Competition and Protecting Suppliers Flashcards
What does SME stand for
Small and medium enterprise
What is a start-up
A company initiated by an entrepreneur to develop a scalable business model that intends to grow large beyond the solo founder
Benefits of small businesses and start-ups
Create competition
Create jobs
Choice is increased for consumers by their presence in the market
Some are a source of exports
Can be a seed-bed for innovation
May be more innovative, flexible and quick in responding to changes in market conditions and reacting well to the different needs and wants of their customers
Problems start-ups and SMEs face
Credit access - seen as a risk
Business skills - lack the skills or experience to succeed in business
Recruitment - finding competent staff can be difficult
What can the government do to support start-ups and SMEs
Provide information on how to set up a business
Deregulate to make it easier to enter
markets
Streamline the process for setting up and running a business
Provide training to help people regain business skills
Educational reform to increase the skills of the overall workforce
Provide business mentoring services
What is competitive tendering
A process in which private sector firms compete to win contracts to perform tasks on behalf of the government
What is the rationale behind competitive tendering
Profit motive by the state should lead to an increase in efficiency and quality
Tax payer should see the benefits from improved and/or cheaper public services
Downsides of competitive tendering
Reduction in the price of contracts may lead to a reduction in quality - not ideal for public services
Firms involved in competitive tendering can drive a hard bargain in contract talks
Competition is limited as there are usually only a few bidders
What is privatisation
When a firm or whole industry changes from being run by the public sector to the private sector
Arguments for privatisation increasing efficiency
Introduces profit motive and competition
Disadvantages of Privatisation
Poor regulation and/or natural monopoly conditions are unlikely to result in improved outcomes for the consumer
Social costs and benefits are more likely to be ignored
Government loses out on a source of revenue
Public sector assets are often sold too cheaply
Some vital infrastructure is arguably better off under state control
Advantages of privatisation
Private companies have a stronger incentive to cut costs and be more efficient and raise productivity
Government gains revenue from the sale of assets
Increase in competition if a state monopoly is replaced by several firms
What is a Private Finance Initiative (PFI)
The government takes competitive bids for and then buys a whole investment project package - government then pays back the costs of the project over a period of time
Advantages of PFI
Efficiency - private sector better at managing cost efficiencies
Extra Investment - Social and economic benefits - Kick start more project
Delivery - Private sector is not paid until asset has been paid
Dynamic Efficiency - Private sector better placed to bring innovation and good deisn to projects
Disadvantages of PFI
Debt costs
Inflexibility and poor value of money - long service contracts are difficult and costs to change
Risk
Administration
Dependance
