Economics for managers

• Economic system
• Population
• GDP and growth rate
• Economic policies-(industry, fiscal, monetary )
• Market structure
• Natural resources
• Political, Social, Legal and Technological Environment
 Economics
• Economists views ( Adam Smith, A. Marshall,
L. Robbins and JM Keynes)
• Science and art of economics
• Positive and Normative
• Microeconomics and macroeconomics
 Fundamental problems
• What to produce? ( Choice)
• How to produce ?( Technology)
• Whom to produce ?( Distribution)

Given scarce resources, how exactly do large,

complex societies go about answering the
three basic economic questions?
 Why study microeconomics?

Corporate decision making

• The design and efficient production of Ford’s
SUV ‘Endeavour’

 Impressive engineering
 a lot of economics
• How the public will react to the design and
performance?
• Understanding consumers preferences and
trade-offs and predicting demand and its
responsiveness to price
• How strong would demand be initially and
how fast would it grow? How would demand
depend on the prices?
• Cost of manufacturing
• How would costs depend on the number of
cars produced?
• How would wages, steel price and other raw
materials effects costs?
• Learning curve
• To maximize profits how many cars to be
produced?
• Design a pricing strategy and consider how
competitors would react to it
• Kind of market environment it operates
• SUV product line required large investments in new
capital equipment – consider risk and possible
outcomes
• Risk related to petrol, wages, taxes, interest, inflation,
recession etc.
• The relationship with the government and effects of
regulatory policies.( Emission Standard)
 Market Interactions
• Consumer-Producer Rivalry :
Consumers attempt to locate low prices, while producers
attempt to charge high prices.
• Consumer-Consumer Rivalry:
Scarcity of goods reduces the negotiating power of
consumers as they compete for the right to those goods.
• Producer-Producer Rivalry:
Scarcity of consumers causes producers to compete with
one another for the right to service customers.
• The Role of Government:
Disciplines the market process.
 Trade off
• Producer
• Worker
• Consumer
 Features of Capitalist Economy
• Private Property
• Free Enterprise
• Profit motive
• Consumers Sovereignty
• Freedom of choice of occupation
• Freedom to save and invest
• The Price mechanism
• Competition
• Limited role of government
 Features of a Socialist Economy
• Social ownership of means of production
• No private enterprise
• Economic equality
• Equality of opportunity
• Economic planning
• Social welfare and social security
 Features Of Mixed economy
• Private and State ownership of Means of production
• Co-existence of private and Public sectors
• Decisive role of marketing and supportive role of
planning
• Profit induced private enterprise
• Production in the state sector guided by social
benefit
• The intervention role of the state
 Business Goals
• Profit
• Growth
• Employee satisfaction and Development
• Quality products and Services
• Market Leadership
• Service to society
• Good Corporate Citizenship
 Characteristics of modern Business

• Change
• Diversification
• Globalization
• Information
• Government Interference
• Competition
We Are the World...
64,000 cr. Idle Investment:
Peep in the future- Global growth projections
( Percentage change)

Country 2013 2014 2015 2017 2019 2020

Brazil 2.7 0.1 -1.0 2.3 2.4 2.5
China 7.8 7.4 6.8 6.0 6.3 6.3
France 0.3 0.4 1.2 1.7 1.9 1.9
Germany 0.2 1.6 1.6 1.5 1.3 1.3
India 6.9 7.2 7.5 7.6 7.7 7.8
Indonesia 5.6 5.0 5.2 5.8 6.0 6.0
Japan 1.6 -0.1 1.0 0.4 0.7 0.7
Russia 1.3 0.6 -3.8 1.0 1.5 1.5
South 2.2 1.5 2.0 2.4 2.8 2.8
Africa
UK 1.7 2.6 2.7 2.2 2.1 2.1
USA 2.2 2.4 3.1 2.7 2.0 2.0
 BRIC GDP Growth rate

200
Country 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Brazil 4.4 1.3 3.1 1.2 5.7 3.1 4.0 6.0 5.0 -0.2 7.6 3.9 1.8

China 8.4 8.3 9.1 10.0 10.1 11.4 12.7 14.2 9.6 9.2 10.6 9.5 7.8

Russia 10.0 5.1 4.7 7.3 7.2 6.4 8.2 8.5 5.2 -7.8 4.5 4.3 3.4

India 3.8 4.8 3.8 7.9 7.9 9.3 9.3 9.8 3.9 8.5 10.3 6.6 5.1
BRIC GDP growth rate
 GDP growth – international experience

Country 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Australia 3.9 1.9 3.9 3.1 4.1 3.2 3.0 3.8 3.7 1.8 2.0 2.4 3.6

United
Kingdom 3.8 2.8 2.5 3.3 2.5 3.0 2.7 2.6 -0.5 -4.2 1.5 2.0 1.2

United
States 4.1 1.0 1.8 2.8 3.8 3.3 2.7 1.8 -0.3 -2.8 2.5 1.6 2.3

Canada 5.1 1.7 2.8 1.9 3.1 3.2 2.6 2.0 1.2 -2.7 3.4 3.0 1.9
GDP growth – international
experience