This class has explored a wide range of principles and concepts that are related to microeconomics. These concepts and principles include supply and demand, government involvement in commerce, production and the operations of markets. One of the issues that set the class apart from others is the practicality of the subjects that it has explored. Nearly all of these subjects have real-world implications and practical applications. For example, the discussion of the forces of supply and demand allows one to understand how these forces interact to determine prices in the real world. Overall, the class has been as eye-opening as it has been thought-provoking.
The Case of Sear’s Decline
The US retail market has become intensely competitive in recent years. Players in this industry are being forced to adopt radical measures in an effort to remain operational. For instance, some retail chains have had to close down hundreds of stores while others have been forced to significantly decrease the sizes of their workforce. Sears is one of the retail companies whose operations have suffered as a result of the harsh operating environment. In previous decades, Sears was a strong player in the retail industry. Today, the company has lost its status and is struggling to keep its stores open. A number of factors can be blamed for the decline of Sears. Loss of investor and supplier trust is among these factors. Such companies as Whirlpool which supply Sears with merchandise have cut ties. Moreover, the company has lost the trust and confidence of investors. This is evidenced by the sharp decline in the company’s share price. For any firm to remain operational and stable, it needs to unwavering support of investors and suppliers. These stakeholders serve vital functions in ensuring that firms have the resources that they need to execute their mandate.
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The decline in investor and supplier confidence is not the only force responsible for the decline of Sears. Poor leadership can also be blamed for the company’s woes. Under the leadership of Eddie Lampert, Sears has suffered a series of challenges and setbacks. Lampert has adopted an unconventional and ineffective strategy. He has refused to invest in capital projects because he does not believe that these investments promise attractive returns. The result of the poor leadership is that Sears’s outlets are often understocked. It is worth noting that Lampert’s strategy goes against the industry trend and standards. Other retailers redoubled their investments in capital projects. One of the insights gathered from this class is that firms need to keep a close eye on the operations of their competitors. They should endeavor to keep up with trends in the industry. It is evident that Lampert does not value the insights gained from market analysis. Had he followed the trends in the retail industry, he would have steered Sears away from the crises that it faces today.
The transformation that the retail industry is undergoing is yet another factor that has occasioned Sears’ decline. Such forces as technology and the entry of new players are redefining the industry. For example, companies like Amazon are using modern technology to deliver convenience and value to their customers. While it is true that Sears was among the early adopters of the internet, the firm’s challenges suggest that its adoption of the internet was ineffective. Apart from the emergence of new technologies, the entry of new players into the retail industry also set the stage for Sear’s decline.
Sears understands that its situation is untenable. The company has initiated a number of interventions that are aimed at reviving its operations. Rebuilding relationships with its suppliers is among these interventions. While these interventions are commendable, it is unfortunate that they are happening too late. It is nearly impossible for Sears to regain the glory of past years. The competition being witnessed in the retail industry is not showing any signs of letting up. If anything, this industry will only become more competitive. Sears desperately needs a friendlier operating environment if it is to turn itself around. This class has highlighted the impact that fierce competition has on the stability and operations of companies. Intense competition threatens operations and could even lay the ground for a company’s exit out of an industry. Since the retail industry will only become more competitive, the chances of Sears’ recovery are depressingly slim.
Firms which are grappling with crises require effective leadership. A stable and firm hand is needed to steer a struggling firm out of turbulent waters and into safer territory. Lampert still serves as the CEO of Sears. Despite the challenges that Sears continues to face and the trends in the retail industry, Lampert has refused to abandon his ineffective style. In fact, he is more adamant and committed to his strategy. This strategy has proven ineffective once and it will prove ineffective again. With Lampert serving as its chief executive, Sears is doomed. The company would benefit greatly from a change of leadership. It is indeed unfortunate that Lampert owns a majority of Sears’ stock. This fact makes it incredibly difficult for the company to implement a leadership change. Combined with the fact that the retail industry is fiercely competitive and firms in the industry are innovating, Lampert’s poor leadership condemns Sears to a future of uncertainty and bad fortune.
Adam Smith’s Theories and Principles
Adam Smith is remembered as one of the greatest and most influential minds on matters of economics. He developed principles and theories that continue to explain how modern economies function. One of his theories concerns the impact of government involvement on business operations. Smith was a strong advocate for limited government involvement. He was a passionate supporter of free economics. He believed that firms are most productive when they are allowed to operate without undue influence from such actors as the government. Smith’s perspective on government interference sheds light on the issues that this class has explored. Among other subjects, this course has explored the role that legislation plays in defining how markets operate. The class has established that while some laws promote business operations, others tend to hamper these operations. For example, anti-trust laws are intended to protect consumers and to discourage the establishment of monopolies. These laws have helped to protect economies against powerful monopolies whose operations and influence are unchecked. The US government has also enacted laws which have had the effect of interfering with business operations. For example, following the 2008 global financial crisis, the Obama government led efforts to introduce new laws that would insulate the economy against another crisis. Critics of these policies argue that business operations have suffered. It is evident that Smith’s principles still apply to modern business environments. He predicted that the more a government becomes involved in private commerce, the less productive the firms become. The lamentations of the business community regarding invasive government policies are evidence that Smith’s predictions have been realized.
Government interference is not the only issue that Smith explored in his theories and principles. He also advocated for markets to surrender to the influence of the invisible hand. The invisible hand refers to the forces of supply and demand which dictate such issues as price. In keeping with his belief in free markets, Smith discouraged interventionist policies. He was of the view that firms need to be entirely free and unhindered. The subjects covered in this class are in agreement with Smith. The class has addressed such issues as supply and demand. It has established that these forces are the fairest and most reliable determinants of price in a free economy. Supply and demand offer a reflection of the production capacity of any economy. These forces interact beautifully to determine the fair price that sellers should charge for their products. The class has also made it clear that there are certain exceptional circumstances which warrant government intervention. For example, when a company exploits its power to set exorbitant prices, the government has a mandate to step in and establish price ceilings. These ceilings ensure discipline in a market and insulate consumers against unfair business practices. On multiple occasions, the American government has intervened after observing businesses engage in unfair, illegal or unethical practices. The government is clearly going against the guidelines that Smith established through his principles and theories.
The numerous benefits that firms experience when they embrace division of labor are another issue that Smith examined. He held that division of labor makes workers more dexterous while minimizing the amount of time required for production. Smith also identified innovation and the development of better machinery as another benefit that the division of labor delivers to companies. Smith’s take on the need for division of labor is in line with the theories and concepts addressed in this class. Among the many insights gained from the class concerns the role that competence plays in business operations. When firms invest in the skills and competence of their employees, they are essentially setting the stage for enhanced productivity. The class has also highlighted the importance of keeping down the costs of business operations. Enhancing employee competence through division of labor allows firms to minimize operational costs. Through division of labor, companies enable their employees to specialize and become competent. Overall, Smith’s ideas and theories coincide with the various models, principles and concepts that this class has focused on. This class is therefore a vital source of insight into issues concerning the operations of businesses.
For the most part, the class has confirmed the arguments and models that Smith presented. However, the class has also raised questions about whether Smith’s principles and beliefs apply to the modern business environment. The class has used the example of technology companies in the US to suggest that government intervention may be necessary. Such technology firms as Google and Facebook have essentially become a monopoly. These firms account for over 90% of global advertising revenue. The other players in the marketing industry account for a significant portion of the revenue. Unless action is taken, the US and global markets risk being at the mercy of the technology companies. Google and Facebook could become so large that it is impossible to contain their operations and protect customers. The class indicated that the US government and other bodies may need to become more assertive in their involvement in business operations. As noted above, government intervention becomes necessary when business operations threaten the stability of an economy and the welfare of customers. Therefore, in violation of the principles and guidelines that Smith established, the US government may need to intervene in the technology industry.
Impact of Course on Personal Perspectives
One of the objectives that this course sought to achieve is to redefine the thinking of learners regarding economic matters. I can confirm that the course has successfully achieved this goal. In the initial phases of the course, my understanding of various economic concepts was severely limited. For example, I did not recognize the impact that government involvement has on business operations. I thought that all forms of government involvement are necessary and justified. After being exposed to various concepts in this course, I now understand that government involvement can have a damaging impact on business operations. For example, intrusive and excessive government interference can discourage investment. Thanks to this course, I now appreciate the need for the government to limit their involvement in commerce. However, I still feel that some level of government involvement is needed. As the 2008 global financial crisis revealed, businesses cannot be trusted to self-regulate. When the government observes that the self-regulation measures that businesses implement are ineffective, it has the mandate to intervene and instill discipline.
Another impact that this course has had concerns my thinking on how supply and demand shape price and business operations. Going into this class, I had some basic knowledge about supply and demand. I understood that these forces are key drives of business operations and how an economy performs. I particularly knew that demand and supply meet at a point of equilibrium. In free markets, this point marks the price of a product. After taking this course, I now acknowledge that demand and supply are complex forces. There are many factors that collude to define the levels of demand and supply. I credit my new and enhanced understanding of demand and supply to this course. Thanks to the course, I also know that the government has the power to influence demand and supply. If it wishes to stimulate demand for a particular product, the government may institute such measures as reducing taxes. These measures have the effect of reducing the cost of operation, thereby lowering the prices of products. Overall, this course has opened my mind to new economic concepts and processes.
Monopolistic power and its impact on an economy is among the many issues that this course has shed light on. The course has challenged us to understand that monopolistic power poses a threat to fair competition. Firms that enjoy this kind of power make it difficult for the competitors to operate freely. For example, Google and Facebook wield so much power that it is virtually impossible for other firms to shape the direction of the industry. Before this course, I did not fully appreciate the damage that monopolistic power can cause. I felt that this power only affects companies. Now, thanks to this course, I know that individual customers suffer when a company wields excessive power. Such companies are able to determine prices as they please without any regard for the welfare of their customers. My overall assessment of the course is that it offers a refreshing take on various aspects of economics.
In conclusion, this class offers in-depth discussions on a wide range of issues. The class allows learners to understand how different forces shape the health and operation of an economy. Thanks to this course, one is able to investigate why such firms as Sears are struggling to remain profitable. In previous years, Sears was one of the biggest and most successful companies in the retail industry. This is no longer the case as the company has been forced to cut the number of its stores and let go of hundreds of employees. The poor leadership and the intense competition dampen any hopes of Sears ever recovering and regaining its status. Adam Smith’s perspectives on economics are another issue that this course enables learners to fully understand. Through the course, one is able to appreciate the role of government interference and the need for free trade. Overall, the course is insightful, fulfilling and eye-opening.
