The Financial Policy of Corporations, Vol. 5 of 5: Failure and Reorganization (Classic Reprint) - Tapa dura

Excerpt from The Financial Policy of Corporations, Vol. 5 of 5: Failure and Reorganization

Competition is most severe in businesses analogous to that of the railroad, where the things bought are never the things sold, so that the determination of the cost of production is entirely a problem of accountancy. Between the years from 1885 to 1893 most of the western transcontinental railroads failed. The reason was simple.5 Too many roads had been built to carry the traffic at remunerative rates. It was clearly a case of excessive competition brought about by unwarranted railroad expansion.

A local public service company is ordinarily protected by the utility commission of the state in the exercise of monopoly powers, provided it renders good and reasonably cheap service to its customers. Competition is a relatively unimportant factor for such businesses, unless one considers the competi tive influence of two utilities - gas and electricity, omnibuses and street-cars. In manufacturing businesses the plea of severity of competition can be advanced but seldom as a funda mental cause of failure. A manufacturing business can cur tail production even at the expense of its organization, rather than dispose of its product at less than cost. It is true, com petition is alleged to be the cause of many failures, but the allegation is merely an excuse to obscure the deeper defect in business management. Too keen competition is invariably the excuse of the weak.

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