Sample Economics Essay Paper on Analyzing an American firm: Tommy Hilfiger

Economic Analysis

Analyzing an American firm: Tommy Hilfiger

            Tommy Hilfiger is an American brand that deals with both men and women’s clothing. The company has annual revenue of $3.6billion which is propagated to be gaining an average of 3% increase annually. Tommy is considered an iconic fashion company that specializes in the apparel industry gaining a global recognition. The company managed to survive global financial crisis such as the great recession in 2008 and 2009. It also maintains its profitability amid the strong competition offered by other companies in the apparel industries. Therefore, this short analysis aims at unearthing some of the basic techniques applied by Tommy Hilfiger in ensuring that it sustains its sales margin and revenue improvements.

            To maintain an increasing trend in revenue earned, a firm has to embrace a number of strategies that will help in sales promotion and profit earning. The fact that Tommy Hilfiger is a renowned American brand gives it an added advantage in sustaining its profitability. One of the ways that the company uses in order to achieve its objectives is through observing and embracing the global trends. It is easily noticeable that fashion is a constantly evolving industry that relies mostly on trends. Fashion is easily influenced by public figures, celebrities, and other individuals in the entertainment industry. For this reason, Tommy Hilfiger is left with no other option but follow the trend and ensure that their products remain cognizant with their customers.

Another observable economic feature of Tommy Hilfiger is its method of reaching consumers or channeling strategy. How a product reaches the consumer influences the number of sales made by the company. Tommy Hilfiger owns both offline and online stores which helps them in channeling their products to the customer. Embracing both methods is advantageous to the firm as it gets the opportunity to increasing recurring buying culture. Since the company has achieved brand awareness, it is important to focus its energy on encouraging recurring buyers. Repeat customers’ results to having brand loyalty as there is a strong relationship between attitudinal loyalty components and consumer spending. Consumers spend highly on goods they perceive to be of higher quality, value for their money, and a product they feel emotionally attached to it. Online channeling is also dependent of internet marketing since in today’s world most of the consumers prefer an online platform. Concentrating on this avenue will enable the company raise its revenues and sales margin.

Tommy has diversified on the number of products it offers in regards to the apparel industry. It produces both male and female wear including watches and other products. Based on observation from competitors, Tommy requires developing policies that will enable the company achieve more diversity in the products offered. It can launch products such as sunglasses and shoes among others. This will help the organization in penetrating the market in a more diversified way which will not only increase its market share, but also its competitive advantage.

Global firm analysis: Lenovo

Lenovo is a Chinese global company that was founded in 1984 and deals with computer hardware and electronics industries. Some of the products it manufactures and distributes include computers, smartphones, electronic storage devices, and televisions. Lenovo has gained global attention with its reported $10.8 billion in revenue and significant growth in terms of its economic status. The company is considered the pioneer of Chinese market reform in the science and technological sectors that was invented from the Chinese Academy of Science (CAS). The firm entered a flooded market with technological firms but it has managed to sustain its profitability and competitive advantage. It is therefore important to outline some of the factors that have helped Lenovo in surviving in the competition.

Merger and acquisition are general terms in relation to Lenovo’s corporate strategy. Acquisition helps the organization in attaining a larger organization culture and combining its resources so that its global strategy can function. In 2005, the company made headlines for acquiring IBM computers for $1.25 billion accelerating its computer market globally. Lenovo managed to acquire the IBMs computer technology and IBMs global sales channels and operation teams. This implies that Lenovo did not penetrate into a market as a new product by creating its own channels; it relied on existing channels making it easier to gain a global acknowledgment. In 2011, Lenovo acquired NEC, a Japanese company, and Medion, a German company, in order to boost its worldwide sales. A year later, the company also purchased a Brazilian based electronic company known as CCE. Another notable acquisition was in 2014 when Lenovo bought Motorolla on a $2.9 billion cash and stock deal. This meant that Lenovo entered into the mobile phone industry.

Lenovo has also utilized the economy of scales as a pricing strategy that enabled it to penetrate the much flooded technological market. The company provides high-tech products with subsidized prices as compared to other firms such as Apple. Personal computers have become necessities especially to students who use them for various purposes. Since students have no income and are marred with financial constraints, they tend to opt for cheaper alternatives that will serve them similarly to the expensive products. Lenovo is one of the products that capitalized on this opportunity and it is enjoying global success for its utilization of economies of scale. The company also concentrated on localization and consumer markets as opposed to other tech firms which focused on profit maximization.

 Lenevo produced PCs that were compatible with Chinese market; for example, the computer had a button that could directly connect to the internet without following the challenging procedure. It also assisted with internet connectivity to the Chinese firms. Similarly, Lenovo history is quite popular in relation to the government policy. When the product was being launched in the late 20th century, there were great efforts from the government to frustrate the technological sector. As mentioned earlier, Lenovo was started as an institute research from an institution of higher learning. This means that it relied mostly on government funding and infrastructure. The company was subjected to challenges such as under-funding and economic frustrations due to the political turmoil. There was too much suspicion that technology would bring instability to the ruling government of the day. It was therefore an uphill task for Lenovo as it tried to stabilize in a highly uncertain economic climate. However, Lenovo managed to defy all the odds and it is currently among the top most ranked technological companies in the world.

Case study: Worker stuck in disability stunt economic recovery

After the recession, various measures were taken by the American government in order to stabilize the economic status and minimize the adversities caused by the financial crisis. In a case study titled Worker Stuck In Disability Stunt Economic Recovery, Leslie Scism and Jon Hilsenrath outlines one of the policies enacted, Social Security Administration Disability Program (SSDI), and its impact to the economy. SSDI is a social security fund that goes to persons with disability and visual impairement and prevents them from working for at least 12 months. It may involve a health insurance cover, medication assistance, and provision of basic commodities. Scism and Hilsenrath argue that the number of people who enrolled for the program is too much for the American economy to handle. Most importantly, the influx indented the labor force with a significant drop in participation rate that was witnessed more than 30 years ago. 

According to this article, the fact that the unemployment rate in US has stagnated at 7.6% for four consecutive years does not accurately reflect job growth. On the contrary, various individuals are leaving the labor force with motivation such as SSDI funds. The exodus is predicted to bring hysteresis in the labor market which refers to “temporary market changes that lead to permanent economic losses.’ The economic funding from this initiative amounts to $13,560 in a year which is only $2,000 lesser than the federal wages requirement of 7.5% an hour (Scism and Hilsenrath 1). This means that the beneficiaries would not risk losing the fund to a more precarious job whereas the economic benefits are almost the same.

Scism and Hilnserath put it clearly that economic growth is fostered by the number of workers in an economy and their productivity. A reduced number of workers will translate to scanted economic growth. By the beginning of the recession only 7.1 million people were enrolled but the number rose to 7.6 by the end of the financial crisis session. The article argues that the disability trust fund exodus cots at least 0.6% of the national output which equals to $95 billion a year. “The greater cost is their long-term dependency on transfers from the federal government, placing strain on the soon-to-be exhausted Social Security Disability trust fund.”

In 2012, Social Security paid nearly $137 billion to 8.8 million disabled workers and 2.1 million of their spouses and children; related Medicare costs were about $80 billion.” Based on these figures it is clear that the government is spending quite a high amount of its revenue on beneficiaries of this program.

Scism and Helinsrath state that the enrollment for the disability program requires some measures in order to prove the eligibility. For an individual to obtain the award, he or she has to prove that they have been of out of work for at least five months and social security must determine that a medical impairment will prohibit work for at least a year. The problem arises when people are enrolled because leaving the program is quite difficult. Some of them like James Ottessen who was interviewed in the article argue that they have fear of living the program because it’s their only means of survival. Besides the fear of unknown engulfing the beneficiaries, there is also a chance that some of them are unskilled and finding a job would be quite difficult as compared to when they joined the program. With very few leaving the program, at least 2.2 million people applied for it in 2014 making the numbers alarming. Additionally, those rejected from the program can seek justice through the legal system. Even though that SSDI is meant to serve a very noble cause in the community, it becomes difficult to lure people into being absorbed back into the labor force. This is why the authors suggest that the government should tailor special services and training for applicants most likely to return to work. It should also improve on conducting inspectoral assessments in order to identify people who can return back to work so that they can cease being SSDI beneficiaries.

Micro-economics applied in South America, India, Poland, and Russia

Chile is one of the South-American countries discussed in the storyline short documentary videos where the characters are discussing the type of economic theory employed in the country and changes that enabled the country to promote its business. Under Pinochet rule, Chile was under controlled economy where the government largely influenced the markets. The rule of demand and supply did not function as the government which was dictatorial had vested power and authority over all the institutions (Nicholson and Snyder 123). Resultantly, the business environment was not performing well since market forces were inhibited from acting freely. A controlled economy is generally based on political centralization and control. This means that the consumer does not have the ability to purchase whatever he or she wants even when he or she has the capability and the willingness to do so. This inhibits trade and commodities are usually scarce and there is a monopolistic market structure.

 Ultimately, a group of economists from Chile Catholic University were enrolled to Chicago University under the school exchange program in 1980s. It is in Chicago where they learnt more effectively about free market or competitive market theory.  A free market system is a system in which the prices and availability of products and services depends on the open market and consumers. Prices are set under the laws of supply and demand where a commodity will be bought for higher prices if its demand is quite high. With this in mind, the young economists were determined to change the situation back in their country and started pushing for a free market system agenda. Obviously, the government was adamant about the call due to their military based authority. One thing that the Chicago boys learnt while in university was that changing a system comes with a hefty price that they were not prepared to pay. Pinochet government was eventually overthrown and replaced with a more democratic government that allowed the free market system in the Chilean economy. Unfortunately, approximately 2,400 lost their lives in that struggle.

India and Russia on the other hand were largely associated with the communist theory. This theory indicated that inputs and resources are allocated directly by the government with a specification of output requirements. Communist theory is an economic and social system envisioned by the nineteenth-century German scholar Karl Marx. In theory, under communism, all means of production are owned in common, rather than by individuals in practice, a single authoritarian party controls both the political and economic systems. The concept was to replace private ownership of property and disseminate it to the society equally. It was based on central planning where it was believed that the government had the ability to overcome market failure and achieve equality of distribution. It later turned out that a centrally planning system was equal to a controlled system because the government played major role in economic planning. In India, every firm required government’s permit to operate. The Indian governments choose the communist theory as a way to conquer the immense poverty and peasant economy in the country. This displeased foreign investment that were quick to leave the country such as British Raj. According to the video narrator, it used to take at least 12 to 24 months and about 50 visits to Delhi to get a license to import a computer worth $1,500.  It was nearly impossible to work with that system and consumers still required some commodities. This paved way for immense corruption in India in order to acquire the permits. This system was a total failure as it is observed that Hindustan Motors began its car manufacturing the same year with Japan’s Toyota; however, fifty years later Hindustan could only make 18,000 cars for Indian’s ambassadors as opposed to five million cars sold by Toyota.

The same case was happening in Russia, formerly known as USSR, where people were questioning the communist system (Nicholson and Snyder 123). This begged for a closer study of the Soviet economy which happened behind closed doors. The group of young economists discussed the market economy and how it can be politically admissible. A beam of hope was seen when Perestroika rose to power and started allowing private firms, though a few, in the country. Political pressure from the western countries was mounting forcing the Milton Friedman philosophy in Russia. This became a significant turning point for the Russian economy that was quite controlled by the government. In Poland, the idea of free-market was brought by western leaders such as Margaret Thatcher where business people were opposed to communist rule as it adversely affected their businesses. The main agenda was that economic freedom was directly proportional to personal freedom. Economic empowerment was based on allowing market forces to control the economy and each person to participate in distribution of inputs and outputs.  An ideological change from these countries was suddenly happening based on the success of competitive market theories in other countries.

Least desirable market structure   

Monopoly is described as a single supplier in the market where the firm controls more than 25% of a particular market (Bagdikian 12). A monopoly type of market structure can be formed in cases where the ownership of a product is quite scarce and only that firm can exploit the resource; for example, Microsoft windows. The government may also grant a firm monopoly status if it feels the product does not require competition. Producers may also attain patents over their design and characterization giving them a monopoly market approach. Finally, firms can merger in order to reduce competition and eventually force other firms out of the market leaving a monopoly market. The key characteristics of monopoly are that it can lead to super-normal profits where firms control the market forces (Bagdikian 12). This leads to some disadvantages that have hefty repercussions to the consumer. Traditionally, monopoly has been associated with higher prices of commodities. The main reason is that there are no competitive products that would force the firm to lower its prices. Consequently, the product may be of necessity to the consumer which makes it challenging for consumers to obtain the product.

 Monopoly also leads to less productivity and allocation efficiency. This is because in a monopoly market people are discouraged from investing since a firm is already controlling the market. Equally, the law of supply and demand does not apply as consumers have to be contented with what is produced. Similarly, there is less employment as there a few firms in the industry. This leads to a lower output; hence, there less need of absorbing more labor force. A monopoly may also have monopsony power in employing workers and buying products. This means they can pay workers lower wage and with unfavorable working condition (Boldrin and David 54). Monopoly also destroys creativity as large firms discourage new entrants in the market. Monopoly is not subject to competition and it destroys innovation by smaller firms and individuals. Consumers are also confined to a specific product and their sovereignty is highly subdued. They have no ability to make market choices and consume what is available. Firms also compete on quality of products which makes it essential in production (Boldrin and David 54). When a firm has a monopoly status it means that the quality of products is not considered. The quality of products will tend to be worse because there is less incentive for a monopolist to develop new products. Actually, when large firms merge it becomes challenging for the market forces to control the economy. The government can also take advantage of monopolizing the firms in order to control the public on dictatorial means. It’s fairly safe to say that monopolies have a rather poor reputation amongst both consumers and also the political entities elected to safeguard public interests.  Monopoly is not entirely concerned with the consumer interests but leaves to benefit few individuals. However, there are a few services that are in order to be monopolized especially those that are run by the government. Based on these factors, I personally consider monopoly the least desirable market structure in the economic system.

Course outcome

To begin with, the learning materials and information sources have developing my overall attitude towards economics as a subject. It is obvious that economic is just not a subject but a system that determines how a country learns. It also gives independency to people and contributes to protecting human rights. Basically, people who are economically empowered have the ability to make decisions on behalf of their government and resources. Lack of an efficient economic system leaves decision making to a few individuals who may take advantage of the entire society by misusing their resources. Secondly, economics and politics are indirectly intertwined and complement each other. Most of the world leaders have to make decision on the economic structure for their countries. Their decision determines on the impact and influence they have on their people. Economic inefficiency would result even to a government being overthrown as observed in the case of Picheton in Chile. Countries such as Poland had to depend on Margaret Thatcher intervention for the economic system to be streamlined. I strongly believe that the main outcome of this course is enlighten me on the factor that economic is a dependent discipline that influences various sectors of the nation.

Works cited

Bagdikian, Ben H. The new media monopoly: A completely revised and updated edition with seven new chapters. Beacon Press, 2014.

Boldrin, Michele, and David K. Levine. “Against intellectual monopoly.” (2008).

Nicholson, Walter, and Christopher Snyder. Microeconomic theory. South Western/Thomson, 2005.