List 4 facts about “Doing Business in 1840”
market transactions involve numerous intermediates
Economic actors face high risk
Interactions are not frequent
Information is scarce
Why did the economy / business look like that in the 1840s?
Because of the infrastructure (Infrastructure in this context = those assets which supports economic actors producing and distributing goods and services)
What is the result of undeveloped infrastructure (in terms of businesses)
markets being local
Majority of the firms being small family run businesses
What kind of Infrastructures were undeveloped in 1840?
Transportation Infrastructure
Communication Infrastructure
Finance Infrastructure
Name 1 fact for each Infrastructure in 1840
Transportation:
poor transportation infrastructure constrained producers to local markets
Communication Infrastructure:
Predominant way to communicate long distances was through postal service which relied on horse and carriage while telegraph was expensive and therefore not used to coordinate production across different locations
Finance Infratsructure:
cost of equity was rather high, so it was not easy to trade shares while futures trading was not available
How has business developed in 1910
Infrastructure improvements and innovations support the growth of firms
Management through experts supported the competitiveness of the firms
Price wars led to concentration in industries
How resulted the development in how business is doing today
rising demand from developed economies increased the size of the market
Firms can specialize more easily
Financial innovations enable faster growth and easier entry
Name some rules for business conditions
Conditions change over time
Strategies change over time
The principles which are needed to devise successful strategies do not change
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