Both these techniques have an inverse relationship with each other. If the Government chooses to make its operations more efficient, it will be able to utilize the same level of capacity efficiently and increase the level of production. On the other hand, it can make more investments to increase the capacity so that the current and projected demand can be met effectively (Landskroner 2001).
The best way to manage the demand and capacity is to get the maximum output from the minimum amount of inputs. But if the Government increases the capacity and does not bring efficiency in its operations, a significant portion of its available capacity will go in vein. Similarly, if it wants to control the level of demand in the market, it will have to introduce new alternative products for the consumers so that they switch to those products. However, this step requires a considerable time and financial resources from the federal budget (Lipczynski, Wilson, & Goddard 2005).
The Government can manage its capacity in an effective and efficient manner if it forecasts the demand for each product and plan its production according to that projected demand. It will not only save the Government's expenditures which it would incur on investment incentives, but also bring the least possible impact on the consumers' bills. That is, consumers will not have to pay extra due to shortage of demand or more efficient services by the same institution. In this case, the energy and water needs can be made to the best match by an effective and efficient capacity planning by the Government (Connolly & Munro 1999).
PART -- IV: REGULATION
Efficiency Initiative is considered more effective than Investment Initiative around the world. The biggest reason is the cost saving by the respective authorities. In order to bring the private monopolies under the umbrella of institutional framework, the Government will need to incorporate effective price control policies (Wilson, Reck, & Kattellus 2010). Generally, private monopolies work on the principles of investment initiatives in order to match the level of competition with the public sector. But in this case, the private monopolies need to be regulated through a proper framework in which they will follow the efficiency initiative (Utton 2003).
Institutional Frameworks to follow:
Under efficiency initiative, private sector will need to improve their business operations and act upon the general operations management principles that may guide them through the capacity planning process. In order to meet the rising consumer demands, they will have to analyze the current supply and demand patterns and then supplement the current operations with more efficient policies and procedures. It will increase the level of production at the same capacity level and at no extra costs. Thus, private monopolies will get greater benefits from efficiency initiatives than by the investment initiatives (Connolly & Munro 1999).
Impact of different environmental factors on Efficiency Initiatives:
The efficiency initiative will get adverse impacts from some internal and external factors from the companies' business environments. The most important factor would be the increased demand for the workforce that will incorporate the new procedures in the current organizational setup. That is, the efficiency initiative may not require heavy investments in the plants and machinery, but they will definitely require extra human efforts and time for effective implementation of these procedures (Hull 2012).
The Rate of Return on Investments:
Secondly, the rate of return will also impact the efficiency initiative under the available options to the Government and the private monopolies. When the Government decides to privatize the publicly owned institutions and departments, it basically forecasts a continuous income from those newly privatized projects. On the other hand, if it decides to keep the projects under public ownership, the main purpose is to get a handsome rate of return on the investments which these institutions make from the available finances. That is, by keeping the departments under public ownership saves the costs of privatization. This saved money can be utilized to make new investments and earn attractive rates of return. The Government can utilize this income on both efficiency initiatives and investment initiatives (Hull 2012).
Other factors to be considered by Private Monopolies:
There are various other factors that need to be considered in the efficiency initiative process for private monopolies. These include the level of competition, stiffness of regulations for these organizations, the governmental behavior towards their current business policies, and the industry patterns with respect to demand and supply. The level of competition varies with the size of these entities. The market leaders have to compete in the presence of a stiff competition from their equally competent market participants. On the same side, there are new competitors that face difficulty in making new customers. Therefore, they try to capture them from the existing market leaders on the basis of quality and price (Connolly & Munro 1999).
Through efficiency initiatives, all types of competitors can compete in the whole industry and make greater market share over time. But there is always a strong interference by the Governmental authorities that may hamper the growth and strategies of the private organizations (Connolly & Munro 1999). The behavior of the Government can change any time and bring negative impacts on the strategies and procedures that were set by private entities in the past. But if they prefer efficiency initiatives over investment initiatives, they will always receive a positive feedback as well as encouragement from the governmental institutions (Graham 2008).
Connolly, S., & Munro a., 1999, Economics of the Public Sector. Harlow: Pearson Education
Graham, L., 2008, Internal controls: guidance for private, government, and nonprofit entities. Hoboken: John Wiley & Sons
Hull, M., 2012, Network Utility Economics: A Basic Text. U.K: John Wiley
Landskroner, R.A., 2001, the nonprofit manager's resource directory. 2nd Edition. New York: John Wiley and Sons