Question

What are the implications of the informal economy for firms that operate only in the formal economy?

When firms consider analyzing their competition, should they include firms in the informal economy? Please explain why or why not.

Please answer one or both of these questions (i.e., opinions, ideas, etc.) in a minimum of 50 words. Quality answers should be well written, well thought-out, rationalized, and detailed in nature. Responding to prior posts and/or making multiple posts is highly valued!

Answer 1

When firms consider analyzing their competition, they should include firms in the informal economy. Neglecting them would be a gross mistake as they are a part of the industry and the market as well. They have a customer base too and therefore, should be taken as a competition by the firms operating in formal economy.

Firms which are operating in the informal economy often pay a role in the pricing of the products and the strategies which are used to gain the market. Therefore, assessing their business operations will provide a clearer image of the market and the customers in the industry.