An Introduction To The Basics Of Economies Essay

An economic system can be defined as “ the system of activity connected with production, trade and ingestion of goods and services of a part, state or others ( non needfully geographic ) countries ” ( John et al., 2008 ). In an economic system, administrations make usage of natural resources like labor, natural stuffs to fabricate merchandise and services which are so purchased by consumers.

Old economic system

Harmonizing to ( Robinson ) 2000 the old economic system was an economic system which occurred between the old ages 1938-1974. It was an economic system in which concern related activities such as purchasing and selling activities were done without the usage of information communicating engineering. The old economic system aimed at standardized production and competitory advantage was achieved through the fast and economic fabrication of standard merchandise. This economic system focused on incremental cost decrease and a national market topographic point.

We will write a custom essay sample on
An Introduction To The Basics Of Economies Essay
or any similar topic only for you
Order now

New economic system

The new economic system can be said to be an economic system that evolved as a consequence of the usage of engineering such as the cyberspace in concern related activities. Harmonizing to It is an economic system based on entrepreneurship, cognition creative activity and sharing invention, creativeness and use of information engineering for developing and selling new merchandises and services ( Combe 2006 ). It is of import to observe that the new economic system does non replace the old economic system it merely transforms it.

Technology has played an of import function in the transmutation from the old economic system to the new economic system, the cyberspace for case utilizing the World Wide Web ( WWW ) is being used about everyplace in the universe today for assorted concern activities, runing from ecommerce to electronic concern.

The intent of this work is to foreground the difference between the old economic system and the new economic system utilizing three positions which are the viz. : concern position, the consumer ‘s position and the economic position. This work will discourse two issues under the concern position which are Organisation and production, for the economic position this work would compare the undermentioned issues between the old and new economic system: market, and competition. Finally this work would discourse the issue of ‘the purchasing wonts of consumers ‘ under the consumer ‘s position.


An organizational construction can be said to be “ a formal allotment of plants functions and administrative mechanisms to command and incorporate work activities including those which cross formal organizational boundaries ” ( Faulkner 2002 ). The ways undertaking are structured, structured and coordinated in an administration are defined by an administration ‘s construction.

Hierarchical construction was the signifier of organizational construction during the old economic system, the hierarchal construction of the old economic system was typical of Max Weber ‘s word picture of a bureaucratism ( Boddy 2005 ). The hierarchal construction during the old economic system allowed for standardized mass production of goods and exercising rigorous managerial control over the activities. This construction tended non to flexible and was extremely bureaucratic ( bandyo-padhay 2002 ). In the old economic system responsibilities and maps were good defined and determinations were made at the top, this organizational construction besides involves strict describing demand. One major advantage this construction had is, holding a clear and defined way of bid, certainty and order. It besides ensures that policies are applied systematically throughout the administration and a unvarying image is seen and presented outside the administration.

Communication in the hierarchal construction was normally perpendicular, as the top direction passes instruction down to the lower member of administration. Lower members of the administration therefore direct questions and inquiries to those above them in the hierarchy, when the demand arises. A major disadvantage of this construction is that of communicating, communicating is normally really slow due to the many beds present in the hierarchy ( Boddy 2005 ). Besides there tends to be small moral for staff at the underside in this type of organizational construction. It besides tends to be slow to environmental alterations, compared to the web or perpendicular construction adopted in the new economic system.

High and increasing competition in the new economic system has put the old hierarchal construction under force per unit area, their bed were both expensive to keep and inflexible, therefore many administrations restructured their administrations by taking the beds and giving authorization to smaller concern units or cross -functional undertaking squads ( Boddy 2005 ). This resulted into the outgrowth of a practical squad or web construction. In the new economic system the hierarchal construction began to give manner to the practical squad or web ( squad ) construction. Lipnack & A ; Stamps ( 1997, cited in Ahuja and Carley 1998 ) defined a practical squad as “ a group of people who interact through interdependent undertakings guided by common intent ”, “ these people works across infinite, clip, and organisational boundaries with links strengthened by webs of communicating engineerings ”.

Virtual administrations can be said to be made up of a group of companies, moving as one company to carry through a demand in the market place ( Combe 2006 ). In the practical construction undertaking were allocated to a squad of people with appropriate accomplishments therefore using the best and most appropriate cognition to accomplish peculiar undertaking. The organizational construction tended to be decentralised and flexible compared to the hierarchal construction adopted in the old economic system which was centralised and stiff. Decentralization in an administration has to make with the ability to administer decision-making authorization throughout the administration ( Weihrich & A ; koontz 2005 ). The practical construction adopted the usage advanced engineering and was capable of reacting to market demand rapidly. This construction is besides democratic compared to the hierarchal construction adopted in the old economic system, since employees had better agencies of showing their sentiments and thoughts ( bandyo-padhay 2002 ). The chief resource in every web nexus is its communicative nexus and ability among its workers.

An illustration of a company that transformed its organizational construction from centralised ( hierarchal ) construction to a decentralised ( web ) one is Daimler-Benz, in 1996 it changed it simplified and decentralised so that its administration unit could accommodate rapidly to administration alterations ( Weihrich & A ; koontz 2005 ).


Production direction used to be defined as those activities necessary to fabricate merchandises, nevertheless, it has been redefined to include activities like buying, repositing, transit and other signifiers of procurance of natural stuffs through assorted activities until merchandise reaches the purchaser ( Weihrich & A ; koontz 2005 ).

During the old economic system mass production was the method for production. Administrations produced big measures of standard merchandises at really low cost which are so ‘pushed ‘ to the consumers. Therefore in this production scheme there was demand for gross revenues and selling administration. This was a provider driven system. This scheme besides requires the creative activity of big mills and specialised section like accounting, and forces to organize activities in the mills. Factory workers in this method of production ne’er knew nor cared about the demands of their client ‘s demands, nevertheless merchandises were really inexpensive and low-cost to clients ( Turban et al 2008 ).

The mass production technique was used to fulfill the gustatory sensations of bulk but non all clients, nevertheless this had a major disadvantage of excepting such administration from the emerging new market of consumers, who were enlightened by wider Tran boundary line communicating installations and wanted specialised merchandises. In this method of production all merchandise are stored in a big warehouse until client need them, besides all clients receive the same type of merchandises. Machines or automatons do the chief physical work with people helping the machines.

Unlike the old economic system the new economic system is a consumer driven economic system, there has been an increasing demand by consumers for high quality and customised merchandises. This has lead to what is termed ‘customization ‘. Customization is the procedure of run intoing the specific demand of a peculiar client. Most companies have to follow with their consumer ‘s demands to prolong their competitory place, this has resulted to a more flexible method of production. Technology made it possible for administrations to run into clients need.

The cyberspace has helped market more crystalline, assisting clients easy locate administration who best meet their demands. Unlike the old economic system the new economic system has a flexible production so merchandise can be tailored to run into the gustatory sensation of consumers. In the new economic system harmonizing to Kanter in Harvard concern reappraisal column ( 1992, cited in Papazoglo and Ribbers2006 ) ‘modern administration involves believing like clients non like a manufacturer ‘ which has been the norm in the old economic system. In the new economic system Administrations have to be flexible to the gustatory sensations and wants of their clients. Equally long as the demand for customization was little it could be met.

An illustration of this is a auto production administration in which clients are told to pay a little more money for customization and wait a small longer to have their customised auto. Another illustration of an administration which does customised production in big ( aggregate customization ) measure is Dell computing machines, a client could log on to the dingle web site and depict the specification of laptop he want associating to the memory infinite, processor velocity, motherboard type laptop coloring material and acquire it delivered in a few yearss, compared to the old economic system where a client has to pick a specific laptop theoretical account manufactured for all. Production in the new economic system involves the integrating of production, services and feedback received from single clients.


Competition is a really important in every administration runing in a commercial environment. Harmonizing to ( BNET Business Dictionary ) Competition is defined as competition between companies to accomplish greater market portion, of client, Competition frequently leads to merchandise invention and betterment at really lower monetary values.

During the old economic system competition was local and between administration within the same part or province, competition in this epoch was limited to administrations within the same state ( Combe 2006 ). However in the new economic system due to efficient and effectual telecommunications, good conveyance nexus, and besides the handiness of capital administrations have driven to a planetary graduated table ( Boddy 2005 ). In the new economic system administrations are non limited by boundary of their state. This resulted into planetary Competition. In the new economic system competition is on a planetary and international graduated table, we now have transnational and multinational companies. Technology promotion has lead to clients all over the universe desiring the same merchandise. The cyberspace has besides been major factor that has lead to this transmutation. The planetary graduated table of the cyberspace has lead to a strong addition in competition on a planetary graduated table, as administrations now come from assorted geographical boundaries to vie for the same market ( Paoazoglou and Ribbers2006 ).

The operation of big administration on a local graduated table is non plenty, administrations in the new economic system are now traveling on a planetary graduated table for assorted grounds. One ground for this is clients in the local market have become little for some administration therefore administrations want to acquire more clients worldwide. Another ground is in the new graduated table most administration see the universe as a individual market topographic point contrast with the old economic system where administrations see market with regard to states. Factors which attracted administration to peculiar province during the old economic system include low revenue enhancement, inexpensive land abundant low monetary value labor, equal natural resources good transit web and other substructure.

However in the new economic system substructure emphasises more of information flow to physical substructure like roads information substructure is more indispensable and besides the demand for non merely inexpensive labors but educated and extremely skilled labor ( J.P Robinson.2000 ). Products in the new economic system are developed as indistinguishable local trade names with criterion practised and a centralized direction. It besides involves a high grade of centralized planning with major determinations made at the Centre ( Boddy 2005 ). In the new economic system planetary competition is encouraged by the remotion of market boundary lines between states.

An illustration of a state which experience tremendous an addition in planetary competition is the United States in which its import and export growing between the 1960 and 1997 was of 1.5 times faster than its domestic growing ( J.P Robinson.2000 ).

Another illustration of an administration which competes globally is Mac Donald ‘s eating house opened by Ray Kroc in 1955 in the United States by the twelvemonth 1995 it had over 18000 eating houses in 89 states by the twelvemonth 2001 Mac Donald ‘s had more than 29,000 eating houses in 121 states of the universe. Great per centum of the eating houses net income comes from international operations ( Weihrich & A ; Koontz 2005 ).

Industry construction

The construction in the old economic system was based on fabrication ( Combe 2006 ). Manufacturing involves the transmutation of natural stuffs into finished merchandise. Fabrication has to make with the production of touchable and physical goods. Industrial construction in the old economic system concentrated more on the industry of touchable merchandises like autos, places, aeroplanes e.t.c.

In the new economic system the fabrication sector has taken a reverse given manner to the service related activities. Service activities are activities which involve the dealing of intangible activities ( Boddy 2006 ), an illustration of a service related activity is talking in a university, rendering Legal service. There has been a displacement, the new economic system differs in assorted manner from the fabrication construction adopted in the old economic system. Servicess have to make with the rendition of intangible and non physical merchandise. Servicess are labour intensive, can non be mass produced, and can non be stocked. It besides involves a high grade of interaction with the clients, contrast with fabrication in the old economic system which there is seldom physical contact between client and fabrication works itself. In the new economic system there has been an addition in the figure of people that provide intangible merchandise like schools, Bankss e.t.c. for illustration in North America Service has improved three times that of the fabrication sector. In the new economic system most industries are migrating from the fabrication sector to the service sector ( Daft 2000 ).

An illustration is the transmutation of General Electric from production to service. General electric a company known for production of assortment of merchandises runing from magnet scanners to magnetic resonance imager late started supplying service related merchandise such as care of medical systems and inspection and repair of aircraft engines, service and care of power workss, serving of railwaies and rendering aid in cooperate computing machine web. This resulted in the up to 60 per centum of General Electric ‘s ( GE ‘s ) net income. ( Weihrich & A ; Koontz 2005 ). Another illustration is the Royal Bank of Scotland group ( RBS ) the fabrication sector is divided in to three countries which are telephony, operation and service. RBS since 1999 get as increase income of 14 per centum a twelvemonth while staffs in the fabrication sector have remained inactive ( Boddy 2005 ).

Buying wonts

Buying wonts can change in so many ways, it is chiefly concerned with why consumers buy things, how they buy what they buy and why do they purchase. People buy what they buy for assorted grounds.

In the old economic system consumers made most of their purchases at shops and marketplaces, besides in the old economic system, people buy things at specific stores non out of great emotional strong belief but merely because their function theoretical accounts, parents or wise mans on Television does so. Customers in the old economic system ever tend to show this type of imposter trueness contrast to in the new economic system clients are information empowered and more selective about where and how they spend their money. Customers in the new economic system before purchasing things they compare the monetary values and quality of what they are purchasing with other merchandises, read and discourse about new merchandise ( Lewis & A ; Bridger 2001 ). Consumers in the new economic system whenever possible attempt to avoid attempt to avoid mass produced and marketed goods. Besides in the new economic system most consumers preferred doing their purchases online instead than traveling to a shop to acquire the same merchandise.

A recent study by the national statistic showed that in 2009 18.31 million people have internet entree and out of this figure 64 per centum of all cyberspace users in the United Kingdom have of all time purchased goods and service on the cyberspace. Besides of this figure 83 per cent ( 26 million ) had purchased within the last three months, with small difference between the proportions of work forces and adult females who made recent purchases.


Hi there, would you like to get such a paper? How about receiving a customized one? Check it out