l ecture o ne : i ntroduction to m anagerial e conomics managerial economics lecturer: jack wu nccu
TRANSCRIPT
MANAGERIAL ECONOMICS
Managerial economics: Science of directing scarce resources to manage more effectively
resources – financial, human, physical management of customers, suppliers,
competitors, internal organization organizations – business, nonprofit,
household
Managerial economics is based on microeconomics.
NEW ECONOMY: INTERNET
Managerial Economics also applies to the new economy.
Example: In pricing, Airlines use online auctions to segment their market between business and leisure travelers.
Example: In competitive strategy, Google competes fiercely with Yahoo.
OLD/NEW ECONOMY
Differences between “New” and “Old” economy:
_ role of network effects in demand **network effects – benefit/cost depends on
total number of other users example: Internt _ importance of economies of scale and scope example: Information in Yahoo is scalable
ORGANIZATION
Vertical boundaries – closer to or further from end user
Samsung Electronics – vertical boundaries longer than Intel – specializes in semiconductors (upstream) Motorola – specializes in mobile phones
(downstream)
ORGANIZATION
Horizontal boundaries – scale and scope of activities
Samsung Electronics – horizontal boundaries broader than LG.Philips LCD – specializes in LCD Motorola – specializes in mobile phones
MARKET
Market: Buyers and sellers communicate with one another for voluntary exchange
market need not be physical industry -- businesses engaged in the
production or delivery of the same or similar items
COMPETITIVE MARKET
Benchmark for managerial economics Extremely competitive market
many buyers and many sellers no room for managerial strategizing
Achieves economic efficiency
MARKET POWER
Definition – ability of a buyer or seller to influence market conditions
Seller with market power must manage costs pricing advertising expenditure R&D expenditure strategy toward competitors