economic analysis for managers chapter1
TRANSCRIPT
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Chapter 1
Introduction
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Overview
Economics and managerial
decision making
Economics of a business
Review of economic terms
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Learning objectives define managerial economics
cite important types of resource
allocation decisions
illustrate ho econo!ic changes a""ect aillustrate ho econo!ic changes a""ect a"ir!#s ability to earn an acceptable return"ir!#s ability to earn an acceptable return
apply to an indi$idual "ir! the three basicapply to an indi$idual "ir! the three basic%uestions "aced by a country%uestions "aced by a country
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Economics and managerialdecision making
Economics
The study of the behavior of humanbeings in producing, distributing andconsuming material goods and
services in a world of scarceresources
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Economics and managerialdecision making
Management
The science of organizing and allocating afirm’s scarce resources to achieve itsdesired objectives
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Economics and managerialdecision making
Managerial economics
The use of economic analysis to makebusiness decisions involving the best use
allocation! of an organization’s scarce
resources
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Economics and managerialdecision making
Relationship to other business disciplines
Marketing " demand, price elasticity
Finance " capital budgeting, breakevenanalysis, opportunity cost, value added
Management science " linearprogramming, regression analysis,forecasting
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Economics and managerialdecision making
Relationship to other business disciplines
Strategy: types of competition,structure#conduct#performanceanalysis
Managerial accounting " relevantcost, breakeven analysis, incrementalcost analysis, opportunity cost
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Economics and managerialdecision making
$uestions that managers must answer"
%hat are the economic conditions in ourparticular market&
market structure& supply and demand&
technology&
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Economics and managerialdecision making
$uestions that managers must answer"
%hat are the economic conditions in ourparticular market&
government regulations& international dimensions&
future conditions& macroeconomic factors&
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Economics and managerialdecision making
$uestions that managers must answer"
'hould our firm be in this business& if so, at what price& and at what output level&
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Economics and managerialdecision making
$uestions that managers must answer"
(ow can we maintain a competitiveadvantage over other firms&
cost#leader& product differentiation& market niche& outsourcing, alliances, mergers& international perspective&
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Economics and managerialdecision making
$uestions that managers must answer"
%hat are the risks involved& shifts in demand)supply conditions& technological changes& the effect of competition& changing interest rates and inflationrates&
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Economics and managerialdecision making
$uestions that managers must answer"
%hat are the risks involved& e*change rates for companies ininternational trade!& political risk for firms with foreignoperations!&
Risk is the chance that actual futureoutcomes will differ from those e*pected
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Economics of a businessThe economics of a business refers tothe key factors that affect the firm’s abilityto earn an acceptable rate of return on its
owners’ investment
The most important of these factors are
competitiontechnologycustomers
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Economics of a business+hange" the four-stage model
'tage I the good old days’!
market dominance high profit margin cost plus pricing
- changes in technology, competition,customers force firm into 'tage II ..
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
1)
Economics of a business+hange" the four#stage model
'tage II crisis!
cost management downsizing restructuring
- re#engineering’ to deal with changesand move firm into 'tage III ..
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Economics of a business+hange" the four#stage model
'tage III reform! revenue management cost cutting has limited benefit
- focus on top#line’ growth ..
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Economics of a business+hange" the four#stage model
'tage I/ recovery! revenue plus
- revenue grows profitably
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Economics of a businessE*ample" 0von
well established company, in stage Iuntil late 1234s
found itself in 'tage II during 1254s since mid 1224s, entered stage III e*panded into emerging markets andupdated its image
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Economics of a businessE*ample" 'ears, 6mart
%al#7art effect 'ears pushed down to number threein late 1254s - repositioned itself as
a clothing store 6mart filed for bankruptcy in 8448 -plan to ac9uire 'ears
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Economics of a businessE*ample" 6odak
struggled to transition fromchemical#based film to digitalimaging
responded by developing strong cashflows in new product range
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Review of economic termsMicroeconomics is the study of individualconsumers and producers in specificmarkets, especially"
supply and demand pricing of output production process
cost structure distribution of income
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Review of economic termsMacroeconomics is the study of theaggregate economy, especially"
national output :;
unemployment inflation fiscal and monetary policies
trade and finance among nations
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Review of economic termsResources are inputs factors! ofproduction, notably"
land
labor capital entrepreneurship
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Review of economic termsScarcity is the condition in whichresources are not available to satisfy allthe needs and wants of a specified group
of people
Opportunity cost is the amount orsubjective value! that must be sacrificed inchoosing one activity over the ne*t bestalternative
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
2)
Review of economic termsAllocation decisions must be madebecause of scarcity. Three choices"
What should be produced&
How should it be produced&
For whom should be produced&
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Review of economic termsEconomic decisions of the Firm
What - begin or stop providinggoods)services production!
How # hiring, staffing, capital budgetingresourcing!
For whom = target the customers mostlikely to purchase marketing!
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Review of economic terms
Entrepreneurship is the willingness totake certain risks in the pursuit of goals
Management is the ability to organizeresources and administer tasks to achieve
objectives
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Chapter One Copyright 2009 Pearson Education, Inc. Publishing as
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Global application
E*ample" %estern >nion
began over 144 years ago huge changes in technology to survive, the company branchedout
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Chapter One Copyright 2009 Pearson Edu 31
Global application
E*ample" /?>
;utch publishing company transformed itself into a globalprovider of marketing and mediainformation