The recent global financial crisis affected various industries in terms of operations affecting their profitability and ability to maintain efficiency in their operations. There were huge loses of employment opportunities in the economy leading to a high rate of unemployment in the economy. Government formulates various macroeconomic policies, with the objective of achieving aggregate objectives such as a reduction of unemployment to reasonable levels, and stabilization of prices among other objectives. The government employs various fiscal and monetary policies in the process of stimulating the economy after a recession. For example, the government can reduce corporate and household taxation to induce spending by these economic players (Tanzi, 2011). However, various outcomes can result from these policies adopted by the government.
For example, in situations when there is a decrease in the rate of households tax, the real income balances of households increase, where they can decide to increase their spending on consumption goods or invest their excess. Through investments, the government can be able to achieve its objective of stimulating the economy. However, the majority of the households respond by increasing their expenditure on health, education, or retail goods. Various retail outlets would be in a position to increase profitability from such policies and decision making by households (Ahrens, 2009). For example, Wal-Mart would benefit from an increased spending by the households on consumer goods, which would translate into more profits.
Wal-Mart can be said to operate in an oligopolistic market structure, with a few large players who control the majority of the retail trade such as Target. These organizations sell consumer retail products in large scale competing for customers in terms of providing a competitive variety of products. However, Wal-Mart has been successful in the recent months as compared to Target, where the fortunes flipped at the onset of the global financial crisis. However, Wal-Mart has responded to the financial crisis providing the right product mix for the receding economy. The failure of Target has been explained as a result of providing a product mix that has not been ideal for the receding economy (Gregory, 2009).
The government plays an imperative role in protecting various industries in the economy through various activities that promote fair competition in the market. The government also plays an essential role of protecting consumers from exploitation from the producers in terms of price and quality of products among others. Government interventions are essential, for example, the recent global financial crisis affected various industries that provide extensive and expansive employment opportunities in the economy. For example, some industries employ a very large number of employees such that if the organization had to shut down its operations, the cost to the economy would be higher than the cost involved reviving the company (Tanzi, 2011). For example, General Motors Company provides employment opportunities to a large number of people that means if the organization had to shut down the employed people would have to lose their opportunities.
The government also provides protection of the organization through patents. Patents enable the organization to combat infringement of what has been developed through extensive research with massive resources by organizations. Basically, a patent gives a monopoly power to an organizations invention. They are essential in protecting the intellectual property, encouraging creativity and innovations in the economy. For example, the smart phone industry has been characterized with increased patents, where, according to analysis by Stanford University, there has been spent over $ 20 billion on patent purchases and litigation in the past two years. Creation of limits on patents is essential, since some patents are too broad, which leads to some patent holders claiming wide ownership of even unrelated products developed by others (Duhigg & Lohr, 2012). In addition, since it is for the purpose of encouraging innovation, it should have time limits to encourage more developments.
References
Ahrens, F. (2009, June 23). Wal-Mart Aims to Hold Onto New Recession Customers by Going Upscale Just a Little. Retrieved January 29, 2013, from Economy Watch: http://voices.washingtonpost.com/economy-watch/2009/06/wal-mart_aims_to_hold_onto_new.html
Duhigg, C., & Lohr, S. (2012, October 7). The Patent, Used as a Sword. Retrieved January 29, 2013, from New York Times.
Gregory, S. (2009, March 14). Walmart vs. Target: No Contest in the Recession. Retrieved January 29, 2013, from Business and Money: http://www.time.com/time/business/article/0,8599,1885133,00.html
Tanzi, V. (2011). Government versus Markets: The Changing Economic Role of the State. London: Cambridge University Press.
