Briefly describe market control at the corporate level, business unit level, and individual level.

Question

What will be an ideal response?

Answer 1

Large, diversified companies use market controls to regulate independent business units. Conglomerates that act as holding companies treat business units as profit centers that compete with one another. Top executives may place very few bureaucratic controls on business unit managers but use profit and loss data to evaluate their performance. Decision making and power are decentralized to the business units, and market controls help ensure that business unit performance is in line with corporate objectives. Market control is used within business units to regulate exchanges among departments and functions. Transfer pricing is one method that organizations use to try to reflect market forces for internal transactions. A transfer price is the charge by one unit for a good or service that it supplies to another unit of the same organization. Market controls are used also at the individual level. For example, when organizations hire employees, the supply and demand for particular skills influence the wages employees can expect to receive. Employers pay higher wages to people with skills most valued by labor markets. Wages do not perfectly reflect external market rates-internal considerations pertain as well-but the market rate is often the best indicator of an employee's potential worth to a firm.