Principals of managerial economics are increasingly used by companies in India to help better manage and increase their profits. In a broad sense, the concept of managerial economics combines the issues that managers face in the day-to-day operations of their jobs with the many different analytics of the economic aspects and issues like demand, supply, cost, production, market, competition, price etc. that exist as some of the most important concepts in any real business and managerial decisions.
A smooth blend of economic theories with their management aspects is what is known as managerial economics. Used primarily for policymaking, the strong prospects of managerial economics combine the importance of economic knowledge and awareness coupled with an understanding of management responsibility to clearly define marketable and financial goals for the company and the individual departments working under it.
No business is a lone wolf. It is often a comprehensive combination of teams, departments, and individuals that is carefully organized in order to maximize efficiency and improve the general working of any structure. Within these departments and teams, businesses often choose high performing individuals and assign them the task of managing that particular department or team. With this responsibility, managers are often in charge of setting goals for their team members. However, a more important task for them is to become the point of contact for their superiors, who seek timely updates on the works of different teams. Managers thus are responsible for their team’s workings as well as for the financial aspects of their departments.
The theory of the firm is a common tool for measuring the performance of companies. Based on the framework of an economic model, this theory helps companies and organizations with huge businesses to take important decisions The theory of the firm often helps the business make crucial decisions of which market to enter, where to invest in research and development or how and when should the firm launch and release their products or services.
The dependence on the success and failure of a firm lies on the way it has been managed. This acute observation made by many managerial economists led to the creation of this discipline. While the manager invokes a sense of leadership and guides his/her team during the project, an understanding of the financial and economic aspects of the project must also be considered in order to succeed to the defined goal.
Thus, management is:
Managerial economics is a proven concept and is employed by some of the biggest companies in the world to better manage and hold accountable for the different departments and their heads over the functioning of the company.
In an effort to better understand and implement the principles of managerial economics, companies and theorists have defined a set of guidelines for the different problems that need to be accounted for in order to better manage the efficiency of different teams and departments within the firm.
These are the four main aspects of decision making that help managers plan ahead for their team:
Defining the problem is the first step in realizing the potential errors of the team. Managers must be acutely aware of the problems and define it correctly in hopes of faster resolution. Often the failure to define and identify the problem derails projects for indefinite times.
Creating a proper description of the objectives of the firm may help managers better arrive at results in the long run. An understanding of the current strengths and weaknesses of the firm coupled with the opportunities that exist in the market makes up for a better realization of the objects defined for the team or the firm.
It is not always that everthing aligns as per the set objectives. Markets are highly volatile and a slight change might impact heavily on the firm. Thus, managers must be thorough in their understanding of the framework set by them, and moreover must then devise strategies for alternative scenarios where changes might affect the project. A crisis management plan must be devised by the manager in order to not be heavily impacted by changes in the external landscape.
Continuing on the crisis management plan, the manager must be good at predicting the consequences of his/her plan for the team. In this way, the manager still is in command of the situation even if a slight change in the market may force the team to adopt new strategies.
Once all the scrutinizing is done then the preferred action is taken, in this final step the objectives and the outcomes are directly measurable. A culmination to the plan set by the manager, the final step involves him/her taking decisions for the team and the firm at large. These decisions are motivated through indepth reseach and after weighing the pros and cons of the problem at hand, employing all the above steps in sequence.
So these are some of the ways how any firm works considering its decision making processes and helps managers fully utilise their team and better manage the efficiency considering the management and financial aspects of the work.