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Case Analysis and Example

Executive summary of the situation
Analysis must go through the entire process of identifying, evaluating, and recommending
The report should summarize this analysis in a manner suitable for a top MARKETING management audience
A SWOT analysis and financial ratios (if data is available) must be a part of the exhibits section
At least three supportable alternatives should be developed for this case
Neither alternative should be a subset of the other

This case analysis MUST include situation analysis (summary of the current situation facing the decision maker. Findings (discussion of the question presented in the case, do not have to answer all the questions). 3 Alternatives and recommendations (what alternatives does the decision maker have) and select one to recommend and explain why. Include at least one of these financial analysis/SWOT analysis/Exhibits and Charts or other support.
Situation Analysis
Often times, the history of the 20th century world economy is considered a “battle of ideas.” After the Bolshevik Revolution of 1917, the leaders of the Soviet Union established a centrally planned economy and put themselves in charge. However, in the West, free market capitalism, was typically practiced. After the stock market crashed in 1925 and the onset of the Great Depression of the 1930s, people began to question whether the laissez – faire economic policies and free markets was the best or whether the Soviet Unit Model would work best in the economy.
By 1930s, according to John Keynes philosophy, many massive spending programs were introduced leading to economic growth in the West. However, by the 1970s, both the West’s and East’s economies were suffering. In the 1980s, U.S. President, Ronald Reagan, and Britain Prime Minister, Margaret Thatcher, reduced the role of government in their respective countries. By 2008, an economic crisis occurred leading to the collapse of the housing market, real estate values plummeting, credit tightening, and job growth slowing.
As the economic crisis began to become global, policymakers set out to devise strategies to prevent a global economic meltdown. Some observers noted that this rhetoric was breathing new life into the long standing debate between two competing schools of economic thought. On the one side was John Maynard Keynes, who advocated giving the state broad powers to make decisions about a nation’s economy. On the other side, economist, Frederick Hayek, was a proponent of the free market. He argued that political freedom and economic freedom go hand in hand. Furthermore, he stated that collectivism could lead to tyranny, which he stated occurred in the Soviet Union.
Today, this battle rages on with a new generation of economists. For example, consultant, Ian Bremmer, explains how the economic environment has changed since the economic crisis began in 2008. One crucial element that has changed is: China. China emerged from the global economic crisis relatively unscathed, yet China’s leaders do not believe in a free market. Consequently, China’s success has emboldened socialist leaning ruling elites in other countries to pursue economic growth while solidifying their own bases of political power. However, this is creating friction between competing economic systems.
SWOT Analysis
There are strengths and weaknesses to each of the different government types:
Strength: Companies can maximize profits and have more money to hire new employees.
Weakness: Companies are not always regulated as well as they should be.
Opportunities: Since companies can maximize their profits, the government can collect more money from taxes.
Threats: Being profit driven means that companies will not always make the best decisions for their country.
Strength: Companies are regulated better.
Weakness: Companies can’t always maximize profits because of certain restrictions.
Opportunities: The economy has a chance to not crash as easily since the companies are much more regulated.
Threats: People can grow tired of living in a socialist community.
State Capitalism:
Strength: Politicians seek to achieve political goals, rather than maximize profits.
Weakness: Companies from the home country are favored more than foreign companies, which can cause the foreign company to get kicked out of that country.
Opportunities: The economy can survive a global crash much better than other countries. China would be a great example of this.
Threats: Companies and government might not always see eye-to-eye.
Detailed Findings
No, I do not think that to a full extent America’s free market capital is fundamentally flawed. Capitalism focuses primarily on a lack of government intervention and means of production owned by firms rather than the government, which leads to innovation in the market place. Furthermore, economic freedom often facilitates economic growth. For example, if governments own the means of production and set prices, it invariably leads to a powerful state and creates a large bureaucracy, which may extend into other areas of life such as the Soviet Union (“Free-market capitalism”). I agree with Hayek’s view in the video John Papola created. Hayek clearly illustrates his points through his emphasis on the prospects of a free market. Hayek focuses on three theories including the business cycle theory, capital theory, and monetary theory. His emphasis on stating that the market is a spontaneous order, meaning unplanned and rather evolving slowly over time truly exemplifies how the economy works. Furthermore, he provided strong evidence on what causes the market to fail and at time leads to large unemployment rates from an increase in money supply by central banks. This would lead to interest rates going down and making credit artificially cheap. Unlike Keyenes philosophy, Hayek suggests not to increase the money supply, which inevitably leads to inflation in the economy (“Friedrich August Hayek”).
As Japan transitions their nation away from a manufacturing dependent model of growth, the service industry may begin to emerge as new drivers for economic growth. Today, services are the dominant component of the economy – contributing to 71.4% of the GDP in 2012. Major services in Japan include banking, insurance, retailing, transportation and telecommunications. Furthermore, the service sector covers many, diverse activities including wholesale and retail trade, advertising, data processing, publishing, tourism, and entertainment. Before, many service industries were small and labor intensive, but as technology improved so did their computer and electronic products (“Japan – INDUSTRY”).
I think at times the economic stimulus plan worked in the US, Asia, and elsewhere. In the US, the economic stimulus package was designed to be spent over ten years. However, to give maximum impact, $720 billion, or 91.5%, was budgeted for the first three fiscal years: $185 billion in FY 2009, $400 billion in FY 2010 and $135 billion in FY 2011 (Jr., Tom Howell).  The stock market recovered the ground it lost, but unemployment has remained stubbornly high (“How Would You Spend $787 Billion??”). Furthermore, China emerged out of the global economic crisis in relatively good shape. However, their leaders do not embrace the free market. Over the past few years, as many developed nations have emerged from the economic crisis state capitalism has become a challenger to laissez – fare economics. Across the world many developing nations are viewing state capitalism such as in a positive light. Today, rising powers such as Brazil and India has used state capitalism in their economy (Kurlantzick, Joshua).
Alternatives and Recommendations
As Bremmer stated, “There will be winners and losers, and the world’s political and business leaders better begin to try to sort out who those winners and losers will be.” Consequently, there are three alternative solutions that these leaders can implement for the future to alleviate the competing economic systems and economic booms and busts.  One, these leaders can continue to implement Keyes economic philosophy of a stimulus package that many nations such as the US, China, and other nations have been doing focusing on giving states broad powers to make decisions about a nation’s economy. Second, to implement a strategy of state capitalism, which Brazil, India, and China do, which focuses on the government offering support to “national champions” but also lists these champions on the stockmarket and subjects them to global competition (“Economist Debates: State Capitalism”). Third, these nation’s leaders can implement more of Hayek economic philosophy of a free market that focuses less on economic stimulus plans and more on letting the economy fix itself over time. For example, Heyek believed that the market was not designed by anyone but evolved slowly over the course of human actions.
I recommend that these nation’s leaders implement the latter recommendation of Heyek’s focus on a free market with the market correcting itself. However, this plan represents several strengths, weaknesses, opportunities, and threats. Some of the strengths of this plan include: it contributes to political and civil freedom leading to transparency, ensures competitive markets, consumer’s voices are heard in their decisions to determine what goods and services are in demand, and supply and demand create competition amongst industries. According to Hayek, collectivism can lead to tyranny seen during the time of Stalin. Furthermore, the deregulation of US airlines in 1979 provided consumers with more choices and lower air fares. However, there are some weaknesses in regards to this recommendation. These include: A competitive environment creates an atmosphere of survival of the fittest, wealth is not distributed equally, and there is no economic stability because greed and overproduction in industries can cause the economy to have swings (“Free Markets: What’s The Cost?”).
There are also several opportunities for this plan. These include: the growth of various sectors such as technology. Often time free markets offer continuous innovation and ideas. This would be highly beneficial for industries like technology as they continue to evolve to fit consumers needs. Also, since customers make the final decision they often times determine the price points for a product, which requires producers to set product prices high enough to make a product, but enough to still have customers buy their product. Furthermore, fairness requires society to provide equal opportunity to achieve success. However, there are also threats that can occur with this plan. These include: with no regulation on business there could be the creation of monopolies in industries. Furthermore, since the economy is more susceptible to instability there may be more boom and busts in the cycle. Often times in a free market economy, there are no government bail outs or loan guarantees. Furthermore, as the market expands and contracts, these disruptions can affect people to lose jobs and be unemployed, which occurred during the global economic crisis of 2008.
Works Cited
“Free-market+capitalism.” TheFreeDictionary.com. N.p., n.d. Web. 03 Sept. 2014.
“Friedrich August Hayek.” : The Concise Encyclopedia of Economics. N.p., n.d. Web. 03
Sept. 2014.
“How Would You Spend $787 Billion?” About. N.p., n.d. Web. 03 Sept. 2014.
“Japan – INDUSTRY.” Japan – INDUSTRY. N.p., n.d. Web. 03 Sept. 2014.
Jr., Tom Howell. “Obama’s Stimulus Package, 5 Years Later: Dems Defend, Republicans
Ridicule.” Washington Times. The Washington Times, n.d. Web. 03 Sept. 2014.
“Economist Debates: State Capitalism.” The Economist. The Economist Newspaper, n.d.
Web. 03 Sept. 2014.
“Free Markets: What’s The Cost?” Investopedia. N.p., n.d. Web. 03 Sept. 2014.
Kurlantzick, Joshua. “The Rise of Innovative State Capitalism.” Bloomberg Business
Week. Bloomberg, 28 June 2012. Web. 02 Sept. 2014.
The chart below shows how even the popularity of free markets to citizens of varying nations is diminishing.

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