Internal and External Sources of Economic Profits. Economics Essay

Internal and External Sources of Economic Profits
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Internal And External Sources Of Economic Profits
The industry and firm levels of a business unit determine the competitive advantage of firms. The industrial organization in the location of a firm is significant to the growth and development of the business units. Companies located in less competitive environments achieve high economic profits. On the other hand, firms have the task of ensuring continuous availability of superior process to enhance competitive advantages (Wilkinson, 2005). The internal and external factors in firms play important roles in boosting the achievement of economic profits.
The performance of any industry depends on the competitive environment of its location. Companies located in attractive industries possess high market power as more potential customers are interested in such markets. The existence of firms in such industries is dependent on the standard management of the competitive levels, leading to yield of more profits (Wilkinson, 2005). Companies that don’t struggle with competing factors in the areas of location are assured of continuous movement of products to the potential consumers. The incident of sequential demand for products results to the realization of economic profit because the firms will always make sufficient sales, maintaining the levels of the company.
The significant characteristics of a certain industry determine the value of attraction for various firms. The suppliers' power determines the value of a company despite the number of suppliers available in the market. Although the market might have many suppliers, the suppliers may still have a significant impact on the growth of the firm if they offer similar prices (Wilkinson, 2005). On the other hand, the entry of new firms in an industry can ...