Write About The Differences Between The Large Firm And Small Firm Variants Of Industrial Modernization Analysis

Amazing Essays
Write about the differences between the large firm and small firm variants of industrial restructuring. Also, about the conditions that necessitated them.
Capitalism has been founded on the idea of large firms. Till 1970s, maximization of profits through large firms was a natural model of economic organization under capitalism. The Fordist model of industrialization was based on mass production of homogeneous goods using assembly line production technology, standardized work routines de-skilling and homogenization of labour force. Such an organization secured increase in productivity through economies of scale. However, there were social, economic and technical limits of Fordism. Technically, there is a limit to raising productivity through
…show more content…
It offered a new paradigm to replace mass production. It proposes reorganization mainly along three lines. Firstly, the reorganization of manufacturing techniques that involved the usage of Just-in-time (JIT) and Total Quality Management (TQM) techniques in production. JIT calls for the elimination of waste in production and producing only what is required and when it is required. TQM argues for good quality goods to be produced. And, also it calls for the identification of all sources of poor quality and rectifying them. Secondly, changes in management and labour relations. Decentralization, specialization, shift in occupational structure, pay, evaluation etc. are also important. Thirdly, transformation of design and changing relations with suppliers in order to extend JIT and TQM along the supply chain. Operationalization of such policies that are designed to involve, motivate and control workers much differently than Fordism and mass production increased efficiency of output and profitability (Humphrey, …show more content…
Why a shift away from the conventional large firm based industrial organization? The third Italy model and clustering in other regions of Europe highlighted the competitive potential and success of small and medium enterprises (SMEs). Influenced by the success of this model small and medium enterprises have become a target of policies in developing countries. A strong support for SMEs in developing countries is based on the assumption that a strong SME sector helps in sustaining a broad private sector. Moreover, it is expected that the welfare impact of these small firms will create employment opportunities for the poor and the disadvantaged. Such policies are also most effective because their customer oriented outlook of programs helps in improving their competitiveness by learning from what customers actually need. Also, cooperation and mutual learning between firms, just like in the case of third Italy, facilitates maximization of the potential and improves efficiency. Collective approach of the firms also reduces the transaction costs substantially. The resulting cumulative capacity that makes such firms less dependent on outside help is another reason why such an industrial organization is effective. Therefore, the triple C approaches i.e. customer orientation, collective approach and cumulative capacity as Humphrey and Schmitz (1996) talk about makes the SMEs more effective.

Related Documents

  • Decent Essays

    Advantages Of IKEA

    • 996 Words
    • 4 Pages

    They had leveraged on technology, innovation and sustainability to lower the cost of manufacturing. IKEA is also known for cost-effective management of distribution center where the democratic design of products ensures quality, form, functionality, sustainability which helps to lower cost due to is high volume production and economies of scale. Figure 4: Three Pillars of IKEA’s Concept Operations in foreign locations with lower wages can help lower both direct and indirect costs. Furthermore, less stringent government regulations on a wide variety of operation practices helps in costs reduction. Hence, the opportunities to cut the cost of taxes and tariffs also encourage global operations for IKEA.…

    • 996 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Next to managing the performance in the workplace, looking at system structure can help lessen any potential large, destructive impact. System structure gives a better relationship between company and vendor, as well as with third parties. It helps for a more effective supply chain. Better relationships within an organization assist in ensuring everything is going as planned. Technology integration increases efficiency by combining information and material handling systems.…

    • 820 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Meanwhile, inventory improves the quality of produces. Companies need the data information from their inventory turnover to determine the quality of a product. The more inventory is used to produce goods and service the better the quality. Overall, it is a chain reaction between the four functions. Conclusion In conclusion, by identifying the effects of each function a company can be much more successful, profitable, and sustainable.…

    • 769 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    This era is dominated by outsourcing and cost reduction. The current era of capitalism has evolved from centuries of capitalism working its way across the globe. One primary difference of Post-Industrial capitalism is outsourcing the manufacture process. Products are made across the globe rather than in one place. Lecture 14 focused on this outsourcing.…

    • 1653 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    One important practice for companies is to focus in the process adapting prices. This helps firms to increase the price effectiveness. Although, this practice is an important step ahead, it should not be the only path creating a successful price-setting system because…

    • 1170 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Many had suggested that trade is a type of technology, in many ways, because when a country exports a product in exchange for another one; the nation benefits as if had invented a new technology. Trade can permit an increased specialization for a nation. As a result, firms become more productive, and help to further the economic growth. Utilization of the theory of comparative advantage, which refers that nations specialize in producing the goods that they can yield cheaply relative to other goods, will help to shift from a country that is self-sufficient, and it generates everything for the consumption of its inhabitants; toward one that employ specialization to produce particular goods and services, and sells them on global markets for other goods and services. As a matter of fact, international trade fosters competition, encourage companies to renovate, improve products, and preserve prices low and quality high in order to maintain or increase their market.…

    • 763 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Supply chain To be successful, a company also needs to look for competitive advantages beyond its own operations, into the value chains of suppliers, distributors and customers. The Supply Chain involves all the necessary activities in the conversion of products from the raw material to the end products, when the goods or services reach the customers and includes shareholders such as manufacturers, suppliers, distributors, transports and warehouse. Supply chain helps companies to reduce cost, maximize the asset productivity, increase service level, reduce the bully whip effect with better consumption of resources and essentially establish proper respond to changes in the market places. All processes in the supply chain are categorized by…

    • 828 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Accordingly, capitalism is a privately owned, profitable system of people that previously emerged in the Renaissance period. The author of the journal “the Origins of the Industrial Revolutions” explains capitalism as “capital distribution” among the people through banking and other “commercial and financial institutions” (72). As the author says, saving money for their future use is a mission that targeted the industrialization for long periods. Hartwell elaborated capitalism and connected with trading as “capital accumulation” and described as savings and investment that caused by improved transportations (67). He also mentions that national economic change caused by capitalism assisted the revolutionizing process (65).…

    • 1224 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Heijunka Case Study

    • 806 Words
    • 4 Pages

    This practice also removes mudas (waste/ non -value -added activities) and standardising work becomes easier. A good sequencing practice is one which reduces the need for labour at the line side of production. For better benefits from fixed investments in lines, the use of resources such as (factories, shop floor, machinery) must be maximised by improving in their time plan, so that higher production rates can be achieved with…

    • 806 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    These two methods are very effective in improving company efficiency and lowering expenses on one side of the scale or the other. Some companies prefer to use vertical integration to save costs on labor and capital resources, while other companies prefer to use outsourcing a significant amount of company tasks, functions, and processes, to focus more on daily operation, lower cost structure, and increase differentiation. Bringing these two methods together, while effectively creating strategic business relationships and contracts, will give a company maximum profitability and competitive…

    • 808 Words
    • 4 Pages
    Decent Essays