To think critically about: Application of competition principles in both public and private organizations.
Introduction:
Economics is the term used for the study of production, allocation and consumption of resources.
Competition in economics refers to the availability of more than one seller or supplier of goods and services due to which buyers have the option to choose one amongst others.
Explanation of Solution
Given information:
The government initiated giving money directly to parents for education so that they can choose amongst any prevailing public or private school.
Explanation:
Competition affects both private and public sector organizations due to the following reasons:
- Public organizations need to follow guidelines of the government and in case the quality of services is not as good as other public organizations then government may take remedial actions against responsible officers and authorities.
- Public organizations often receive funds on the basis of the performance or ranking.
- Public organizations which perform better get opportunities which motivate people working under the organization.
- Overall public sector may feel competition from private sector as private sector is does a better job, and then there is a possibility of disinvestment by the government in that particular sector.
Public sectors may remain unaffected by the competition due to the following reasons:
- Public sectors do not have to worry about earnings since; the funding is to be done by the government.
- Public sector organizations do not get bankrupted therefore; such organizations do not have to worry about repayment or
cash inflows to make payments. - Public sector organizations do not shut their operations in case of lack of supply or sales or lack of earnings.
- Therefore, public sector organizations remain unaffected from competition amongst themselves or private sectors.
Thus, public sector organizations generally do not face as much competition as it is faced by the private sector.
Want to see more full solutions like this?
Chapter 2 Solutions
Understanding Business
- Foundations of Business (MindTap Course List)MarketingISBN:9781337386920Author:William M. Pride, Robert J. Hughes, Jack R. KapoorPublisher:Cengage LearningFoundations of Business - Standalone book (MindTa...MarketingISBN:9781285193946Author:William M. Pride, Robert J. Hughes, Jack R. KapoorPublisher:Cengage Learning