Firm Within

Firm Within

Firm Within a single firm the network of decisions is co-ordinated by a management authority. It takes policy decisions that determine or alter the direction of the enterprise by establishing and varying its procedures, settle its choice of markets and its investment expenditures, and select its top staff. The administrative apparatus and structure of communications exist to absorb information, take and execute decisions, operate routines as standing orders and correct mistakes.

The firm comes into being, in principle, because it can produce or buy and sell a commodity or service more cheaply than it can be - obtained through price mechanism. In the first instance it is the product of men, ideas and capital. Sometimes one man or several men possess the two other requisites. At other times the separate elements may be brought together from a number of directions. Some firms are single product and single process, others are multi-product and multi-process. Firms are as varied as their originators and the ideas which inspired them. The simplest form of organization is the one-man business. One man does all the work and 'departmentalizes' the functions within himself. He is perhaps more accurately termed 'self-employed', but the one-man business may refer to the financier owned by one person which employs a number of people. This is not widespread in industry as a whole in Britain; nor are the systems of partnership in which two or more people are associated (or limited partnership which limits liability for a sleeping partner). The major form of private business organization is the joint-stock company with limited liability. It may be a private company (shareholders limited to fifty) or a public company. Private companies are more numerous, but in terms of capital public companies are dominant. They have grown up as an effective means of mobilizing large quantities of capital both by attracting funds from shareholders through the capital market and by large-scale reinvestment of profits. A joint-stock company need not be large, but it lends itself to the development of large enterprises in which decisions are taken by managerial executives formally accountable to the shareholders, on paper, although not always effectively in practice, because shareholders are usually content to leave the direction of their company to the board of directors. An increasing number of 'institutional investors' (insurance companies or mutual offices, pension funds, unit trusts and others) are bringing a change here: although they may not wish to be involved in business management they cannot be uninterested because they may not easily be able to dispose of their share-holding if they are dissatisfied with the conduct of the companies in which they invest.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this site is therefore not a final statement of economic doctrine.

Economics is in the last resort a technique of thinking. The reader will therefore need to make an intellectual effort, more substantial for some web entries than for others, to get the most interest and value out of this website.