financial assistance

“Evaluate the view that the government should give financial assistance to firms producing cars in the UK to increase their competitiveness.”a. What does financial assistance mean?b. What different forms might it take?c. Draw on recent examples of occasions when financial assistance has been asked for or has been forthcoming. What does competitiveness mean? It is a concept with more than one meaning.e. Which firms might be offered financial help?f. Who are the stakeholders involved in such decisions?g. Who gains and who loses in the medium term from state aid?
I copy this from Mr chris's blog, and now I try to answer this question with the steps that he gives to us.
A.what does financial assistance mean?
Financial assistance means refers to assistance given by a company for the purchase of its own shares or the shares of its holding companies.but it is also use for markets.
B. What different forms might it take. I think this question means what types of financial assistance,so:
The most common type of assistance is a financial guarantee for a loan and/or third party security to allow a borrower to borrow money to buy shares which is routinely given (to the extent legally possible) after a leveraged buyout in support of the new owner's acquisition debt. It would also normally include a gift or loan from the company or any other act which reduces the net assets of the company to a material extent where this is done for the purpose of the acquisition of shares in itself or its parent.(wikipidia)
c. Draw on recent examples of occasions when financial assistance has been asked for or has been forthcoming.
I think I would like to talk about recession globally. Because this is a main reason of a lot of firm or market need financial assistance, even though england or other countries.
Recession is a fall in real GDP over a period of 6 months.in 2008 recession affect every country, like for England exchange rate decrease until now. A lot of companies face to bankrupt, and market face to fail,and the companies and market are like that has bben asked for or has been forthcoming financial assistance.for example Some export companies face to bankrupt, and domestic unemployment keepincrease trend. The government use financial assistance to help them and make them arise. Like subsidies and decrease interest rate to help investors borrow money easier, also they spend money to maintain market run, or invest by government leading to some export companies or some companies run or get better, and then to increase the whole economy of england, but now for england just financial assistance may not deal with the main problem they need consider about other countries economy and then design the right method to face and solve it. Also I can talk about Chinese financial assistance, recently, a lot of news of different countries report that Chinese government assume more than 30 billion policy to enlarge the domestic need leading to increase the domestic economy, and also there is a 0.4 billion save market plan,because this global recession, Chinese export market and companies,domestic manufacture or tourism, etc arise decreased, and some of them ask for financial assistance to correct their business, but the known financial assistance of China recently is the rebuild the city where damage by the earthquake. Chinese government spend more than 700million of them .According to above we can see the firm and market which affect by recession need a financial assistance.
What does competitiveness mean?
Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market.
e. Which firms might be offered financial help?
I think this question means what is financial assistance target.
In this question, we need talk about firm, so I think the firm who face to some problem like cash flow problem, cost push inflation, ,new firm, face to bankrupt, or credit crunch, but they should have potential development ability, or a stable market, and the cause of those problem happen might be current economy. So I think these types firm might be offered financial help.
f. Who are the stakeholders involved in such decisions?
I am not sure what is mean about this question ,but in my opinion I think it means who can gain the benefits from financial assistance to other companies or markets, like a positive externality.
So I think the stakeholders can be complement of those companies or markets which offered financial assistance. For example the england car company get situation get better, they may increase the import of material from other countries , thus the demand of those manufacture firm will increase. Also consumer is a stakeholder I think
Because producer have financial assistance leading to they increase the output , and then in order to correct their marketing, they maybe reduce the price, so for consumer it god for save money. etc.g. Who gains and who loses in the medium term from state aid?The value of after state aid is good, like exports, like China increase production, rise the government spending help China marketing,this marketing and some company involve gains the medium term from state aid. Opposite, the value of after financial assistance is bad, like SanLu milk power company in China, they loss their medium term state, because their market is nothing now, even though they are a famouse and big company in the world , but bad reputation, bad quality of production make them loss chance.
I do not know my answer is totally wrong all a little bit right , but I try my best to do every question. If you think some answer are wrong, can you help me to correct it ?THX