Outside the firm operations, price movements relate directly to production, which is co-ordinated by a series of counter transactions within the market partners. Inside a firm, these market partners’ transactions no longer exist and in place of the large markets’ structure with counter transactions performed by the entrepreneur-coordinator. He directs production, examines methods of coordinating production with a critical eye, and shapes the market accordingly.
Earlier in time there was something of importance than the relations inside each factory captained by a caretaker. there existed relations of the caretaker with the entire of the economic world aside from his immediate area of operation. The caretakers’ activities were to sub-divide labor within each firm, plans and organize consciously. Directions of an entrepreneur give guide as long as they are within certain allowable limits. The chief goal of the contract is to state the required limits to the powers of the entrepreneur. Within these provided limits, the entrepreneur can direct the other factors of production.
The operation of a market costs something and by allowing entrepreneur to direct the resources, saves certain marketing costs. Many factors contribute to putting profit objective of a firm first. Mode of payment is one among the key issues of the firm-fixed incomes that are guarantee for those involved in the production.
Market shape up may require that a firm size down or up to accommodate changes in the market environment. The relationship that exists between efficiency and size of a firm is a serious problem of economic theory in contrast with relation to a plant, largely because of personality rather it is of intelligible principles (Coase). Continuous and unlimited expansion of a given firm leads to decreased efficiency.