Managerial Economics and Organizational Architecture, 5e

Managerial Economics and

Organizational Architecture, 5e

Chapter 1: Introduction

McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
 Managerial Economics and Organizational Architecture, 5e

Overall Purpose
• Provide a framework for analyzing
organizational problems
• Provide basic managerial economic
concepts
• Apply these concepts to operational
decisions

1-2
 Managerial Economics and Organizational Architecture, 5e

Organizational Architecture
Objectives
• Assignment of decision rights
• Methods of compensation
• Performance evaluation of individuals and
units

1-3
 Managerial Economics and Organizational Architecture, 5e

Managerial Economics Objectives

• Which markets to enter

• Product differentiation
• Production choices
• Pricing decisions
• Market analysis and competitor behavior

1-4
 Managerial Economics and Organizational Architecture, 5e

The Economic Perspective

• Economics provides a framework for
analyzing decisions
• How do individuals make choices?
• the role of incentives
• How can managers structure
organizational architecture to motivate
employees?
• incentive conflicts and opportunistic behavior

1-5
Managerial Economics and Organizational Architecture, 5e
 Managerial Economics and Organizational Architecture, 5e

Economic Darwinism
• Only the fittest survive
• competition encourages efficient decisions
• maximizing shareholder value
• firms must adapt or close

1-7
 Managerial Economics and Organizational Architecture, 5e

Economic Darwinism
• Firms “benchmark” successful practices
• best practices are emulated
• Appropriate organizational architecture
can
• lower costs
• ensure high quality production

1-8
 Managerial Economics and Organizational Architecture, 5e

Economic Darwinism
• Existing architecture is not random
• Surviving architectures are optimal
relative to competitors
• As environments change, the appropriate
architecture changes

1-9
 Managerial Economics and Organizational Architecture, 5e

SOURCE
• https://www.csub.edu/~agrammy/Courses/
econ451/Ch001.ppt
• Hirschey, M.
www.cameron.edu/~abduls/ppt/ME11_Ch
01.ppt