Question

Developments after the global financial crisis moved the US away from being one of the most free-market economies in the world toward an economy with much more active and stronger government involvement (e. g., the “Patient Protection and Affordable Care Act,” commonly known as “Obama-care,” requires employers to spend more on health care, including smaller firms). What implications does this shift in the political and economic environment in the United States have for large firms (such as GE or IBM) versus small firms (mom and pop entrepreneurs and technology startups)? How does this change the competitive landscape and affect a firm’s strategy formulation and implementation?

Answer 1

Since Obama has taken power, the US economy has seen growth slowly but steadily. It is commendable how fast Barack Obama's office has changed the economic scenario in the U.S. His office has made many changes with regards to the welfare of the needy and the neglected, highlighting healthcare and overall well-being of the people. Thus the new reforms namely, Obamacare, the Dodd-Frank Act, the net neutrality rule and so on was able to uplift the economy from a downward-spiralling ball of moss.

Under the guidance of the Obama government, General Motors and Chrysler were saved from going bankrupt and almost one million jobs were saved by an independent government body that gave $80.7 billion in federal funds to General Motors and Chrysler on certain conditions that the companies reform the administration of retirement benefits into an independent trust, reduce their line of operations and legally file for bankruptcy.

Large firms may not have been affected in a very averse manner. The reforms may have created a much lesser dent in their coffers, but small businesses and start-ups are facing a hard time with the government intervention and curbed independence. The rules and regulations are definitely affecting their pockets. On one hand, the government has helped with grants to set up the start-ups and on the other hand it is has taken back the grant on the name of Patient Protection and Affordable Care Act. Thus the shift in the political and economic environment in the United States has proven to be a two-way sword.