CHAPTER 3

PRODUCTION
AND COMPETITIVE
MARKETS
PRESENTED BY
Marc Yves Bernardino
Patricia Mangulabnan
Krista Mae Quimado
 PRODUCTION
ANALYSIS AND
COMPENSATION
POLICY

03
What is Production?
The process of converting the inputs into
outputs

INPUT OUTPUT

Resources to create The finished goods and

service or goods. services.
FIXED INPUTS GOODS
Factory Face mask
Building Note book
Equipment Bread

INPUT PROCESS OUTPUT

VARIABLE INPUTS SERVICES

Teacher
Workers Driver
Raw Materials Waiter
FACTORS OF PRODUCTION
1. LAND RENT
2. LABOUR WAGES
3. CAPITAL INTEREST
4. ENTREPRENEUR EMPLOYMENT
Production Function
- The Technological - Specifies the maximum
relationship between output using the given
inputs and outputs output

Short - run Long - run

- A situation where - A situation where

at least none
one input is fixed. of the inputs are fixed.
Law of Diminishing Returns

Increase in one factor of production

generates lower returns assuming that
nothing changes with the other factors.
Isoquant Curves
Shows all of the
various
combinations of two
inputs that result in
the same amount of
output.
Isocost Lines
It shows how we can
spend money on two
different factors to
produce maximum
output.
PRODUCER'S EQUILIBRIUM
Producer’s
equilibrium
implies a situation
in which a
producer
maximises his/her
profits.
PRODUCTION ANALYSIS
Production Analysis provides a visual
representation of production output.

Production Analysis allows you to evaluate the

reliability of manufacturing processes.
COMPENSATION POLICY
• COMPENSATION

- refers to monetary payment given to an

individual in exchange for their services.

- Salary / Wages - Perks

- Commision - Incentives
COMPENSATION POLICY
A combination of the philosophy and
practices a company adopts when
determining employees’ pay, rewards, and
benefits.
WHY DO COMPANIES NEED A
COMPENSATION POLICY?
Creates a standard Having a compensation
for how salary, policy in place ensures
rewards, and benefits fairness.
are managed within
an organization.
COST ANALYSIS
AND
ESTIMATION

03
What is Cost Analysis?

Also known as cost-benefit analysis, is the

process of calculating the potential
earnings.
Why Cost Analysis is Important?

Helps in Decision Making

Helps Secure Funding
Solves Problem
Opportunity Cost
The potential benefits that a individual or businesses
missses out on when choosing one alternative over
another
Implicit Cost
A decision which leads to lower income

Explicit Cost
A transaction that has measurable cost to a firm
Fixed Cost - are cost that are independent of
volume
Sunk Cost - refers to money that has already
been spent and cannot be recovered.
Variable Cost - changes based on the amount of
output produced
Total Cost - VC + FC
 ECONOMIC PROFITS

The difference between the revenue received

from sales and the costs of producing it.
COST ANALYSIS
Evaluate Cost
Direct Cost
Determine
Indirect Cost
the reason Real Cost

Compare to
Define all
Previous Interpret the Results
Stakeholders
Projects

Subtract the
List Potential
cost to the
Benefits
Outcome
LINEAR
PROGRAMMING
WHAT IS LINEAR PROGRAMMING?
A solution method for maximization or
minimization decision problems subject to
underlying constraints

Useful for guiding quantitative decisions in

business planning,
OPTIMAL SOLUTION - The best answer

FEASABLE SPACE - The set of all possible feasible

solutions

OBJECTIVE FUNCTION - The goal of a Linear

Programming problem

CONSTRAINTS - Restrictions on the linear

programming problem
IMPORTANCE OF LINEAR
PROGRAMMING
Attaining optimum use of resources.
A more objective way of arriving at decisions.
Ensuring due attention to bottlenecks before the
problems.
COMPETITIVE
MARKET
WHAT IS A COMPETETIVE MARKET?

a structure in which Its response to supply

no single consumer or and demand
producer has the fluctuates with the
power to influence the supply curve, a
market. representation of a
product's quantity
PERFORMANCE AND
STRATEGY
IN COMPETITIVE
MARKETS
STRATEGY IN COMPETITIV MARKET
Focus on Profit • DIMNISHING SUPPLY
- Companies go into - As companies produce
business for the products and
opportunity to sell a consumers purchase
product or service and the product, supply
make money. diminishes over time.
STRATEGY IN COMPETITIVE MARKET
EXCLUSION OR INCLUSION HEALTH MARGINS AND
THE BILITY TO CHARGE

In a competitive market, Businesses make

both the customer and the profits when the
business can set cost to make a good
parameters for buying is less than the price
behavior. it sells for.
STRATEGY IN COMPETETIVE MARKET
INFORMATIVE FOR THE FEWER TIME DELAYS
CUSTOMER
A competitive market Companies benefit when a
ensures consumers have consumer purchases a
the information they product and enjoys the
need to decide on a advantage right away.
purchase.
STRATEGY IN COMPETITIVE MARKET

REDUCED EXTERNAL INFLUENCES

External influences may have positive and negative
cost effect

TWO EXAMPLE OF EXTERNAL INFLUENCE :

- Positive External Influence
- Negative External Influence
STRATEGY IN COMPETITIVE MARKET
PROTECTION OF ELEVATED
PROPERTY ENTREPRENEURIAL
RIGHTS OPPORTUNITY
Property rights protect a Competitive markets
company's assets and inspire entrepreneurs to
shield them from theft take calculated risks and
or damage. enter the market.
PURPOSE OF COMPETITIVE
MARKET
The purpose of a competitive market is
to create ideal conditions where the
buyer and the seller both benefit from
the purchase of goods or services.
PROVIDES SIMILAR PRODUCT
Gives consumers many options by offering
similar products with different approaches to
branding and marketing.

REMOVE BARRIERS TO ENTRY

In a competitive market, anyone can enter.
4 TYPES OF MARKET STRUCTURE
PERFECT COMPETITION

Involves many firms that don't have the

ability to influence the industry due to
their size.
 4 TYPES OF MARKET STRUCTURE
MONOPOLY MARKET

A system that controls the supply or trade of

a good.
A single business produces a product that has
no substitutes.
4 TYPES OF MARKET STRUCTURE

MONOPOLY MARKET
Monopolies fall under two categories, natural and
legal:

NATURAL: These monopolies include public utilities

LEGAL: This monopoly involves patents for

exclusive product use for a limited time.
4 TYPES OF MARKET STRUCTURE
MONOPOLISTIC MARKET

Combines perfect competition and

monopoly to create a system where many
sellers offer products that serve the same
purpose, but slightly differ.
4 TYPES OF MARKET STRUCTURE

OLIGOPOLY MARKET

Systems where a small selection of

producers offer a good or service.
INNOVATION AND
GLOBAL
COMPETITIVENESS
WHAT IS INNOVATION?

Innovation describes the development and

application of ideas and technologies that
improve goods and services.
WHAT IS GLOBAL COMPETITIVENESS?
The ability of a country to achieve sustained high
rates of growth in gross domestic product (GDP) per
capita.
Factors are:
Labor wages
Inflation
Labor Productivity
Exchange Rate
Infrastructures
Legal & Regulatory System
Thank
you!!