The which needs to be studied. The “for-profit”

The effect profit seeking can have on
quality of products

 

Firms have
traditionally pushed themselves to gain the maximum profit and many of them
have been time and again accused to compromise on quality to gain this profit.
The purpose of this research is to claim the validity of this accusation. In
certain markets this profit maximization has led to competitive market which in
turn brought improvements in technology and allocating resources efficiently in
the economy. A good example of this would be mobile phone industry.

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But the
opposite scenario happens in industry where there is complete monopoly. This
dilemma between profit and quality is extremely dangerous in health care
industry resulting not just in the inflation of healthcare costs that we’ve
seen but occasionally irresponsible behavior- it’s opened the door to doctors
prescribing excess amounts of expensive medicines, suggesting unnecessary
appointments; generally practices that are not so helpful to the patient but
helpful to the hospital’s finances. With different industries come different
situations, and thus profit seeking has the potential to be both extremely
beneficial and damaging to society as a whole which needs to be studied.

The
“for-profit” ethic is at the heart of the capitalist system. It is always
assumed that human beings are very selfish and competitive, so because of that
the best way to incentivize innovation and facilitate economic activity is to
appeal to people’s self-interest. It has created a for-profit business model
where every stakeholder expects a portion of the company’s profit in various
form such as dividend, shares or shares. This model has become central to our
current economy and ensured that we live in a for-profit world. But this
for-profit business model has led to socioeconomic inequality within our
society, where the major contributor to this income divides is the capital
gains and company dividends. Private profit has now become the driver of
economic activity and the priority of most big business is now profit
maximization. This global financial inequity has resulted in social
stratification which would further result into ecological devastation.

Has this for
-profit business model had any positive impact? Yes, it has to some extent in
technology related industries, for example Apple’s and Samsung’s rivalry to
gain profit has brought rapid advancement in mobile technology. This
competition was the key in bringing improvement and allocating resources
efficiently in the market economy. If we have a look at how far the iPhone has
developed since its release in 2007. The current iPhone X is thinner, lighter
and of better quality material than the original iPhone and at the same time it
is decisively faster and more advanced. Competition with Samsung’s ‘Galaxy’
phone drove Apple to proactively seek better technologies for every single generation
of iPhone, which has brought us advancements in almost every aspect of the
phone.

Both Apple
and Samsung had to keep up with the market demands continuously. So they have
to come up with new products continuously and at the same time have to bring out
quality products.

If they come
up with a product like iPhone 5C, which very few people liked it would damage
the company by a drop in their profits. They would be marginalized by their
competitor over a long term and could be also driven out of the market.  On the contrary we have the example of Nokia
and Blackberry who saw huge success in the 2000’s but failed to keep up when
the iPhone came. Apple and Samsung created huge advancements in the tech
industry with the primary motive of chasing profits. They have shown the
potential positive effects of profit-making motives.

 

But this
profit-seeking has had visible socially negative effects especially in the food
industry- particularly in fast food. The companies find it easier to cut down
costs than to try to increase income and as a result of this the artificial
junk food industry was born that we see today. Healthy, organic food has become
something of a premium in the food industry, as the influx of Big Macs, with
their far higher profit margins, have dominated the fast food market. Seeking
profits, companies such as McDonalds and Burger King have sacrificed quality in
their products. They have sought to make a cheap (and not so cheerful) product
that has damaging impacts on the health’s of those who consume it, rather than
making a product that adds genuine nourishment value to consumers. Financially,
their current activity is incredibly sound- but in the real world? Not so much
the case.

But the
worst hit of this model is the health care industry. We all know that
healthcare costs all over the world are too high. And this is due to the
desire to gain more profit. As said by Russell Andrews, a neurosurgeon
“the morphing of American medicine from a function of a humanitarian society
into a revenue stream for healthcare profits, drug and medical device
companies, hospitals, and insurance companies.  In essence, we have
transformed healthcare in the U.S. into an industry whose goal is to
profitable.”  Andrews goes on to characterize the profit motive as “a
virus” infecting the system.

The health
care sector is being transformed from a profession into a business like any
other because of the growing dominance of those types of motivation,
decision-making techniques, and organizational structures that are
characteristic of large-scale commercial enterprises. Firstly, it is said that
for-profits contribute directly to the problem by not providing care for
nonpaying patients. Several data shows that for-profit hospitals provide less
or as much uncompensated care as do nonprofit hospitals. Second, it is also
alleged that for-profits worsen the problem of access to care in an indirect
way because the competition they provide makes it more difficult for nonprofits
to continue their long-standing practices of “cross-subsidization.”

A third
reason for viewing predictions about the effects of for-profits on access to
care with caution is that there are other variables at work that may be having
a much more serious impact. In particular, the advent of a prospective reimbursement
system for Medicare hospital services and other efforts for cost-containment by
state and federal regulatory. bodies and businesses, as well as the general
increase in competition throughout the health care sector, are making it more
difficult for any institution to cross-subsidize.

But in some
cases for-profits have actually improved access to care not only by locating
facilities in previously underserved areas thus making it more convenient for
patients to use them, but also by making certain services more affordable to
more people by removing them from the more expensive hospital setting. The
growth of outpatient surgical facilities in suburban areas, for example, has
improved access to care in both respects. For-profits may improve access to
care in the sense of better meeting some previously unmet demand for services
by paying patients, while at the same time exacerbating the problem of access
to care for nonpaying patients. However, there is clearly a sense in which the
latter effect on access is of greater moral concern. We assumed that the
members of a society as affluent as ours have a collective moral obligation to
ensure that everyone has access to some “decent minimum” or
“adequate level” of care, even if they are not able to pay for it
themselves. Surely providing basic care for those who lack any coverage
whatsoever then should take priority over efforts to make access to care more
convenient for those who already enjoy coverage and over efforts to reduce
further the financial burdens of those who already have coverage, by providing
services for which they are already insured in less costly nonhospital
settings.

Having
discussed the effect of for-profit model for various industry now let’s discuss
why does it occurs. The most commonly suggested alternative to this dysfunction
is greater
market regulation. But while regulatory measures are critical in
responding to social and ecological challenges, they can only do so much given
that a heavily regulating state is politically divisive, disempowers citizens
and can suppress real innovation. Furthermore, with politicians so commonly “in
bed” with big business, regulatory reform is often just window-dressing.

Others point
out that conscious capitalism, and see means such as B Corp
certification and “shared
value” as the best ways to get there. These means may bring
attention to important questions of sustainability, but such approaches fail to
address a root problem.

Although new forms of
for-profit business seek to balance people and planet with profit, they
continue to treat profit as an end in itself, rather than a means to an end,
encouraging the destructive greed inherent in a system that relies on the privatization
of profit.

Nor can capitalism’s
innovative potential come to the rescue. Not only are the levels of innovation
required to avoid collapse totally
unrealistic in a growth-based system; it’s the for-profit ethic
that created the very problems we now face.

There are also other
alternatives to this problem. Fortunately, the dominant story about human
nature is changing. Research increasingly shows that, under the right conditions,
human nature has a tendency
towards co-operation . We’re witnessing the rise of a workforce
increasingly motivated by purpose, and we’re realizing the potential of an
existing business structure called not-for-profit (NFP) enterprise.

There’s a rising tide of
entrepreneurial companies globally that have business plans, make profits and
pay good wages, yet are legally incorporated as “not-for-profit”. They are a
bold response to the common misunderstanding, compounded by use of the words
“non-profit” and “charity”, that not-for-profit entities cannot be successful
businesses.

In the UK, examples of
prosperous NFP businesses include accommodation provider YHA, energy firm
Ebico, London Re-use Network, the Big Issue, the Breadshare Bakery, and the
Cowheels car-club. Around the world, well-known NFP businesses include South
Korea’s Hansalim, Bangladesh’s BRAC and Mozilla in the US. Under law, 100% of
any profits these businesses make must be reinvested into the business or
community. So, not-for-profit really means not-for-private-profit; no more
incentivising selfish behaviour.

But what would happen if we
were able to solve all these problems. How then might a world look in which
every business was operated not-for-private-profit? It would still involve a
thriving market. Government, banks, money, loans and interest would remain. But
within a not-for-profit framework, these things would have vastly different
consequences.

When banks can’t privatize
profits they have no shareholders, owners or partners that they need to keep
happy with dividends and private returns. They have no reason to exist other
than to provide high-quality financial services to their customers, and they
have little to distract them from this mission. They are built to be more
transparent and more efficient.

Rather than siphoning wealth
away from people and communities who take out loans, all profits are allocated
according to the NFP’s social mission, enabling the generation of real
community wealth. Now imagine the entire financial sector being not-for-profit.
Imagine the entire retail sector being not-for-profit. Imagine all
manufacturing being not-for-profit.

Capital requirements are falling
dramatically, and large capital investments are proving less and
less necessary to seed innovation, enabling the emergence of NFP businesses
such as car manufacturing company Wikispeed and solar power plant designer
Zenman Energy. Furthermore, new forms of capital raising are now available to
emerging NFPs, such as crowdfunding, revenue-based finance andcommunity bonds. When the
market exists to meet human needs, government requirements for taxation
diminish, making good wages and purposeful work all we need for the economics
of enough.

By changing the nature of
incentive and ownership in business, the NFP world model enables companies to
make truly sustainable decisions, in turn promoting a less consumerist society.
The NFP world also fosters a more equitable economy because it has an inbuilt
redistribution of wealth, with companies required by law to reinvest, rather
than privatise profits.

While the informal not-for-profit
economy has kept human civilisation running since time immemorial, through
care-giving and forms of non-monetary exchange, the emergence of the formal
not-for-profit economy is now fully under way. To fund the work they do, NFP
institutions are increasingly
generating their own income, as opposed to the traditional
non-profit approach of depending on grants and philanthropy.

Increasingly entrepreneurs
are seeing the benefits of establishing businesses as NFP, through structures
such as the UK’s Community
Interest Company limited by guarantee. And there is renewed focus on
successful, age-old business structures that most commonly exist as
“not-for-profit”, such as consumer co-operatives in the food, healthcare,
insurance, housing, utility and finance sectors.

The rise of NFP enterprise
is catalysed by the advantages NFP businesses hold in the marketplace, which
have proven largely resilient to deregulation and recession. Not-for-profit
businesses don’t have to pay dividends, and can often offer
lower prices, primarily because they are not-for-profit.

They may gain tax exemptions
and have the ability to receive tax deductible donations. They more easily draw
on the support of passionate volunteers. And their propensity for flatter
organisational structures can facilitate productivity and innovation. Moreover,
in a world with rising demand for
ethical products and services, organisations that focus on
fulfilling human and ecological needs are ahead of the game.

Combined, NFP advantages are
resulting in a greater market share. The NFP sector in the US grew significantly faster than
the for-profit sector between 2001-2011, and this from base of 1,259,764
organisations.

For the first time in modern
history we have the structures, capabilities and impetus to evolve to an NFP
world, in which the best energies and drivers of good business are harnessed
for our collective flourishing.

So while
there is a valid argument for private profit-seeking opening up industries to
market competition and all its benefits, this is something that is perhaps not
applicable to the economy as a whole. With regards to healthcare,
profit-seeking is a dangerous motive to have when the primary motive of any
such establishment should be to cure their patients. Similar problems arise
with fast food businesses, which damage the customer’s health but bring in
lucrative profits.
As it often is with economics, there is no straight answer. With different
industries come different situations, and thus profit seeking has the potential
to be both extremely beneficial and damaging to society as a whole.

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