View
246
Download
3
Category
Preview:
Citation preview
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
1
Chapter 1
Introduction
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
2
Overview
Economics and managerial decision making
Economics of a business
Review of economic terms
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
3
Learning objectives define managerial economics
cite important types of resource allocation decisions
illustrate how economic changes affect a illustrate how economic changes affect a firm’s ability to earn an acceptable returnfirm’s ability to earn an acceptable return
apply to an individual firm the three basic apply to an individual firm the three basic questions faced by a countryquestions faced by a country
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
4
Economics and managerial decision making
Economics
The study of the behavior of humanbeings in producing, distributing andconsuming material goods andservices in a world of scarceresources
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
5
Economics and managerial decision making
Management
The science of organizing and allocating afirm’s scarce resources to achieve itsdesired objectives
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
6
Economics and managerial decision making
Managerial economics
The use of economic analysis to makebusiness decisions involving the best use(allocation) of an organization’s scarceresources
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
7
Economics and managerial decision making Relationship to other business disciplines
Marketing: demand, price elasticity
Finance: capital budgeting, breakevenanalysis, opportunity cost, value added
Management science: linearprogramming, regression analysis,forecasting
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
8
Economics and managerial decision making Relationship to other business disciplines
Strategy: types of competition,structure-conduct-performanceanalysis
Managerial accounting: relevantcost, breakeven analysis, incrementalcost analysis, opportunity cost
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
9
Economics and managerial decision making Questions that managers must answer:
What are the economic conditions in our particular market?
market structure? supply and demand? technology?
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
10
Economics and managerial decision making Questions that managers must answer:
What are the economic conditions in our particular market?
government regulations? international dimensions? future conditions? macroeconomic factors?
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
11
Economics and managerial decision making Questions that managers must answer:
Should our firm be in this business? if so, at what price? and at what output level?
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
12
Economics and managerial decision making Questions that managers must answer:
How can we maintain a competitive advantage over other firms?
cost-leader? product differentiation? market niche? outsourcing, alliances, mergers? international perspective?
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
13
Economics and managerial decision making Questions that managers must answer:
What are the risks involved? shifts in demand/supply conditions? technological changes? the effect of competition? changing interest rates and inflation
rates?
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
14
Economics and managerial decision making Questions that managers must answer:
What are the risks involved? exchange rates (for companies in
international trade)? political risk (for firms with foreign
operations)?
Risk is the chance that actual future outcomes will differ from those expected
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
15
Economics of a business The economics of a business refers to
the key factors that affect the firm’s ability to earn an acceptable rate of return on its owners’ investment
The most important of these factors are competition technology customers
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
16
Economics of a business Change: the four-stage model
Stage I (the ‘good old days’) market dominance high profit margin cost plus pricing
… changes in technology, competition, customers force firm into Stage II ..
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
17
Economics of a business Change: the four-stage model
Stage II (crisis) cost management downsizing restructuring
… ‘re-engineering’ to deal with changes and move firm into Stage III ..
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
18
Economics of a business Change: the four-stage model
Stage III (reform) revenue management cost cutting has limited benefit
… focus on ‘top-line’ growth ..
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
19
Economics of a business Change: the four-stage model
Stage IV (recovery) revenue plus
… revenue grows profitably
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
20
Economics of a business Example: Avon
well established company, in stage I until late 1970s found itself in Stage II during 1980s since mid 1990s, entered stage III expanded into emerging markets and updated its image
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
21
Economics of a business Example: Sears, Kmart
Wal-Mart effect Sears pushed down to number three in late 1980s … repositioned itself as a clothing store Kmart filed for bankruptcy in 2002 … plan to acquire Sears
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
22
Economics of a business Example: Kodak
struggled to transition from chemical-based film to digital imaging responded by developing strong cash flows in new product range
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
23
Review of economic terms Microeconomics is the study of individual
consumers and producers in specific markets, especially:
supply and demand pricing of output production process cost structure distribution of income
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
24
Review of economic terms Macroeconomics is the study of the
aggregate economy, especially: national output (GDP) unemployment inflation fiscal and monetary policies trade and finance among nations
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
25
Review of economic terms Resources are inputs (factors) of
production, notably: land labor capital entrepreneurship
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
26
Review of economic terms Scarcity is the condition in which
resources are not available to satisfy all the needs and wants of a specified group of people
Opportunity cost is the amount (or subjective value) that must be sacrificed in choosing one activity over the next best alternative
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
27
Review of economic terms Allocation decisions must be made
because of scarcity. Three choices:
What should be produced?
How should it be produced?
For whom should be produced?
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
28
Review of economic terms Economic decisions of the Firm
What - begin or stop providing goods/services (production)How - hiring, staffing, capital budgeting (resourcing)For whom – target the customers most likely to purchase (marketing)
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
29
Review of economic terms
Entrepreneurship is the willingness to take certain risks in the pursuit of goals
Management is the ability to organize resources and administer tasks to achieve objectives
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
30
Global application
Example: Western Union
began over 100 years ago huge changes in technology to survive, the company branched out
Chapter One Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
31
Global application
Example: VNU
Dutch publishing company transformed itself into a global provider of marketing and media information
Recommended