Capitalism is the primary driver for innovation. Being a producer of goods and services, the market needs to provide sufficient motivation for the industry to continue meeting market demands. Motivation in this sense is profits, and the pursuit of profits is interpreted as an advancement of capitalism. An industry that is profitable is capable of sustaining innovation which is critical in meeting important consumer needs as explained by Shiller (2013).
Capitalism with reference to corporate decision making is a question of wealth accumulation by owners of a company. With this understanding in mind, owners of corporates (shareholders) make all important decisions. Through this concept, shareholders are capable of maintaining their investments in corporations, since they are in control of wealth development through profit making. Capitalism is the engine that corporations use to make profits and in return retain investments for shareholders. In the absence of decision-making capabilities, corporates remove owners from the decision making position and this jeopardizes their wealth generation prospects. In turn, they withdraw their input, which is critical in the marketplace.
One example of corporate decision-making in action fueled by capitalism is Coca-Cola. The board of the company is elected to office by the shareholders to act on behalf of the shareholders. The consumers of coke products have increasingly become health conscious and as such, were of the opinion that coke products being so sugary, were unhealthy. The shareholders wanted their company to continue and as such, sanctioned the board to find a way around the challenge. The solution was researched and the results were sugar-free products such as coke zero. The credibility of the organization went up as a result.
With the right kind of focus, it is possible for a company to cater to its best interest and that of the consumer conjointly. Companies, with well-established ethics and consumer protection policies, can maneuver the otherwise complex dual affair as espoused by Shiller (2013). A company that purely focuses on its own interests will get fixated at profits and this is often at the expense of the consumer. The consumer in return, will shift their preference from such an egocentric company and give the same to its competitors. With this danger so close, companies with a going concern have no choice but to think about their customers since, in the long-run, such companies often feel the heat.
To a company, the sustenance of business is a concept that calls for the maintenance of a delicate balance between the company and the consumers. To this end, companies have established corporate social responsibility departments and activities, which give back to consumers and society. In doing this, companies create a mechanism that allows them to distribute profits between themselves and society. Consumers have a right to quality products and the government is there to enforce the same. Companies who flout these provisions are often taken through a process that ensures they comply often at very high costs. As such, it is usually better and cheaper for companies to mind their customers; rather than wait for government intervention.
Kim, S., & Lee, Y. J. (2012). The complex attribution process of CSR motives. Public Relations Review, 38(1), 168-170.Shiller, R. J. (2013). Capitalism and financial innovation. Financial Analysts Journal, 69(1), 21.
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