What Is Managerial Economics?
explanatory Essay
1284 words
Review of Subject
Managerial decisions are an important component in achieving the objectives of the organization. The success or failure of a business depend upon the decisions made by managers (Jurina, 2011). Today’s increasing complexity in the world of business brought forth greater challenges for both the firm and its managers. The rapid rate of technological and digital advance as well as greater focus product innovation and processes that influence marketing and sales techniques have contributed to the increasing complexity in the business environment.
This complex environment together with a global market where input and product prices are continuing to fluctuate and remain volatile. Such changing environments creates a pressing need
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According to McGutgan and Moyer: “Managerial economics is the application of economic theory and methodology to decision-making problems faced by both public and private institutions”. McNair and Meriam: “Managerial economics consists of the use of economic modes of thought to analyze business situations”. Spencer and Siegelman: Managerial economics is “the integration of economic theory with business practice for the purpose of facilitating decision-making and forward planning by management”. Haynes, Mote and Paul: “Managerial economics refers to those aspects of economics and its tools of analysis most relevant to the firm’s decision-making process”.
Managerial economics deals with the use of economics’ principles, techniques and concepts to managerial problems of business and industrial enterprises. Managerial economics helps firms in formulating logical tools and techniques for managerial policy and decisions making. Furthermore, it helps in narrowing the gap that exists between economics in theory and in practice and guides managers in making decisions that are related to customers, competitors, suppliers and internal functioning of a firm. It also encourages the use of statistical and analytical tools in solving practical business problems by
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Therefore, to achieve this objective, managers have to make choices in decision-making, which is the process of selecting a course of action from two or more alternatives (Weihrich & Koontz; 1994, 199). A sound decision making requires extensive knowledge of economic theory and the tools of economic analysis, that are directly related in the process of decision-making. Since managerial economics is concerned with such economic theories and tools of analysis, it is very relevant to the managerial decision-making process. According Spencer and Siegelman managerial economics accommodates traditional theoretical concepts to the actual business behavior and conditions by amalgamating tools, techniques, models as well as theories of traditional economics with actual business practices and environment in which a firm operates. According to Edwin Mansfield, “Managerial Economics attempts to bridge the gap between purely analytical problems that intrigue many economic theories and the problems of policies that management must
In this essay, the author
- Explains that managerial economics provides a logical and experiential framework for analyzing the question such as "what or how much should i produce, and for whom?", or "should i try to retail or whole sale?"
- Explains that managerial decisions are an important component in achieving the objectives of the organization.
- Explains that managerial economics encompasses all the problems and areas of management and a firm. decision-making, forecasting, demand analysis, capital management, and profit management are considered.
- Explains that managerial economics provides a logical and experiential framework for analyzing the question such as "what or how much should i produce, and for whom?", or "should i try to retail or whole sale?"
- Explains that managerial decisions are an important component in achieving the objectives of the organization.
- Explains that managerial economics encompasses all the problems and areas of management and a firm. decision-making, forecasting, demand analysis, capital management, and profit management are considered.
- Explains that managerial economics is concerned with economic theory and tools of analysis, which are directly related in the process of decision-making.
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- Explains that scientific management theory arose from the need to increase productivity in the u.s.a. especially, where skilled labor was in short supply.
- Explains that early theories of organizations emerged mainly for military and catholic church. the metaphor of the machine was dominant, where organizations are viewed as machines.
- Explains that the three well-established theories of classical management, taylor's theory of scientific management, fayol?s administrative theory, and weber’s theories of bureaucracy, developed historical sequences.
- Explains that scientific management theory arose from the need to increase productivity in the u.s.a. especially, where skilled labor was in short supply.
- Explains that it put planning and control of workplace activities only in the hands of managers.
- Explains that henri fayol is considered the founder of the classical management school because he was the first to systematize it.
- Explains weber's theory of bureaucratic management that stressed the need for a strictly defined hierarchy governed by clearly defined regulations and lines of authority.
- Opines that bureaucracy allows for the optimal form of authority -?rational authority?
- Explains that purdue occupational research center's research led to the publication of the position analysis questionnaire in 1972.
- Explains that work stress received increasing attention in i/o research, theory, and practice. balancing work and family lives received increased attention.
- Cites katie enock, public health specialist, harrow primary care trust www.healthknowledge.org.
- Analyzes how workers and unions opposed the "speed up" theory because they feared that working harder or faster would exhaust whatever work was available, causing layoffs.
- Explains that fayol was the first to give a definition of management, namely?forecast and plan, organize, command, co-ordinate and control?
- Explains that many of the principles were not designed to cope with conditions of rapid change and issues of employee participation in the decision making process of organizations.
- Explains that weber's theory can be used as a gold standard to develop other modern theories.
- Explains that rigid behavior by senior managers can lead to standardized services that do not meet the needs of the client. exercise of control based on knowledge has led to experts whose opinions and attitudes clash with those of more generalized managers and supervisors.
- Explains how the behavioral school emerged because the classical management theories did not achieve sufficient production efficiency and workplace harmony.
- Explains how carl rogers' and abraham maslow's theories of motivation supported the human relations movement.
- States the 1964 civil rights act, which states that discrimination on the basis of race, color, religion, sex, or national origin is unlawful. katz & kahn published classic text outlining theory and research of organizational behavior embedded in open, sociotechnical systems.
- Analyzes how b.f. skinner advocated behavior modification strategies to motivate people in organizations, and the rise of cognitive approaches to studying topics in psychology.
- Explains that civil rights laws, and related supreme court decisions, led to increasing research on bias in organizations. the rigidity of classical management theories produced harsh consequences for businesses during these times of rapid change.
1964 wordsRead More - Evolution of Managementexplanatory essayThe evolution of management though the decades can be divided into two major sections. One of the sections is the classical approach. Under the classical approach efficiency and productivity became a critical concern of the managers at the turn of the 20th century. One of the approaches from the classical time period were systematic management which placed more emphasis on internal operations because managers were concerned with meeting the growth in demand brought on by the Industrial revolution. As a result managers became more concerned with physical things than towards the people therefore systematic management failed to lead to production efficiency. This became apparent to an engineer named Frederick Taylor who was the father of Scientific Management. Scientific Management was identified by four principles for which management should develop the best way to do a job, determine the optimum work pace, train people to do the job properly, and reward successful performance by using an incentive pay system. Scientifi...
In this essay, the author
- Explains that management has been evolving over the past 100 years. modern managers use practices, principles, and techniques developed from earlier concepts and experiences.
- Explains that the evolution of management through the decades can be divided into two major sections: the classical approach and the human relations approach.
- Explains that the last approach to classical management was bureaucracy. although it works well with most organizations, it may not be the best approach for organizations that require fast thinking and decision making.
- Explains that management has been evolving over the past 100 years. modern managers use practices, principles, and techniques developed from earlier concepts and experiences.
- Explains that the evolution of management through the decades can be divided into two major sections: the classical approach and the human relations approach.
- Explains that the last approach to classical management was bureaucracy. although it works well with most organizations, it may not be the best approach for organizations that require fast thinking and decision making.
- Explains that the contemporary approach has four types of management that have developed from the time period around world war ii to present time.
- Explains the systems theory, which is a managed system which transforms input into output, and the contingency perspective.
- Explains that management has been evolving for many years and through trial and error new forms of management have arisen. as the world continues to change with time, management must keep changing as well.
660 wordsRead More - Organizational Life Cycleopinion essayManagers should be ready to teach the importance of decision-making skills and reinforcing organizational policy. Avoiding hasty, careless decisions, which can have devastating results on the manager's unit or the entire organization. Decisions made with forethought, using the many managerial tools available will lead to better and more profitable operatio...
In this essay, the author
- Explains that organizations go through different life cycles similar to people, such as infancy, child-hood, early-teenage, start-up, growth, maturity, decline, renewal and death.
- Explains that in the start-up phase of an organizational life cycle, employees are eager to make a name for themselves and act impulsively, making highly reactive decisions based on whatever is going on around them.
- Explains the importance of recognizing the direction the company is going and how its methods of working can be improved.
- Explains that organizations go through different life cycles similar to people, such as infancy, child-hood, early-teenage, start-up, growth, maturity, decline, renewal and death.
- Explains that in the start-up phase of an organizational life cycle, employees are eager to make a name for themselves and act impulsively, making highly reactive decisions based on whatever is going on around them.
- Explains the importance of recognizing the direction the company is going and how its methods of working can be improved.
- Explains that the distinction between start-up and growth stages is not easily defined. managers can look forward to many managerial challenges, perspective policy issues, and re-evaluating the business plan for revisions.
- Opines that managers should be ready to teach the importance of decision-making skills and reinforcing organizational policy. avoiding hasty, careless decisions will lead to better and more profitable operations.
- Opines that when a firm enters the maturity phase, it shifts focus to efficiency and productivity. management should create formal systems and structures that will facilitate knowledge and opportunities.
- Opines that managers should plan for resistance or conflict between new and old employees. they should be aware of change management, what to look for and how to avoid the frustration associated with change.
- Opines that employees need to know management appreciates the difficulties a change will create. change creates with the staff must be thought out and implemented to avoid negative effects.
- Explains the importance of communicating the particulars and details as simply, clearly, and extensively as possible, both verbally and in written form.
- Recommends obtaining input, allowing employees affected by the change to offer their input and express their needs. empowered employees are committed employees. support from senior management is the key.
- Explains that resistance is an inevitable response to any change. people rush to defend the status quo if they feel their security or status is threatened. if managers don't understand, accept and make an effort to work with resistance, it can undermine even the best-intentioned changes.
- Opines that managers must be flexible and adaptable, able to change their own management style to fit the situation. the navy is constantly recruiting new members, renovating and redesigning training techniques and promoting diversity with an emphasis on teamwork.
- Concludes that organizations revolve through the many different stages of life. employees in the start-up phase have few barriers to effective communication.
- Cites adizes, i., ciavarella, m. a. and lester, d. l.
1245 wordsRead More - Differential Analysis In Businessexplanatory essayMaking business decisions involves choosing between alternative courses of action. Many factors affect business decisions, yet analysis typically focuses on finding the alternative that offers the highest return on investment or the greatest reduction in costs. Some decisions are based on little more than an intuitive understanding of the situation because available information is too limited to allow a more systematic analysis. In other cases, intangible factors such as convenience, prestige, and environmental considerations are more important than strictly quantitative factors. In all situations, managers can reach a sounder decision if they identify the consequences of alternative choices in financial terms. This unit
In this essay, the author
- Explains how managers can make sound business decisions if they identify the consequences of alternative choices in financial terms.
- Explains that management may have to decide which customer to drop or keep. all the information related to each customer must be tracked including the revenue, the variable costs and the fixed costs.
- Explains that the company has to make a decision to exclude or stop production lines because it achieves loss. this decision making requires an accurate analysis of cost components, because some fixed costs associated with the production line are general fixes.
- Explains how managers can make sound business decisions if they identify the consequences of alternative choices in financial terms.
- Explains that management may have to decide which customer to drop or keep. all the information related to each customer must be tracked including the revenue, the variable costs and the fixed costs.
- Explains that the company has to make a decision to exclude or stop production lines because it achieves loss. this decision making requires an accurate analysis of cost components, because some fixed costs associated with the production line are general fixes.
- Explains that differential analysis helps companies decide whether to sell a particular product in its current form or to carry out additional manufacturing operations on it and sell it after the completion of production.
- Explains how to determine the differential revenue, by comparing revenue in the case of selling the product in its current form with revenue after completion of product manufacturing.
- Defines differential cost, which is the difference between the cost of a product in its current state and its cost in case of completion of manufacturing.
- Explains that if there is a differential profit, the company will decide to complete the manufacturing, ignoring other non-quantitative factors such as market share and providing job opportunities.
- Explains that management may wish to stop production temporarily to avoid expected losses or to reduce existing losses. fixed costs are taken and compared with the net realized loss in case of continuation.
- Explains that the management may have a problem whether it is better to manufacture part of its final products or to buy this part from an external supplier.
- Explains that there are some related concepts to the differential analysis according to (accounting for management, 2017).
- Explains that sunk costs are historical costs that cannot be recovered or changed by any future decision or action. they are not affected or taken into consideration when making any decision.
- Explains accounting for management's differential, opportunity and sunk costs - explanation and examples.
- Explains that the differential analysis is useful in many situations faced by the management to make the necessary decision.
- Explains that opportunity costs are the expected revenues or benefits that will be lost as a result of not choosing the best available alternatives.
- Cites heisinger, hoyle, and kumar, pranav. differential cost analysis: meaning and its practical applications. lumen learning.
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