Can Government Support Make Companies Succeed?

People buy agricultural products at the market even though they could grow them in a garden and eat them, and they purchase furniture in the marketplace even though they could bring in wood and make it themselves. Why do they try to meet their needs through firms? Because through the market, they can readily buy products that are cheaper and of better quality than what they could make themselves.

Even if they could make something better on their own, they still often do not. The reason is that they believe it benefits everyone to leave that task to others while they devote their time to fields where they can create greater added value.

In this way, the civilizational tool people created to engage in better economic activity is the “firm.” A firm is an organization in which people join together for economic activity. Through firms, people can make what others want faster, in greater quantity, and with higher quality. What is more, in recent years, firms have made real even the things once left to the imagination. For example, who would have thought that just 50 years ago people would one day walk around carrying telephones, making calls, and even using the internet?

Because firms are an efficient form in market competition, they have become increasingly sophisticated and advanced over time and have come to play the leading role in the market. Stock companies, rather than cooperatives, and large corporations, rather than cottage industries or the self-employed, have become the main agents of competition.

That does not mean every firm has survived in the market. Only those firms that effectively achieved their economic goals have survived. Therefore, the firms that have survived are successful firms, and the clearest proof of success is that a firm has earned a reputation through its brand.

What is a firm’s goal, its vision? It is to discover new business methods and sell the best products—good enough to impress consumers. In that sense, from a neighborhood bakery to a world-class automobile company, the essential goal is the same: consumer satisfaction.

In the market, consumers choose products that offer the highest quality at the lowest price. Firms that satisfy consumers can make better products, produce more of them, and sell more of them. By this principle, firms compete fiercely to improve quality and strive to produce more cheaply. They mobilize all the capital and technology they possess in order to be recognized by consumers as offering the very best products. As a result, consumers can buy better-quality goods at lower prices with the same amount of money, making their lives more comfortable and prosperous.

The firms that exist today can be seen as the result of evolution. A firm chosen by many consumers can exist as a large corporation. Conversely, a firm chosen by only a small number of consumers cannot help but remain small. To compare firms thoughtlessly by saying one is big and another is small is to speak without properly understanding how the world works.

It is best to accept the outcomes chosen by individuals called consumers as they are. If one disparages the results of consumer choice by calling them a “gap” and then tries to forcibly correct them, that is a mistake that goes against the natural order.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 정부 지원으로 기업이 성공할까

Author: Sung-no Choi

Date: 2017-04-17

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=27&idx=11089