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Greg Ip’s post “A Provocative Look at the Harm From Corporate Heft” inspired my Text Analysis Essay. I choose this essay because it speaks to me. I operate with a bigger DIRECTV affiliate that was recently purchased by AT&T. My research goes over the details contained in the text, where Ip demonstrates the negative effects that big companies have as they dominate the market share in their business and debunks the positive comments made about the issue. So far in this process, I’ve found that writing this sort of essay requires a lot of rereading and preparation. I believe the strengths of this rough draft to be around the MLA citations and the use of information from the article and the problem areas being the use of repetitive vocabulary. If I had two more days to spend writing this draft, I would spend more time finding different ways of writing without using repetition. When reading through this, the main question I ask the reader is if I followed all instructions given in the assignment.
The Effect Large Companies Have on the US Economy
In his article, “A Provocative Look at the Harm From Corporate Heft,” Greg Ip explains how giant corporations have been able to corner their specific markets based on their sheer size and the negative impact this has on the US Economy. He provides statistical data and examples from other research on how large corporations are using their size and buying power to make it more difficult for start-up companies to come in and compete in their market. This causes prices to increase and labor force and wages to decrease. In addition, he gives information about the opposing thought that this is good for the economy because it allows a faster and cheaper experience to the consumer. By giving examples that show information for and against his argument, Ip strengthens his argument that allowing companies to have massive growth with little competition has a direct negative impact on the US Economy.
He starts off by saying how the concentration of businesses in America can be a good thing, stating that “size and scale can enable companies to reduce costs, invest in better products and compete globally” (Ch. 2). This is not the case as he shows how recent studies outline the negative impact America sees in the decrease in a number of companies within a particular market. The larger companies have the advantage of being able to lower their prices, primarily driving their competitors out of operation and increasing their market power. Once they have done this, they raise their prices as there is no competition to stop them. Over recent decades, the lack of competition has increased prices by supply and demand as well as decreased the number of jobs in the labor force. By doing this, larger companies have effectively made it almost impossible for smaller startups to come into their line of business and compete.
The article proceeds to reveal how fixed costs have made it more difficult for smaller companies to cope up with the harsh business environment. A study done by former President Barak Obama’s Council of Economic Advisors discussed how fixed costs have risen to cover the expenses for such things as software, computers, research and development, and marketing (Ch. 12). Depreciation has also made an impact; rising from 12% of gross domestic product in the 1960’s to 16% today. The reason for this is that the more a company is spending on assets such as computers and software, the quicker it will depreciate due to the technology becoming obsolete faster. Ip explains how this is a challenging area for smaller businesses to compete. An excellent example of this would be how banks are now using more and more technology to analyze their risk on loans. Larger banks who have a national footprint and can spread the cost of this technology across a larger customer base which essentially makes it less expensive for them to operate than a smaller bank. Large corporations have the advantage of using their resources in this manner to actually eliminate their smaller rivals.
One of the most significant topics that the article covers is the acquisitions and mergers of companies and how it negatively impacts the economy. Ip gives the example of Amazon’s purchase of Whole Foods that was recently approved by the Federal Trade Commission. This acquisition increased the number of products that Amazon provides, and now getting them into the grocery business. Although it does not seem to create a pressing issue as it will only give Amazon a small portion of the US grocery market, Ip debates that there is a larger plan in place than just purchasing groceries from Amazon. This also extends their network of physical locations for Amazon. The worry here is that by Amazon getting into this market, they have the ability to sell at lower prices, having such a huge customer base. Over the course of time, this can drive out smaller businesses and allow Amazon to raise their prices then; when there is no competition.
Ip makes valid points with information to support his idea that although there may be some benefits from having large businesses corner their markets, in the long run, it will create a much more significant negative impact on the US Economy. He shows that allowing companies to grow larger and larger and take up a bigger percentage of their market will come full circle once the smaller companies have been driven out of business. The economy will be felt widespread as these enterprises increase prices due to higher costs, demand from consumers, and a reduction in the labor force. All of which provides a non-favorable situation for the American Consumer. With more and more of this data becoming available as time passes by you can rest assured that there will be more articles like this one that highlights the negative effects this has on the American People.
Ip, Greg. “A Provocative Look at the Harm From Corporate Heft.” The Wall Street
Journal, Dow Jones & Company, 30 Aug. 2017,
www.wsj.com/articles/a-provocative-look-at-the-harm-fromcorporate-heft-1504108799. Accessed 30 Aug. 2017.
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