Port of Baltimore

1. Explain the idea of productivity, and briefly describe why achieving high levels of productivity is important for (a) firms and (b) an economy in general.

The definition of productivity is the quality of work done relative to the time and effort that was needed to produce it. Productivity ultimately drives the success or failure of a business. It is an index that measures output relative to input. It describes how well the company uses its resources to produce its goods or services.

Achieving high levels of productivity is important for the firm because it drives their profitability. It measures how well a firm uses its resources. Low levels of productivity can hurt a company’s output, which directly influences profit. High levels of productivity also help the firm stay competitive. A higher level of productivity can allow a firm to charge lower prices because it has lower internal costs, thereby making their products or services more attractive to consumers.

Productivity for the economy in general is important because it is a measure of the profitability of the country as a whole. An increase in profitability allows for an increase in a standard of living. Higher levels of productivity in an economy are indicative of higher profits, and in turn greater wealth.

2. Briefly describe the central problem at the Port of Baltimore. How did changes affecting the port in Norfolk contribute to the situation in Baltimore?

The central problem at the Port of Baltimore was the conflict between labor and management. The conflicts between labor and management affect productivity on the docks, and that inefficiency has caused traffic to the port to drop 21% in the past 10 years.

Compounding the problem at the Port of Baltimore, is the deregulation of the railroads. This deregulation, coupled with the reduced productivity and inefficiencies at the Port of Baltimore, has made Norfolk more attractive to importers

Changes instituted at Norfolk have directly affected the situation in Baltimore. The changes in Norfolk have made the port more productive. Changes in work rules have made Norfolk more efficient by speeding up cargo loading in the terminal. This in turn makes more money for management, which has led to 200 more jobs for the port. This leads to increased efficiency, which attracts ships away from Baltimore.

3a. Based on the framework of Jensen and Meckling, describe the three (3) principal components of an organizational structure.

Delegation of decision making authority(Alienability): Because it is costly to transfer specific knowledge among agents, it becomes necessary to decentralize decision rights. Alienability is the concept that allows managers to delegate decision rights throughout the firm. This in turn maximizes the limitations on knowledge in a firm’s decision making. Alienability