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What is the role of managerial economics in different functional areas of business? Managerial economics
Managerial economics, or business economics, is a division of microeconomics that focuses on applying economic theory directly to businesses. The application of economic theory through statistical methods helps businesses make decisions and determine strategy on pricing, operations, risk, investments and production. The overall role of managerial economics is to increase the efficiency of decision making in businesses to increase profit
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Case: The management revolution How decision making is revolutionized? Introduction: In todays world business society has been revolutionized which caused an in-turn revolution of management. Management has to take many decisions. All decisions of management are influenced by following four components of revolution. Globalization of market Spread of information technology Computer networks Spread of information economy
Globalization of markets: Globalization of markets means the more integration of international markets and increased interdependency upon one another. Managers have to make decisions while keeping in view of a global market and also strong competition. Because of improved communication and
transportation, national products becoming international e.g. Mcdonalds, KFC etc. local producers are facing continuous competition from abroad.
Spread of information technology: Another thing which revolutionized the todays management is the wide spread of information technology. As everyone related to any field is using computers and internet to facilitate his work. This immensely speeds up the delivery of goods, cuts wastes and costs, and increases productivity. Managers, make sure that their workers are familiar to the information technology in order to stand in the market with the competitors. Computer networks: Computers plays a great role in revolutionizing todays management. In early days middle managers used as transmission line between top management and workers, but now with the help of computer networks top management can communicate directly with workers and can save a lot of time and costs. Decisions can be implemented quickly as transmitted directly to the workers from the top management. Information economy: Final component of the revolution is information economy, in which creation of value based communications and knowledge rather than physical labor and natural resources. Jobs which are labor intensive earlier are becoming labor free because of automated programs, which increases the level of production and improves the quality of products. Managers have to design their production/delivery process efficiently. 3|Page