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Market and market mechanisms

market, marketing, market mechanisms, profitability, efficiency, private sector, public sector

During the 1980s, there was an unexpected resurgence of the capitalist system reflected by the adoption of ‘market-led’ economies throughout the world and a decrease in the role of governments in providing goods and services. The most astonishing development happened with the collapse of the old Union of Socialist Soviet Republics and the switch of Russia and the other constituent states to market-led economies.

It seems that businesses should formulate their policies and carry them out with the customer’s needs as their central concern and not the needs of the business. It was like rediscovering an old forgotten fact, but business that does not follow this course will most likely be unsuccessful in the long run. Any business will most probably suffer the consequences of bankruptcy in the short run because it is the customer who decides whether to buy or not to buy.

For this reason, the essence of the marketing concept is the central role of the customer, buyer or consumer. In the present economic systems, most businesses, even those in the public sector, profit is the measure of their success. For those in the private sector, profit is truly essential for long-term survival. Profit only comes from sufficient revenue at a sufficient margin over costs. Ultimately, profit depends on support from customers. It is obvious that the whole future success and even continuation of the business depends on offering customers what they want at prices they will pay. This is one of the most important reasons why the marketing concept is so vital to a business.

In the 1980s, the argument of ‘profitability’ also infiltrated the services in the public sector. It began to be recognized that public services cannot be sustained unless the investment in them produces worthwhile returns, i.e. they have to be ‘profitable’ in a sense. The public services institutions who came under heavy fire by unsatisfied citizens had to change their strategies imitating the institutions in the private sector. Consequently, privatization became an important vehicle for the adoption of these new strategies. The quality of public services have improved considerably after the introduction of the new market-led forces in public services.
Published: 2007-04-14
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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