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Definition: Coordinated Market Economy
Coordinated Market Economy is the economy where the management (the industrialist) handles the various issues it faces in its operations through different channels and takes long term view in any situations rather than just market oriented view.
Fundamental Types of Economies defined by Peter A Hall in his book called ‘Varieties of Capitalism: The Institutional Foundations of Comparative Advantage ‘are
1. Liberalised Market Economy
In this kind of economy market force takes care of the various issues that are faced by the management in its course of operation.
2. Coordinated market Economy
Various issues that are faced by the management are taken from long term terms perspective and by collaborating with other firm in the industry.
The issues faced by management and how they are being handled by the coordinated market economy
1. IR issues:
In Coordinated market economy, trade unions have higher number of member. Negotiations took place at national level or industry levels. In Liberal Market Economy, these negotiations took place at employer levels.
2. Governance of Companies
Companies in coordinated market economies do not judge their performances on short term market orientation but take a long term view. Companies in the Liberal Market Economies do give importance to share market and related market information to judge their market performance.
Advantages of Coordinated Market Economy one liberal market Economy
1. Stability in in terms of environment
Due to the less market orientation companies experience sufficient stability in their operating environment
2. Less number of ideas that disrupt the business
As there is less market related focus toward business daily disruption that happens in market to try out new ways are limited to test current strategy.
3. Specialised into niche areas
As there are no daily disruption coming up, firms tend to specialised in to niche area. Good example of this is the German companies specializing into precision manufacturing.