ECON 3551: Managerial Econ & Bus Strategy - Essay Example

He said that even if he is a manager, he also has a boss and his boss has a boss and ultimately, it will redound to the various stakeholders and society in general who are the ultimate boss of the company. As a manager, he is given metrices that he has to meet in what they call KRA or Key Results Area. Part of such metrices are economic indicators such as increased productivity, low turnover rate, etch. For me, he likened it to my grade which I have to meet or exceed in order pass a subject. Concretely, he said that if 75 is a passing mark, in his job, that would mean an X number increase in productivity.

If he meets and exceeds it, then he could get a raise and his employment is secure in the same manner that if I will get a grade of 75 or above, I will pass the subject. Inversely, if he fails to met his metrices, he will be in trouble in the same manner that a student will be in trouble if he or she will not be able to met the required grade. To achieve such metrices, he is given a budget to work of which he has to plan on how spend and allocate it to met if not exceed his targets. The respondent said that this is where economics comes in his department.

He has a limited resources to achieve a certain objective and he has to plan it carefully to achieve the optimum output in accordance with the target in mind. For example, to achieve an additional 10,000 units in production, that could mean hiring an additional personnel and procuring new equipment. But it does not mean that more employees and machine would automatically equate to higher productivity. At some point, productivity will decline because there will be people and more machine doing the same thing in what he call in economics as the principle of marginal diminishing return (The Law Of Diminishing Marginal Returns).

In instances where he has to ask for additional personnel or equipment, he has to justify it in economic terms. For example, in proposing the additional employee, he would have to mention that there is an unmet production requirement because of the lack of personnel. He could use terms such as “under capacity” indicating that the equipment or the plant in general is not performing at its optimum. In a company, this could mean an expense in the form of opportunity cost where income that could have been earned by those units manufactured was not realized because the plant is not performing at its optimum.

There are also other factors that has to be considered internally such as overhead cost that should be considered when hiring additional personnel and equipment. It will not only be the salary that will be added as one of its cost but also added electricity, office equipment and maintenance in the case of the additional equipment. The manager also explained that to be effective, one does not only look inside the company because outside factors such as our general economic condition can affect the business.

When I was asked him how, he explained that this is important in procurement and the principle of law of supply and demand. He said that if economic condition is bad and manufacturers of the materials you need became conservative in their production to protect themselves from risk, you might want to hold off your purchase because most likely the materials will be expensive. When asked why, he explained that