Expansion and Mergers Essay Example | Topics and Well Written Essays - 1000 words

Expansion and Mergers - Essay Example356). In this regard, a natural monopoly whitethorn have adverse effects on the market economy once organizations manoeuver in anticompetitive practices aimed at locking out their competitors out of lineage. In addition, the monopoly may engage in other practices like hangout footings of goods, which is non the ideal situation in a free market. On the contrary, government regulation is authoritative in dealing with excessive competition practices in the market economy (Carroll & Buccholt, 2011, p. 358). In this case, firms pull up stakes engage in setting prices below unprofitable levels forcing some firms out of crease while the remaining firms will raise their prices resulting to products that are too expensive for the consumers. Government regulation is important in controlling prejudicious externalities in a market economy (Carroll & Buchholtz, 2011, p. 357). By definition, Hackette and Moore (2011) defined a negative externality as an uncompensated harm to others in a society that is generated as a by-product of production and switch (p. 61). It is evident that production of good has many by-products with some being harmful while the manufacturer does not pay for the harm caused. In effect, the manufacturer produces more products and earns more profits without catering for the harmful effects of the by-products. In this case, governments will always regulate such industries in suppose to ensure businesses do not risk the lives of others while making more profits. Rationale for the Government Intervention in the US marketplace Process As earlier indicated, governments regulate businesses to ensure that there was no market dominance by a monopoly. According to Geroski and Jacquemin (1985), dominance of a business firm goes hand-in-hand with the ability of the firm to exploit a strategic advantage to gain a large overlap of the market at the expense of its business rivals (as cited in George & Jacquemin, 1992 , p. 150). In this regard, it is possible for business firms to use anticompetitive strategies and try to edge out their competitors. Although the US is a free market, it is important for the government to intervene and ensure that all businesses engaged in ethical business practices. Since the US is a free market, it is important for the forces of get hold of and supply to determine the market price of goods and services. In this case, it is important for the government to regulate businesses in industries that fixed prices below the profit making levels in order to get rid of their competitors, in the US. In this regard, the governments failure to regulate makes the businesses eliminate their competitors and only raise the price of goods once their competitors are not in the market. In effect, these unethical practices do not provide for a competitive market environment. Therefore, this emphasizes the importance of government intervention in the form of regulation to ensure the f orces of demand and supply remained as the important factors in determining the prices of goods and services. Self-Expansion Complexities on Capital Projects The underlying complexity presently facing any capital project in the US is obtaining capital required for expansion after(prenominal) the recent fadeout. According to LaBonte (2009), the weak economy and competition from other manufacturers led to decreased market share of the US automobile industry. In addition, the recession had an effect on credit facilities in the country. In this regard, LaBonte (2009) noted, The recession had made credit facilities less available, which may have limited the ability of auto manufacturers and suppliers to finance their