Question

In: Economics

How would the regulations that come from the government have an influence on the firm's strategic...

How would the regulations that come from the government have an influence on the firm's strategic options and its performance results?

Solutions

Expert Solution

government can influence the firm's plan and productivity level both positively and adversely..

  1. impact on planning concerned with price-it there is less competition then the firm would set high price in the market,which is a positive impact and if government increases the competition through imports and FDI(foreign direct investment) then the firm are bounded to sell the goods and services at lower price.which is a negative impact.
  2. impact on planning concerned with quantity-if government policy is favourable then the firm would be able to produce higher quantity of goods.but if government restricts the quantity through prodcution quota or any unfovrable policy then producers would be discourage concerned with their production.
  3. market efficiency-if there is better marketing facilities,transportation and incentives then it would make positive impact on the production process and in case of contrary situation it would make adverse impact on production.
  4. determination of margin of profit-if there is no competition and government subsidies are provided then the margin of profit would increase.and if government puts restriction and levy taxes and duties thus the profit margin would decreases.
  5. expansion and contraction of business-if policy is favorable then the producer would encouraged to expand the production process which is a positive aspect on business activity.but if government introduces a policy which is not favorable for the growth of business then the producers would decline the producton as a result there would be contraction of the size of business.

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