; which for some reason or other has been ignored or neglected by the big guys.

However this is moving away wildly from thread topic!
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07-Feb-2011, 03:57 AM #12
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Originally Posted by buffoon View Post
Follow Paq's advice and think cartel. Monopoly even (not the same thing).

Now one can go into sophistry on what constitutes enterprise but I still hold competitiveness, productivity and innovation to be the prime markers. All of which are forestalled in the case of both monopoly and cartel (forming).
Thanks El Buffo.

As usual, Buffo is greatly assisting by pointing discussion along critical orientation.

You cannot have "Competition" and thus "Competitiveness" if Cartel and worse, monopoly operates.

It is hard to be "Productive" and create "Productivity" when this is restrained: perhaps, for example, by unfair access to raw materials.

It is impossible to have "Innovation" if the innovator has to fight tooth and claw to protect IPR (Intellectual Property Rights) and Patents when patent busting and IPR encroachment is pursued by a mega-wealthy major.

(n.b. There is a normal recommended route to overcome this: but today it is highly flawed! I'm going to await someone pointing out the possibilities!)

Furthermore, it is impossible for innovators to innovate: if they are unable to access risk capital.
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07-Feb-2011, 05:05 AM #13
Quote:
Originally Posted by Paquadez View Post
Try thinking in terms of Cartel: and effective Monopoly, Brett.

Then consider Exxon's recently posted Supra-Profit. See here:

Next consider how any business can suddenly increase profit by 50% odd, when and if two realities pertain:

1. Their operational cost base (Overhead) remains stable: &,

2. Their standard industry mark-up (Difference between Cost of goods for Sale: and Cost of goods Bought for Sale) remains roughly the same. All business activities tend to follow a standard Gross Profit and Net Profit margin which can be expressed as percentages: i.e. Gross Profit expressed as a percentage of Gross Revenue: Net Profit expressed as percentages of Gross Profit and Revenue.

Next consider how any activity can become essential in terms of allowing a continuum of any society, at any one time and era.

What has "Many Nations" got to do with the question?

We are considering ALL nations. And all socio-economic systems.
But are of the oil suppliers in agreement of fixed pricing?..who knows
According to the link...the profit only comes out to a few percent of total revenues.
Another link showed me they increased production 19 percent as well..
While 50 percent sounds high..that would be 9 percent verses 6 percent for example...even less if we include total production
The corp has also had losses in the recent past as well
Should the govt force people to buy products from them when they are losing money to keep them afloat...what is an acceptable profit margin?
Is it something we have a right to regulate?.
If we regulate one way shouldnt we regulate also while in the red?

Exxon is a huge corp working out of many nations...I would be interested in which nations gouging occurs if indeed it is occurring.

At the risk of sounding petty..Walmart fits the bill for abuse...not by price agreements,but by reducing prices in certain areas thus causing local competition to fail..its just a rotating platform of pricing.
They have enough variety to pull it off one dept can be supported by the others.

But if truly want to get technical....wouldnt any company that has loss be guilty of trying to undercut the competition with malice....why else would one operate in the red unless to intentionally destroy the competition then raise the prices back up..there are laws to prevent such,but who is to say motive? for said companies,who makes the judgment and do they truly not have any interest in any companies?

Can K mart blame Walmart for failures?..Walmarts intention was to take their business/or why open shop.
Where is the line drawn?...A company has to sell a product at x amount above costs..in all depts?
It is rumored for instance that many fast food places dont make money on certain items..but pick up slack on the rest..do we drop the dollar menu to save the guy around the corner?
Should GM have been prosecuted for going broke?...after they were selling cars without making profit...were they trying to put the others out of business?....If the car makers are making profits next year are they guilty of conspiring?
Microsoft has battles with software...cant include this or that as it harms third party etc.
This would be no different than lets say a store having a restriction on selling bread because of bread stores.

I dont see anything cut and dried...but I do see alot of wet grass ahead

Last edited by aka Brett; 07-Feb-2011 at 03:34 PM..
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07-Feb-2011, 07:34 AM #14
Brett:

You've muddled and conflated numerous issues and facets here.

I'll revert later when I have more time!

Meantime, works calls..............

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07-Feb-2011, 03:10 PM #15
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Originally Posted by Paquadez View Post
Brett:

You've muddled and conflated numerous issues and facets here.

I'll revert later when I have more time!

Meantime, works calls..............

I am showing the larger picture
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