Business Economics - Final

8/11/2019 Business Economics - Final

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Business Economics


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Business EnvironmentBusiness environment refers to all those forces

which influence functioning of business. Twotypes of factors are relevant here-

Internal factors controllable, altered ormodifiedCorporate philosophy, physical assets,management structure, human resources, R &D,Finance, technology etc.

External factors uncontrollableCustomers, suppliers, competitors, naturalfactors, demographic changes, political situation,eco-social condition, government policies etc.


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Modern business world is characterized by

dynamism ,computerization,Economies are no longer self-sufficient, inward-looking; added is the pressure of severecompetition due to globalization.

Big corporates follow military strategiesinvolving surprise, security and unity ofcommand.

Business units aim at a variety ofgoals/objectives.

Problem of economizing and choice are most

important for firms.

contd.


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CHANGING BUSINESSENVIRONMENT4 Stage Model of Change

Stage I

The good old days Market DominanceHigh Profit MarginsCost Plus Pricing

Changes in Technology, Competition, Customersforced into Stage II


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Stage IICost managementCost CuttingDownsizingRestructuring

Reengineering to deal with changes Stage III

Revenue Management

Cost cutting has limited benefitFocus on top - line growth Stage IV

Revenue PlusGrow revenues profitably


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CHANGING ECONOMICENVIRONMENT

Globalization of Economic ActivityGoods and ServicesCapital

TechnologySkilled Labor

Technological Change Telecommunications Advances The Internet and the World Wide Web


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BUSINESS ECONOMICSDeals with the decision making and forward

planning in uncertainty and integrates economictheory with business practice for the purpose offacilitating decision-making and forward planningby management.

Thus the application of economic theory and thetools of decision science to examine how anorganization can achieve its aims or objectivesmost efficiently.It borrows theories from traditional economics i.e.microeconomics where as it borrows tools fromdecision science i.e. mathematics and statisticsand it tries to find out optimum solution ofbusiness problems .


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Business Management DecisionsProduct, price and outputMake, buy, sell and investmentProduction techniqueInventory level/technologyAdvertising and financingLabour decisions/Stateregulations

EconomicsMicro EconomicsMeso EconomicsMacro Economics

InternationalEconomics

Decision Sciences

EconometricsStatisticsMathematicsGame theoryForecasting

Programming

Business EconomicsUse of economics, businessmanagement and decision

sciences to solve managerialproblems

Solutions to the managerial problems


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Aspects Of Application Use of optimization techniques to improveorganizational decisions

Consideration of individual consumer choice tounderstand individual and market demand

decisions and to forecast demand

Analyze cost and supply structure to understandsupply decisions

Understanding markets

Understanding external factors likeunemployment, inflation


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BUSINESS ECONOMICS ECONOMICS

It concerns with theapplication ofeconomic principlesIt is highlymicroeconomics incharacter and does notstudy macro

It is a study of theproblem of a firm only.It focuses its attentionin the study of profits

Economics deals withthe body of principlesitselfEconomics consist of

both micro and macroeconomicsEconomics is a studyof both firm and an

individualAll the theories offactor pricing such asrent, wages, interest

and profit are studied


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NATURE OF BUSINESSECONOMICS

i. Microeconomics character

ii. Choice and Allocation

iii.Goal Oriented

iv. Conceptual and Metrical

v. Pragmatic

vi. Normative

vii.Multi-disciplinary


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SCOPE OF MANAGERIALECONOMICS

Internal issues include all those problems which arisewithin the business organization and fall within thecontrol of the management. Some of the basic internalissues are:

Choice of business and the nature of products, that is, what toproduce,Choice of size of the firm, that is, how much to produce,Choice of technology, that is, choosing the factor-combination(technique of production)Choice of price, that is, how to price the commodity,How to promote sales,How to face competition,How to decide on new investments,How to manage profit and capital,How to manage an inventory, that is, stock of both finished goods

and raw materials.


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contd .. Microeconomics Applied to Operational Issues:Microeconomics deals with such questions confronted

by managers. The following microeconomic theoriesdeal with most of these questions.

Demand Analysis and Forecasting

Theory of Production and Production Decisions

Market Structure and Pricing Theory

Analysis of Cost

Profit and Capital Management-Investment Decisions

Inventory Management


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contd . Macroeconomics Applied to Business

EnvironmentMacroeconomic issues relate to the general businessenvironment in which a business operates. The factorswhich constitute economic environment of a countryinclude the following.

Economic System Trends in Macro variables - NI, Emp., Prices, S & I, etc;Strength of the Capital Market;Governments Economic Policies: industrial policy, fiscalpolicy, monetary policy, price and foreign trade policies;

Social Factors - value system of the society, property rights,customs and habits;Socio-economic organization - trade unions, consumers associations, and producers unionsDegree of Globalization

O O S SS


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ROLE OF BUSINESSECONOMIST

Primary Functions these require use ofeconomics

Producing SchedulingDemand ForecastingMarket ResearchEconomic AnalysisAdvice on Foreign Exchange Management

Advice on TradePricing related decisionsAnalyzing and Forecasting Environmental Factors


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contd..

General Functions -

To obtain and process information of generaleconomic conditions

To advise and suggest the management regardingtheir likely effects on the firms operation and goals

To analyze the changes in demand, taste, fashion,preferences of the product and changes income ofthe consumer

To understand factors affecting prices of inputs,

changing market share of the firm due to changeseconomic policies Tries to find most profitable output mix and bestprices


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Create & Design

EngineeringProjects

Evaluate

ExpectedProfitability Timing of

Cash Flows Degree ofFinancial

Risk

Analyze

Production Methods Engineering Safety

EnvironmentalImpacts

Market Assessment

Evaluate

Impact onFinancial

Statements

Firms MarketValue

Stock Price

contd

RESPONSIBILITIES OF


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RESPONSIBILITIES OFBUSINESS ECONOMISTS

Better Management of ResourcesDecision Making & Forward PlanningEconomic Forecast

Goal of Maximum ProfitChallenging TasksResearcher & Philosopher

Additional Information


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Documents

Business Economics - Final