Business expansion refers to the growth in the size of the business. This growth is seen in terms of increase in the size of the market, number of stores and the sales volume. A merger refers to the combination of different businesses in the market with the aim of growing and taking over the existing market. Business mergers ensure that two or more businesses in the same industry combine to form one enormous enterprise that has the potential to take over a competitive market. Government regulation of businesses entails the setting of standards in the market. The government regulates businesses, in order to ensure that there is a fair competition, participation of legal businesses in the market and the need to license businesses. Boone & Kurtz (2011) report that the government works towards ensuring that each business gets a fair share in the market and operates within its objects as set by the law. Businesses merge due to similar business interests and the plan by individuals to work together.
This essay explicates key reasons for the government involvement in market economy and operations of business combination.
The government involves itself in the market economy, in order to check and counter illegal business operations. All businesses are supposed to operate according to rules and regulations of the country. According to Vogel (2003), businesses are supposed to engage only in those activities that are approved by the government and help all individuals within the country. A business is not supposed to engage in activities that are against the public policy. For instance, a business would not be expected to engage in the sale of illegal drugs that are rejected by laws of the country. Therefore, the government intervenes in market economies in order to counter the spread of illicit businesses. It participates in the market with the objective of ensuring that all businesses respect laws of the country and work towards the wellness of citizens. The government ensures that businesses taking part in illegal activities are closed down indefinitely and certificates of incorporation withdrawn. It ensures that legal action is taken against key operators of the business, hence, serving as an example to those intending to set up illegal businesses. Thus, the government participates in the market economy, in order to ensure that all businesses that are in the operation work within the established rules of the state.
Another key reason for the participation of the government in a market economy is the regulation of competition. For any business to produce the best quality of goods and services, it must encounter some level of competition in the market. Competition emanates from the production of similar products and services in the market between businesses situated in a particular place. Aggressive competition is not healthy for a market and should be effectively eliminated, so that the market operates within set conditions. The government engages itself in the market in order to ensure that the market experiences a fair level of competition. This is done through licensing a particular number of businesses to participate in a specific line of operations. Selective licensing ensures that there is fair competition in the market and the quality of goods and services is gradually improved with high levels of competition. Healthy competition ensures that all businesses get a fair share in the market and no business is pushed out of the market. Therefore, the government takes part in economic markets with the objective of ensuring that, there is a regulated level of contribution, which positively contributes to the development of the market.
The government also takes part in economy markets with the objective of providing finances for effective business operations. It must be noted that all businesses need adequate financial bases for the effective operation. A business that lacks stable financial bases does not succeed in a market dominated by competitors with stronger financial bases. The government comes into the market with the objective of ensuring that businesses get an easier access to finances, hence promoting the development of the economy. Jennings (2010) asserts that the government aims at supporting businesses, in order to ensure that they effectively expand and reach their effective levels of operation. The government participates in the market with the objective of ensuring that all businesses operate with adequate levels of finance that would help them tackle the tough competition in the market. The government provides such funds through banks and other significant bodies. Businesses pay later on with a specific level of interest. The provision of finances for business operations ensures that the economy grows at the best level with effective competition. Furthermore, many businesses emerge making the economy more stable and competitive, as required by most states.
Different forces existing in the market are likely to create the convergence between stockholders and management. Stockholders are those individuals that hold a particular interest in the market while managers are responsible for running the business. The key force that creates convergence between these two individuals is the financial force. Shareholders are one of the key stockholders in any business enterprise and are required to provide funds for operation. Therefore, a bond is created by the managers’ demand for business operation funds. FK Publications (1993) reports that a business is only able to run with adequate amounts of funds that would enable them meet its obligations in both the short-run and long run. Another force that creates the convergence is the force of business leadership and effective management. Stockholders play an instrumental role in choosing the leaders of a business. Therefore, the force of leadership brings about the convergence between these individuals.
The firm is supposed to participate in business operations with the objective of creating effective profits for itself and create adequate wealth for its shareholders. The key motive of any business is to maximize profits in the market and perform at the best level as demanded by the industry. Mann & Roberts (2007) observe that apart from the profit motive, a firm is expected to create adequate profits for its shareholders in the market. These are key financial providers that need an adequate return on their contributions in the business. Thus, the firm would be fair in cases where it takes into consideration key interests of shareholders. They must be able to reap from amounts of funds invested in the business.
In conclusion, it is vital for the government of any particular country to effectively engage in the economy market. This should be done with a high level of caution, in order to ensure that it does not hinder the development of the economy. The government engages in activities of economy market with the objective of providing finances for effective business operations, elimination of illegal businesses and the regulation of competition. The participation of the government in business is healthy, because it ensures that the economy develops within established standards. The government acts as a watchdog, hence ensuring that the entire market is stable and the economy is effectively regulated. Businesses must also ensure that they create some level of wealth for their shareholders, because these are individuals in charge of providing all financial requirements of the business. All these activities would effectively boost the operation of businesses in the country.