High productivity is important under all conditions. It enables manufacture to reduce cost, and increasing production. Which ultimately means improved capacity to deliver more value to customer. The greater value thus generated bu increased productivity can be shared by the company and the customer.
However, when there is no completion the customers are often forced to be content with lower value delivered by the products purchased by them. The manufactures also manage to survive, although at lower profit. But in competitive markets the customer will shift their business to competitors who are able to offer lower prices and higher value because of their better productivity. In a situation like this a company cannot compete with more productive firms on price also.
Similarly, firms with low productivity find it difficult to survive during economic slowdown. In such periods, the total consume demand is reduced, and the firm that have lower productivity and hence create lower value find it most difficult to maintain their sales volume, and therefore are the worst hit by economic slow down, and if the conditions are very bad may be forced to close down.
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