Business Economics - Final
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Transcript of 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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