Failure of Marketing System

Market system failure is a situation where the mechanism of the price is unable to allocate the available scarce resources in an efficient way. The market system failure may also result from loss of social welfare due to the operations of the forces of the market. Market failure is real when the outcomes of the completion in the market are not pleasing from the perspective of the society. There are two types of market failures; complete market failure where the market fails to supply the products completely to the consumers. The second type is the partial market failure which results from the production of a wrong quantity of product or wrong price of production into a functioning market.

In the first situation where firm A manufactures cement sifters in a process that involves melting of metals and chemicals and finally disposes the waste to the River, the type of market failure is partial. In this case, the cement sifters have its externalities which are the residents of the area. The gains and the losses of the product, as well as the production cost, makes the society around the Firm A plant suffer from the disposal of waste into the river and yet they did not incur any cost in the pollution process. From the community perspective, the price for production of the cement sifters is wrong. The wrong price of production is because some of the cost of the production process is borne by the surrounding people. In the firm, there is the absorption of labor, capital and other production inputs and the firm must cater for this cost. These production costs reflect on the final price of the cement sifter, but yet the market equilibrium is not optimal. The cement sifter produced are more than they are supposed to be if the firm is forced to pay for the pollution it causes. Since the society is the one catering for some of the production process, the market price for cement sifter fails to incorporate the maximum opportunity cost. As a result, the marginal social price of the product surpasses the marginal societal benefits, hence the failure of the market system.


In the case of the second situation where there are some states that allow free education to residents of the state, the type of market failure is partial. The reason for being partial is because there is favorism in the University, where the students who are residents are exempted from the tuition fee. Exemption of fee from the residents of the state motivates people from the area of the University to study hard and finally join the University at the provided free tuition learning. As a result, the state ends up having many educated people who are more productive compared to other states. This favorism results to a society which is not balanced since some may feel neglected. Since the University is a public service, all students should be treated equally without considering their residential place. The cost of producing well-trained graduates for such universities through the teaching process is not uniform from the fact that some students pay for the education where the others get it for free. The outcome of the favorism is graduates with different qualities yet from the same institution an act that can be compared to as different quality of products from the same business.

These differences starting with the number of graduates from certain states to the qualities that they have makes the marketing system of the Universities fail. The failure is due to the institution inability to meet the expected results of equality and diversification of the students. Another reason which makes the policy fail the marketing system is that in the work environment, the workers can’t work effectively to make any organization succeed because some of the employees will be more productive than the others. A market system that is upright should provide same opportunities on access of public services to the whole society without any discrimination. Every individual should be given equal chances of succeeding as well as failing so that there will be equity in the society and hence creating a market system that is upright in service delivery of the Universities.

The third situation describes a case, where Bob who is a resident of a certain subdivision, uses his money to fund the paving of the dirt road and later ask other residents to pay for the paving but they all refuse. The marketing system of Bob failed completely from his faults in communication. In the beginning, Bob did not communicate with other resident concerning his view on the paving of the dirt road. The breakage of communication is one of the reasons that made Bobs system of seeking resources to fail. The second reason for the failure of the market system in the Bob’s action is the fact that when starting the project, it was a volunteer decision to pave the dirty road because he had money. After the completion of the project, Bob moves away from his volunteer action when he sees the others are benefiting from his action thus he start asking for refunding of the resources he used.

To avoid such problems, when one want to carry out a project that will not of private beneficial but will also benefit the public, it is better to discuss the issue of the project funding with the residents to agree on conditions that will apply. Failure to communicate on the money for the project will mean that there will be no legal actions that can be taken to seek for refunding of the resources used. Also, unlike Bob, it is significant that if one decide to do a project on his or her own, he or she should maintain that even after completion of the project even if it turns out to be more beneficial than expected. For the case of Bob, the residents were right to refuse to pay for the paving since they were not involved in the process of planning and construction of the road. Indeed, failure to communicate leads to failure of the marketing system.

The advisor who tells the president of United States that the voluntary contributions to help the military will not work are right. If there will be contributions by volunteers into the military sector, it will turn the military from being a state-owned branch of government into a commonly owned property. Individuals who will contribute are likely to demand some rights of control over the military since they have a share in it. The voluntary contribution will bring inequality in the society since not every person in the United States will be in the position to support the military in finances. Some people are likely also to feel being left out in helping the states due to their inability to contribute. The feeling of being underrated should not be present in any market system.

Also, volunteer contribution may not help the United States since there is no set value of money that will be given as a target of the help needed. This means that the contributors ay make less contribution and fail to meet the size of capital that the government requires in financing the military. Besides, there may be excess money contribution which is likely to be diverted to other government sectors which will be exploitation of the citizens because the money should only be spent on the military.The advisor who says it will not work has evaluated so many challenges that are likely to arise when the financing of the military becomes dependent on the contributions of the citizen. For the government to retain full control of the military, it will be necessary not to delegate the financing to the volunteers. If the budget for the military has become unsustainable, to avoid affecting the operations, the president should first involve all the citizen in a dialogue, and then a decision should be made. Involving all the citizens in the decision making will avoid the many mistakes that are likely to occur when they are not involved in the process.

From the situations discussed above, the failure of the marketing system and failure to allocate enough resources can be caused by various reasons. Before sending a product to the market and determining its price, the cost of production, and the effect on the environment as well as the consumers are key issues which can either lead to either success or failure of the system of marketing used. The following are some of the issues that lead to marketing system failure as described in the above situations:

  • Negative externalities are major causes of the marketing system. When the action of one person affects the other and the relevant cost are not included in the production process, there will be a failure in the marketing system.
  • Universities are public goods and the favorism of some students due to their residential place results to inequality in the society since the resources which are the learning is not distributed effectively.
  • The military is also a public good that should not be left in the hands of volunteers but rather the government should have full control.
  • Better and timely communication is a key issue that determines the success or failure of the marketing system.
  • Public places like roads should be developed with the consent of all members of the subdivision to avoid confusion in the resources used for development.
  • The cost of pollution of the environment in the production process should be catered by the factories and not the residents incurring extra cost to protect their health.

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