Overall coordination and competition

The existence of uncoordinated business decisions and activities is an important factor that can impact the effectiveness of government policies or other external changes. However, nowadays, are the decisions and activities that seem uncoordinated really uncoordinated? My opinion is that in our modern economic system there are more coordinated business decisions and activities than uncoordinated ones. There are several reasons to support my opinion.

Firstly, information transfer has been easier and faster nowadays, it makes coordination much easier than before. Secondly, coordination meets the interests of many businesses. Because coordination can help to reduce competitions, firms tend to coordinate when such option becomes available. Thirdly, without having direct communication, firms can send signals to their markets in order to inform others to coordinate together. For example, in the airline industry, when one airline firm publicly announces its price increase, it does not aim to inform its customers, it actually informs other airline firms that it may be the time to increase the entire market price. Fourthly, firms are able to coordinate by estimating other firms' strategies and moves. All companies' targets are clear and known to everyone, which is to maximise their profits. However, because such coordination is based on estimation, firms do not necessarily make the ideal decisions and their decisions also do not necessarily match others' estimates. Under such circumstance, we can see that uncoordinated business activity and decisions appear.

Of course, it is normal for firms to compete with each other in order to gain more market shares. the competition tends to increase when the sector is at its early stage of development, then the competition is likely to decline since a clear winner appears in the sector and coordination becomes more favourable.

As nowadays, the major general sectors tend to be complete and well developed while their new sub-sectors are at their developing phases, then coordination will be the mainstream pheromone while competition appears in relatively smaller scales.