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This paper discusses General Motors (GM) Company in the context of how the costs of its production systems affect its various operations. This is a critical provision since the company operates in a competitive industry where operational and production costs are soaring, overwhelming, and critical.
There are numerous costs of production that the company faces in its business endeavors. These incorporate the costs regarding raw materials, labors costs, equipments, outsourced services, and other relevant production provisions that the company incurs their costs. In this context, there are short-run costs that the company incurs in its operations.
This incorporates costs that vary with the demand for the company’s products (McConnell, Brue & Flynn, 2009). For example, when the company experiences increased demand for tracks, cars, and other motor vehicle models, it will need more materials and labor hence increasing its production costs.
Nonetheless, this condition is temporal since it will change when the demand for such commodities diminish. It is crucial to consider such provisions in the contexts of their viability and applicability in the business realms. Precisely, short-run costs in this context incorporate the changing labor and raw material provisions depending on the demand of the concerned products.
Concurrently, General Motors is being affected by the economic cost structures in the contexts of decision making. This occurs in numerous ways depending on the situation at hand. The company has to operate with viable visions, missions, and expenditures in order to enhance its returns in the business contexts.
Additionally, economic cost structures assumed by the company has necessitated it to formulate viable business decisions in order to remain cost effective, competitive, and relevant in the automobile industry (McConnell, Brue & Flynn, 2009). Despite the production, economic, and market challenges, the company does not experience diminishing returns in its operations. Evidently, GM has been registering substantial returns in the past years despite the competition and economic challenges.
In this respects, there are numerous factors that have led the company to decrease the prices of its commodities in order to capture and retain a considerable number of clients globally. This incorporates the aspects of competition due to the emergence of numerous motor vehicle manufacturing companies worldwide.
Despite the high costs of production and the economic crisis experienced by numerous organizations, the company sets the prices of its commodities competitively in order to remain relevant and competitive in the market. In this aspect, the company makes its optimal business decisions in situations where Marginal Benefits equal the Marginal Cost experienced by the company (McConnell, Brue & Flynn, 2009).
It is agreeable that consumers usually make rational decisions when purchasing automobile products. They consider the aspects of benefits versus costs. If the benefits of similar products tend to be the same, consumers tend to consider prices. Conversely, they consider the benefits in case prices are the same. GM considers these factors in its pricing decisions.
The type of the long-run costs that GM would face incorporate the aspects of business expansion, running the entire company for years despite the challenges, continuous innovation, and market strategies among others. This factor entails the aspects of varying inputs that allow firms to enter and exit an industry at will (Mankiw, 2012).
The issues relating to the Long-run costs are numerous. They form the core provisions for any business. It is crucial to consider these factors in the business realms. Long-run costs affect GM in the aspects of strategies, future prospects, and in enhancing its competitive advantages.
References
Mankiw, N. (2012). Principles of microeconomics. Mason, OH: South-Western Cengage Learning.
McConnell, C., Brue, S. & Flynn, S. (2009). Economics: Principles, problems, and policies (18th Ed.). Boston, MA: McGraw-Hill Irwin.
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